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The “Big Change” era in trade book publishing ended about four years ago


Book publishing is still very much in a time of changing conditions and circumstances. There are a host of unknowables about the next several years that affect the shape of the industry and the strategies of all the players in it. But as publishers, retailers, libraries, and their ecosystem partners prepare for whatever is next, it becomes increasingly evident that — from the perspective of trade publishing at least — we have already lived through the biggest period of transition. It took place from sometime in 2007 through 2012.

At the beginning of 2007, there was no Kindle. By the end of 2011, there was no Borders. And by the end of 2012, five of America’s biggest publishers were defending themselves from the US Department of Justice. The arrival of Kindle and the exit of Borders are the two most earthshaking events in the recent history of book publishing and its ecosystem. The Justice Department suit first distracted and then ultimately strait-jacketed the big publishers so it was both difficult to focus and then difficult to react to further marketplace changes.

Paying close attention to what we then called “electronic publishing” started for me in the early 1990s, with a conference other consulting colleagues and I organized for Publishers Weekly which we called “Electronic Publishing and Rights”. This was before Amazon existed. It was when the big transition taking place was from diskettes to CD-Roms as the means of storage. And it was even before Windows, so the only device on which you could view on a screen anything that looked at all like a book was a Macintosh computer, which had literally a sliver of the market. The most interesting ebook predecessor was the Voyager Expanded Book, and it could only be used on a Mac.

In this speech I gave in 1995, I put my finger on the fact that online would change all this and that publishers shouldn’t spend too much energy on CD-Roms.

The period from then until when it was clear Kindle was establishing itself — the awareness that it was for real slowly dawned on people throughout the year 2008 — was one where the inevitability of some big digital change was generally acknowledged. But dealing with it was the province of specialists operating alongside the “real business” and largely performing experiments, or getting ready for the day when it might matter. There was a slow (and inexorable) shift from store-purchasing to online purchasing. And the online purchasing almost all went to Amazon. But even that wasn’t seen as particularly disruptive. Neither ebooks nor online purchasing called for drastic changes in the way publishers saw their business or deployed their resources.

The first important new device for books in 2007 didn’t start out as one at all. It was the iPhone, first released in June of that year. Although Palm Pilots were the ebook reader of choice for a big chunk of the then-tiny ebook community, they lacked connectivity. The iPhone was not seen as an ereader when it came out — indeed, Apple head Steve Jobs still believed at that point that ebooks were not a market worth pursuing — but they could, and did, rapidly become one when it was demonstrated that there was a market. And they vastly expanded the universe of people routinely paying for downloaded content, in this case music from the iTunes store.

Then Kindle launched in November of 2007. A still unannounced number of Kindles sold out in a few hours and Amazon remained out of stock of them for several months! Because the original Kindle was $399, it was only a “good deal” for the consumer who read many books on which they could save money by buying electronic. What this meant was that Kindle owners bought ebooks in numbers much greater than the relatively small number of devices placed would have suggested. Throughout 2008, the awareness dawned on the industry that ebooks were going to be a significant business.

And that awareness rapidly shook loose a raft of competition. Barnes & Noble saw that they had to compete in this arena and started a crash program to deliver the Nook, which first appeared almost precisely two years after the first Kindle, in November 2009. Months earlier, Amazon had released the app that put Kindle on the iPhone. Meanwhile, Jobs had become persuaded to take ebooks seriously, and, anyway, he had a store selling content downloads to devices like crazy. Now, about to launch his new tablet format, the iPad, he had what looked like the perfect vehicle with which to launch ebooks. The iPad and the iBookstore debuted in April 2010. A month later, Kobo entered the market as a low-priced alternative with their first device. And by the end of the year, Google reorganized and rebranded what had been Google Editions into Google eBooks. The original concept was that they would populate the readers that were using epub, which meant Nook and Kobo at that time.

All of this change within three calendar years — 2008 through 2010 — created a blizzard of strategic decisions for the publishers. Remember, before all this, ebooks were an afterthought. Amazon had applied pressure to get publishers into the Kindle launch in 2007. Before that, no publisher that I can recall made any effort to have ebooks available at the time a book was initially launched. There were workflow and production changes (XML FIRST!) being contemplated that would make doing both print and digital editions a less onerous task, but they were seldom fast-tracked and doing ebooks meant taking on and managing a book-by-book conversion project.

During the period when Amazon was pretty much alone in the game (the pre-Amazon market leaders, Sony and Palm, faded very quickly), they started pricing Kindle titles aggressively, even willing to take losses on each sale to promote device sales and the ecosystem. This alarmed publishers, who were seeing small Kindle sales grow at what were frightening rates and raising the spectre of undermining their hardcovers. It didn’t hurt that the retailers with whom they (still, then, though not now) did most of their business were also alarmed. Nook arrived and Barnes & Noble would never have been as comfortable as Amazon with selling these new products at a loss. But B&N also worried about the impact that cheap ebooks might have on more expensive print book sales. Amazon didn’t.

So when Apple proposed in late 2009 and early 2010 that there could be a new way to sell called “agency” which would put retail pricing power for ebooks into the publishers’ hands, it met a very receptive audience of publishers.

And that, in turn, led to the Department of Justice’s lawsuit against the big publishers which was instituted in April of 2012.

Coinciding with and enabled by all of this was the huge growth in author-initiated publishing. Amazon had bought CreateSpace, which gave them the ability to offer print-on-demand as well as Kindle ebooks. The combination meant that a huge audience could be reached through them without any help from anybody else. When agency happened (2010), they started to offer indie authors what amounted to agency terms: 70 percent of the selling price for ebooks. This was a multiple of the percentage an author would get through a publisher.

Agency pricing fell right into Amazon’s and the self-published hands. Getting 70 percent on the ebook, the indie author got $2.10 pricing at $2.99 and $2.80 pricing at $3.99, royalties comparable to what they’d get from full-priced print. Many bestselling indie ebooks were priced at $0.99. The very cheap ebooks indie authors would offer juxtaposed against the publisher’s agency up-priced (many at $14.99) and undiscounted branded books created a market opening that allowed the Kindle audience to sample (aside from the free chapter that is standard in ebooks) cheap ebook authors for peanuts. Suddenly, names nobody had heard before were on the map, selling millions of ebooks, and taking mindshare away from the industry’s output. And it also handed the publishers’ authors an alternative path to market that could only have the effect of improving their negotiating position with the publishers.

Meanwhile, Borders sent the most persuasive possible signal that the shift in sales from stores to online, accelerated by the ebook phenomenon, was really damaging. They went out of business in 2011. That took the account that sold upwards of 10 percent of most publishers’ books, and a far greater percentage of the bookstore shelf space for backlist, off the board. Or, viewed another way, publishers went from two national retailers who could place a big order and put books in front of the core book-buying audience to one.

So the authors’ negotiating position was stronger and so was Barnes & Noble’s.

And all of those events — the devices, the ebook surge, the introduction of the agency business model, and the Department of Justice suing most of the big publishers, a very noticeable rise in successful independent publishing, and the increased leverage of the trading partners with whom publishers negotiate their revenues and their costs — were head and body blows to the titans of the industry. Every one of them threatened the legacy practices and challenged the legacy organizations and resource allocations.

During this period, Random House (the number one publisher) merged with Penguin (the number two publisher) and created a super-publisher that is not far from being as big as the four remaining members of what were called “The Big Six” in 2007. If you are viewing the world from the perspective of HarperCollins, Simon & Schuster, Hachette, or Macmillan, that might have been the biggest development of all.

Compared to the sweeping changes of that era, what has happened since and what is likely to happen in the next couple of years is small beer. There are certainly clear trends that will change things markedly over time.

Amazon continues to grow its share, and they are around 50 percent of the business or more for many publishers these days.

Barnes & Noble is troubled but in no immediate jeopardy and is still, by far, the number one brick-and-mortar account for publishers. But the optimistic view is that their book sales will remain flat in the near future.

Independent bookselling continues to grow, but even with their growth since Borders went down, they are less than 10 percent of the sales for most publishers. It is true that ebook sales for publishers have flattened (we don’t know the overall trend for sure because we don’t really know the indie sales at Amazon, and they’re substantial) and don’t seem likely to grow their share against print anytime soon.

These things seem likely to be as true two years from now as they are now. Nothing felt that way in from 2008-2012.

Digital marketing, including social network presence, is an important frontier. The industry has a successful digital catalog, called Edelweiss, which has obviated the need for printed catalogs, a cost saving many publishers have captured. And another start-up, NetGalley (owned by Firebrand), has organized the reviewer segment of the industry so that publishers can get them digital advance copies of books, which is cheaper and much more efficient for everybody.

Owning and mining email lists is a new skill set that can pay off more each year. Pricing in digital seems to offer great opportunity for improved revenue, if its effects can be better understood. International sales of American-originated books are more accessible than they’ve ever been as the global network created by Ingram creates sales growth opportunities for just about every publisher. That should continue and requires new thinking and processes. Special, or non-traditional, markets increase in importance, abetted by digital marketing. That will continue as well.

Audio, which has been one of the big beneficiaries of digital downloading, will continue to grow too. The problem from the publishers’ perspective is that Audible, owned by Amazon, owns most of that market. So they have a sophisticated and unsentimental trading partner with a lot of leverage controlling a market segment that is probably taking share from print and ebooks.

And with all of this, what will also continue to grow is relentless margin pressure from the publishers’ two biggest accounts: Amazon and Barnes & Noble.

But the challenges of today aren’t about change of the magnitude that was being coped with in the period that ended five years ago. They’re more about improving workflows and processes, learning to use new tools, and integrating new people with new skill sets into the publishing business. And there are a lot of new people with relevant skills up and down the trade publishing organizations now. That wasn’t so much the case when things were changing the fastest, 2007-2012.

It isn’t that there aren’t still many of new things to work on, new opportunities to explore, or long-term decisions to make. But the editor today can sign a book and expect a publishing environment when it comes out in a year or two roughly like the one we have today. The editor in 2010 couldn’t feel that confidence. The marketer can plan something when the book first comes up for consideration and find the plan will still make sense six months later. And while things still very much in flux in sales, a blow comparable to the loss of Borders isn’t on the

Of course, there could always be a black swan about to announce itself.

This post explains why, among other reasons, I will no longer be programming the Digital Book World Conference, as I did for seven years starting with its debut in 2010. At its best, DBW anticipated the changes that were coming in the industry and gave its attendees practical ways to think about and cope with them. Future vision was a key perspective to programming although we always strived to give the audience things they could “take back to the office and use”.

It has been harder and harder over the past couple of years to find the big strategic questions the industry needed answers to. The writing was on the wall last year when most of the publishers I talked to felt confident they understood where books were going; they wanted to hear from other segments of the digital world. That was a sign to me that the educational mission I had in mind for DBW since I started it was no longer in demand.

To their credit, the DBW management, as I understand it, is trying a new vision for the show, more focused on the immediately practical and the hands-on challenges of today. I wish them the best of luck with it.

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Things are calmer than they were in the book business, but change is a constant


Among the shifts that have been taking place in publishing houses over the past decade is an increase in the head count dedicated to marketing and a decrease in head count dedicated to sales. This reflects the reduction in the number of bookstore accounts and the transfer of “discovery” from store shelves to digital search.

The reduction in bookstores and the concurrent and related reduction in print books sold in stores also affects how publishers view the economics of the sales departments and the entire support system for print distribution. The big houses still need sales forces and warehouses and sophisticated systems to track inventories and payments and returns but the “throughput” of print from their own publishing programs is declining. For many, that means that distribution clients are increasingly important. They provide the volume to support scaled operations without requiring the publisher to invest in publishing more titles. For at least four of the big five (HarperCollins being an apparent exception), distribution of other publishers’ books, with or without providing the sales force effort, is a critical component of maintaining the volume that keeps unit costs in line.

But that adds risk. Distribution contracts vary in length, but they generally only extend two or three years out. With four major publishers plus Ingram, which has, effectively, five different full distribution options to offer, on the prowl for clients, there is a plethora of choices for any publisher seeking to shed their own fixed-cost distribution or to switch distributors. Indeed, the percentages being charged for distribution services have dropped drastically over the past two decades. The competitive environment is likely to perpetuate that trend.

While the big publishers doing distribution have (so far) tended to insist on fairly large clients, Ingram is using its multiple configurations to try to serve publishers of all sizes and entities that aren’t primarily publishers at all. Today a publisher that is really a literary agency or, before long if not already, a bank, an advertising agency, or a not-for-profit with a mission, can put a book or a list of its own into the book publishing arena with sales and distribution capabilities competitive with the biggest and most experienced publishers. So a revolution that began with Amazon enabling indie authors, starting about ten years ago, to reach a big percentage of the total book market through Kindle and CreateSpace, is being dramatically extended. Going after real bookstore distribution definitely requires incremental investment and marketing savvy, even with the machinery in place to help.

But incremental investment and marketing savvy were always far easier to come by than the machinery has ever been for the small or occasional publisher.

While this levels the playing field in a major way, there are still distinct advantages to size and a B2B publishing brand. The diminishing bookstore shelf space has made the also-diminishing mass merchant (Walmart, Target) shelf space relatively more important. Between the chains — primarily Barnes & Noble and Books-a-Million — and independent stores, there are only about 1000 to 1200 points of purchase for books provided by bookstores. There were three to five times that many two decades ago. So the additional thousands of opportunities to put a book in front of the public through the mass merchants are critical, particularly to move bestseller quantities.

But relatively few titles can make the cut for those outlets and the pressure on them to perform quickly is immense. Returns are high. These slots are simply not available to publishers who aren’t recognizable B2B brands with a solid reputation for backing their books effectively. These outlets represent the competitive advantage that remains for the Big Five publishers.

For the past few years, pretty much since the demise of Borders in 2011, the number of bookstores has been going up a bit each year. (It is not clear that the bookstore shelf space has been going up; indie stores seem to be smaller, on average, today than they were two decades ago, or at least there are fewer mammoth ones.) It could well be that, aside from Borders, the indie revival is also fueled by the reduction in shelf space for books at the mass merchants. If so, that is good for smaller publishers and it is good for backlist, both of which are seriously challenged getting in front of the public through mass merchants.

So, while it is definitely true that the dizzying pace of change we saw during the early years of ebooks has subsided, and it is true that the print format has not yielded much share, if any, to ebooks in the past couple of years, it is not time to celebrate a new stability. The marketplace itself is still changing; the online share when you combine print and digital is still growing and the ratio of shelf space available for backlist and slower-sellers is still declining. The smallest publishers are getting better and better market access and the biggest publishers are seeing escalating risk in how they place the books they publish and in the danger they’ll face a sudden decrease in distribution volume that would turn their fixed costs into a burden.

This is a great time in the book business to be very big (among your peer group) or very small and focused. It is a challenging time to be anything else.

A very frequent point of contention when negotiating distribution arrangements is how Amazon will be handled and compensated. Amazon is almost always the single largest account and it is not uncommon for it to represent — on many books and even some publishers — 50 percent or more of the sales. Although sophistication definitely helps in dealing with Amazon, it is also true that Amazon provides incentives to give up the “other half” of the market and just work through them. Any sophisticated businessperson is likely to get more money out of Amazon working it themselves than any distributor can get for them, even before distribution fees. (IF, and this is a big if, you discount the marketing value of books throughout the supply chain which, counterintuitively but frequently, will raise the level of sales at Amazon from what they would have been without books broadly distributed.) In any case, being able to really add value to Amazon sales would be a Holy Grail. Right now, most of the time, distributing publishers really have to make the argument that you can’t effectively split things and that they will add so much value in the rest of the world, and do the work around Amazon, that the overall relationship is worth the trade-off.

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An obituary last week reminded me of some family history we are proud of


Normally what is written here is about publishing’s present with a look to its future. An obituary notice last week recalled some personal family history about publishing’s past and shed some light on how much has changed in the past six decades. It’s publishing history from a highly personal point of view, but it seems an appropriate story with which to end the year.

Last week there were several reports, including from The New York Times and from Publishers Weekly, of the death of Charles F. Harris at the age of 81. Harris had been the founder of Armistad Press, now an imprint of HarperCollins, and was for a time the director of Howard University Press. He was very unusual, if not unique, being an African-American executive in the world of trade and university press publishing. It was noted that he began his career at Doubleday in 1956.

This brought back to me that my father, Leonard Shatzkin, had hired Harris at Doubleday back then. The obit triggered a partial memory: that Dad had hired two black men at Doubleday in the 1950s and was then told, by somebody in authority: “that’s enough, Len”. Dad died in May of 2002 and Mom, Eleanor Shatzkin, in January of 2007, so I pinged my sisters Karen and Nance to help me piece together more of the story. Turns out there was more in my memory that my sisters helped me to dig out (but memory turned out to be only a secondary authority).

I had met the second of the two hires in the 1970s. I believe that at that time he owned a printer of book jackets. I couldn’t remember his name — which was Ed Simmons — until I dug it up in a way you’ll be told in the postscript. Nance and I had some professional interaction with Harris in his Howard University Press days. Ed Simmons’s name was temporarily lost to memory, including with the one veteran of Doubleday at that time with whom I was able to check, until I found it later.

The family account had always been that, after he got the word from higher-ups to stop his personal integration movement that our Mom had to wrestle with him to cooperate so he wouldn’t lose his job. That shook loose another slightly-off memory, which was that Dad corrected that account sometime before he died. I recalled that he had defied both Mom and his bosses and did offer a third black man a position at Doubleday. “How come you didn’t lose your job, Dad?” The answer? Because the person to whom the job was offered turned it down!

Karen recalled that Dad had gotten help from the Urban League to find worthy candidates who would pass muster in as genteel (and in this case gentile as well, Len very much excepted) an environment as this major New York publisher in the 1950s.

Reflecting on this made me think a bit harder about Dad’s career. He left Doubleday in 1961 for Crowell-Collier Macmillan, a company that would have been presumably more hospitable to him since it was headed by a Jew. (Jews were vanishingly rare at Doubleday in the 1950s.) But Dad found reasons to object ethically to the Macmillan management too, and he resigned from there in 1963. He went on to McGraw-Hill in a much less exalted (and substantially lower-paid) position and was there for about five years before starting his own businesses: first a book production service and then a trade book distributor. During that same period, he quit a lucrative consulting gig in a company originally started by a mentor of his because he objected to the Board decisions of the founder’s children.

In other words, Dad wasn’t real good at working for other people.

He apparently passed that along to us. Sister Karen runs her own law firm and sister Nance runs her own consultancy doing data management in the health care business. But at least they have worked for other people, at least for a while. Since I left my Dad’s employ in 1978, I never have. Fortunately, the independent temperament we inherited from Dad and which was nurtured by both our parents was augmented by training in basic business skills that we got mostly from our mother. (She started as a physicist but then became a management consultant.)

We now live in times where we would not be told by any employer that would conceivably have us that we couldn’t hire a person of any particular color. There are other aspects of corporate and organizational life that would prevent a child of our parents from being a happy component of somebody’s larger scheme, but that particular problem is a relic of history. I’m so glad that our Dad’s courage in the 1950s gave Charlie Harris an opportunity that, with Harris’s own talent and application, turned into a remarkable career.

And, as I was finishing this post, I searched “Urban League” within my blog and found out I had told the story once before, back in April, 2009. Turns out I remembered back then the name of the second hire, Ed Simmons, so I was able to put it in here. And I also got the story straight about how I learned that Dad had hired a third person, which I left mangled in this recollection. AND I got at least part of the straight scoop on exactly how the word came down from Doubleday. This post adds some insight that the first didn’t, but I would also refer you to the original. And let this one and the gaps between them stand as testimony to how much we can forget in nearly seven years.

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Books as brands and the opportunities to sell book-branded merchandise


There’s a lot in this post that anticipates conversations we will have at Digital Book World 2016, coming up March 7-9 at the New York Hilton. “Transformation” will be an important theme at that event and nothing says “transformation” more than revenue sources you didn’t used to have.

It was really 20 years ago that it first occurred to me that “content marketing” would, at least in part, replace “marketing content”. Or at least partly replace selling content. As the world progressed, so did my understanding of how this would play out, and I saw that publishing would increasingly be done by entities extending their brand or their audience reach. I called that the “atomization” of publishing and have written about it for a few years.

But the way it worked out, thanks to an Amazon far more powerful than I envisaged in the 1990s, is that publishers don’t actually sell their content direct to consumers very often. Their primary job — their primary responsibility to the authors they sign up — is to get the content sold by whatever means possible. Publishers have mostly learned that trying to take sales away from Amazon to make them directly costs far more in lost sales than it gains in even ostensibly improved margin. (And, in fact, the margin does not improve most of the time even if the share retained of the selling cost rises, because the cost of serving customers exceeds the cost of having Amazon do it for you.)

So an idea that briefly seemed right to me in the 1990s — that publishers would use their content as a springboard to market other things — never materialized. And what’s happened is mostly the other way around: people who sell other things are creating content, sometimes competing with publishers, to bring in customers for their primary products.

The world that I envisioned back then has played out somewhat in vertical publishing. F+W has been building on its book and magazine audiences to sell other things, including live events, for nearly a decade. Rodale will be launching online courses this month. They also do “summits”, which are several days long, built around the authority of a book and author, and which are free events out of which products are created from the content that attendees can purchase.

The general trade publishers are trying some of this too. Macmillan has sold mugs and t-shirts through Tor.com and other sites it controls that did “fairly well, but nothing earthshattering”.

HarperCollins has been a bit more aggressive. A scale email channel – their Bookperk bargain newsletter (which was just grown by acquisition last week) – allows them to effectively promote all sorts of things, from e-book bargains to discounts on print front list to event tickets to just fun things, like a chance to win Notorious RBG temporary tattoos. Combining some of that, they have done two virtual pop-up stores – one for Father’s Day and one last Christmas – where they sold signed editions and non-books like Roxane Gay “Bad Feminist” t-shirts and Agatha Christie tote bags.

But the publishers mostly have the limitation we pointed out at the top that cramps their ability to sell non-book items: they don’t actually sell very many books or ebooks themselves either. So their content marketing efforts are not routinely building toward a transactional relationship with the audiences they touch. That means that “upsells” are not about “putting another item in the shopping cart”. They’re about getting a customer to use a shopping cart with them for perhaps the first time. That’s much harder.

The full potential to sell “other stuff” is now being demonstrated through the “custom book” play from Sourcebooks called “Put Me in the Story”. There are other personalized books — like those offered by Quarto (This Is Your Cookbook), Chronicle (“I See Me” children’s books, which are custom books based on Chronicle titles), or the global sensation for kids called “Lost My Name”. But PMITS is different because it works with highly-established children’s book brands and delivers personalized versions of them. So PMITS sees itself from the git-go as a brand enhancement and extension, making a new revenue stream available for the publishers (and authors and illustrators) of the books they build on.

Like the other personalized book creators, PMITS does have a shopping cart; they do have a transactional relationship with their customers.

So when they look at non-book gift products, the book again is central, as it is for their core offer. Like with the book, there’s a royalty payment tied for non-book product that’s directly derived from books and it’s another whole new revenue stream for many authors and illustrators. From Sourcebooks’ perspective, this is what they were trying to do from the beginning. The personalized books add a revenue stream, and now personalized gifts add another revenue stream. (Chronicle also sells chotchkes like stuffed animals that “go with the books” but they are not evidently deeply into doing branded chotchkes, creating extra value for commodity items around the book’s fame.)

Put Me in the Story uses the book’s brand as the key asset distinguishing their non-book products to create companion gifts.

For example, they used the artwork from their own bestselling “I Love You So” Marianne Richmond book to create personalized gifts including puzzles, wall art and placemats. They’re now beginning to expand their offerings to include many other product types including nightlights, backpacks and ornaments (that last actually in beta just in the last two weeks). Last month, they had a bestseller with a Halloween Scare book and its corresponding Trick or Treat bag.

Selling stuff beyond the books themselves has been on the PMITS road map all along and was launched in a “beta” mode a year ago for holiday season 2014. They’re now working to scale it with new content partners and merchandise so they can create some unique gift bundles with books as the foundation.

The customization capability inherent in PMITS is not actually the most important piece that enables them to sell non-book chotchkes. The requirements are the direct customer relationship with the reader and the licensing relationship with the owner of the book. Sourcebooks has created both with Put Me In the Story. Any publisher with a strong ecommerce business would have the pieces in hand for their own books (as Chronicle is now demonstrating). One could see the value and the opportunity here for a big book retailer, but the effort required to create the licensing relationships necessary would be substantial. (Of course, a big book retailer that owned its own content would have an advantage here. And we can think of one…)

An important principle is being established here. A book creates a brand. There are many things people want — beer mugs and scarves and t-shirts among them — that have greater consumer value if they are branded. Put Me In the Story has made that abundantly clear.

Note that Digital Book World, the biggest global discussion of how digital is changing the publishing business, has moved from the January slot it occupied for its first six years to March 7-9, 2016 at the New York Hilton. In addition to the “transformation” theme, this year we have a strong focus on the tech companies that are affecting publishing’s world. How do Amazon, Apple, Facebook, and Google strategies and initiatives affect publishers and authors? Our program is loaded with experts on that. 

Digital change may have seemed to slow down, but Digital Book World is still covering aspects of it that none of us know well enough yet. You’ll want to be there. The first Early Bird deadline expires at the end of the day on Monday, November 9. To get your best price, sign up through Publishers Marketplace by then.

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What Oyster going down demonstrates is not mostly about the viability of ebook subscriptions


The news that the general ebook subscription offering Oyster is throwing in the towel was not really a surprise. The business model they were forced to adopt for the biggest publishers — paying full price for each use of a book with a threshold trigger at considerably less than a complete read while, at the same time, offering consumers a monthly subscription price that barely covered the sale of one book, let alone two — was inevitably unprofitable. Their only hope was that they’d build a large enough audience fast enough that publishers would become in some way dependent on it (if not the revenue it produced) and agree to different terms.

It would be a mistake to interpret Oyster’s demise as clear evidence that “subscriptions for ebooks don’t work”. Obviously, they can. Safari has been a successful and profitable business for nearly two decades. The Spain-based 24Symbols has been operating an ebook subscription business, mostly outside the US and mostly not in English, for too many years to be running exclusively on spec VC money. Scribd has very publicly (and a bit clumsily, in my opinion) adjusted their subscription business model to accommodate what were unprofitable segments in romance ebooks and audiobooks, but the inference would be that for other segments the business model is working just fine. And then there’s Amazon’s Kindle Unlimited, which is sui generis because they control so many of the parts, including deciding more or less unilaterally how much they’ll pay for much of the content.

What seemed obvious to many of us from the beginning, though, was that a stand-alone subscription offer for general trade books could not possibly work in the current commercial environment. The Big Five publishers control the lion’s share of the commercial books that any general service would need. All of those publishers operate on “agency” terms, which makes it extremely difficult, if not impossible, for a subscription service to pull those books in unless the publisher allows it. The terms that the publishers would participate in the subscriptions required, which were, apparently, full payment for the book after a token amount was “read” by a subscriber, combined with a limited number of titles offered (no frontlist), made the subscription offer inherently unprofitable.

The publishers see the general subscription offers as risky business for books that are currently selling well a la carte. Not only would they threaten those sales, they threaten to convert readers from a la carte buying to going through the subscription service. To publishers, this just looked like another potential Amazon: an intermediary that would control reader eyeballs and have increasing clout to rewrite the terms of sale.

So they only participated in a limited way. Penguin Random House (the biggest, and in shouting distance of half of the most commercial books all by themselves) and Hachette Book Group did not even experiment with the non-Amazon subscriptions. HarperCollins and Simon & Schuster, and to a lesser extent Macmillan, participate in a limited way. Multiple motivations drove the participation that did take place. The primary goad, probably, was to simply oppose Amazon. Having customers nested anyplace except the behemoth in Seattle can look like a good idea to most publishers. But another was to collect at least some of that VC money poured into an unlikely-to-work business model before it was exhausted. And because the publishers got to decide which books to include, they could choose backlist titles that weren’t generating much revenue anyway and which might benefit from “discovery” within the subscription service.

(Carolyn Reidy, the CEO at Simon & Schuster, tipped to this in her talk last week at the BISG Annual Meeting where she specifically mentioned the value of the discovery S&S has seen take place in the subscription platforms.)

But not all the subscription services were equal. The established Safari was in a market niche, serving mostly B2B customers in technology companies. (They have recently gone to an expanded offering because Boeing and Microsoft techies don’t just need books about programming; they’re also parents and cooks and gardeners so general-interest non-fiction can appeal to them. But that’s not the foundation of Safari’s business and they’re not trying to push fiction.) Scribd had a foundation business as a sort-of “YouTube for documents” that the ebook subscription business both built on and enhanced. For Amazon, Kindle Unlimited just gave them another way to transact with the ebook customer and it gave them another outlet for their exclusive Kindle content.

Only Oyster and another pretty-much simultaneous startup, Entitle (which had a proposition more like a book club than a straight subscription service), were trying to make the alternative ebook revenue stream into a stand-alone business. Entitle went down before Oyster. Librify, another variation on the theme, was acquired by Scribd.

So the failure of Oyster is actually another demonstration of a “new” reality about book publishing, except it is not so new. Book publishing — and book retailing — are no longer stand-alone businesses. Publishing and bookselling are functions, and they can be quite complementary to other businesses. And as adjuncts to other businesses, they don’t actually have to be profitable to be valuable. What that means is that entities trying to make them profitable — or, worse, requiring them to be profitable to survive — are at a stark competitive disadvantage.

Amazon is the past master at making this reality obvious. Remember that they started as a “book retailer” and nothing else. They leaned on Ingram’s Oregon warehouse to enable their business model, which was to take an order for a book and accept payment, then procure the book from Ingram and send it to the customer, and then a little later pay Ingram’s bill. This positive cash-flow model was so brilliant that Ingram could have readily enabled lots of copycats, and they formed a division called Ingram Internet Support Services to do just that. So Amazon killed that idea by cutting their prices to no-margin levels and discouraged anybody else from getting into the game. That was in the late 1990s.

They could do that because the financial community had already accepted Amazon’s strategy of using books to build a customer base and to measure future business prospects by LCV — the “lifetime customer value” of the people they did business with. And it became clear pretty rapidly that they could sell book readers other things so no- or low-margin sales were simply customer acquisition tactics. This was a game Barnes & Noble and Borders couldn’t play.

Now book and ebook sales are almost certainly no more than a single-digit percentage of Amazon’s total revenue. Kindle Unlimited, like their publishing enterprises and self-publishing offerings, are small parts of a powerful organization that has many ways to win with every customer they recruit.

Scribd is not as powerful as Amazon, but they began with a network of content creators and content consumers. That gave them a marketing advantage over Oyster — not every customer had to be acquired at high cost since many potential customers were already “in the tent”. But it also gave them some stability. Eyebrows were raised recently when Scribd put the brakes on the lending of romance books and audiobooks. But tweaking the business model for those verticals simultaneously leaves open that the model is actually working in other niches.

We can see this playing out in a much more limited way in Barnes & Noble stores, where books are being replaced on shelves by toys and games. But that’s not likely to be enough diversification to matter in the long run. It is certainly not going to get B&N where Amazon is, where far more than nine out of every ten dollars comes from something other than books. And Barnes & Noble is nowhere near a point Amazon has reached: where the profit from book sales is incidental if they keep bringing in new customers and also keeps them loyal.

The story on Oyster, still incomplete as of now, is that a lot of their management team is on its way to Google, which, in effect, “bought” the company to get them. Google seems to be trying hard to make sure we don’t think they bought Oyster’s business, they just bought Oyster’s staff. Obviously, Google fits the description of a company with many other interests in which books can play a part. In the beginning, that was all about search. Now it is also about the Android ecosystem and media sales in general. An ebook subscription business, or even a content subscription business, could make sense in Google’s world. But it would be a relatively small play for them. My hunch, and it is only a hunch, is that they have something other than a mere “book subscription service” in mind for that Oyster staff to work on. Smarter observers than I seem to believe that the personnel Google recruited give them knowledge about Oyster’s mobile reading and discovery technology. Of course, that’s core information for Google.

Similarly, Apple, which now has subscription service for music, might also consider doing one for books — or for all media — at iOS at some point. They don’t have one of Amazon’s advantages — a big stable of intellectual property they control — but they are all about creating an ecosystem that people stay in and don’t leave. Book subscriptions could enhance that.

But the central point I’d take away from this is not that subscription failed, but that a pure book business play failed. One obvious question that provokes is when we will see some signs of synergy between Kobo and their owners at Rakuten, who presumably have Amazon-type ambitions but haven’t seemed to use their ebook business to help pursue them.

And what is true of book retail is also true of book publishing, as we observed in this space quite some time ago. Both publishing and book retailing will increasingly become complements to larger enterprises and decreasingly be stand-alone activities that business can dedicate themselves to for profit.

The New York Times this morning has a front-page article essentially reporting that the ebook surge is over, at least for now, and the print business appears stable. This is great news for publishers if the trend is real. Unfortunately, there were a few important points either elided or ignored that might have undercut the narrative.

One is that, while publishers report ebook sales as a percentage of total book sales steady or slightly declining, Amazon says (and Russell Grandinetti was quoted in the article) their ebook sales are going up. Assuming all this is true, is the difference perhaps sales migrating away from publishers (which sales would be reported by the AAP stats they rely on) and moving to cheaper indie titles available only through Amazon (which sales would not)?

Another is that publishers are raising prices on ebooks and making the price rises stick because of Agency. Is all the sales resistance created by higher prices resulting in print sales, or is some of it causing the book to be rejected for something cheaper? In other words, might total sales for many titles be less than publishers would have looked for before? (At least one agent tells me this is the case.)

And another is that the indie bookstore resurgence has occurred in the years following Borders’s demise and the shifting of the product mix in Barnes & Noble. It is worth asking whether the indies are temporary beneficiaries of a sudden shelf space deficiency or whether we’re really seeing not only an increase in print reading, but a renewed interest by book readers to go to stores to buy the print. That question isn’t posed in this piece.

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The big global publishers are integrating across both territories and languages


Since I posted this two days ago, one of the Big Five CEOs pointed out some things I missed that are important. These are addressed in a post-script at the bottom. Subscribers to the blog would have received the original post without the “correction”. My apologies.

The announcement this week that John Sargent has apparently moved up another notch in the global Holtzbrinck hierarchy reminds us that the cross-border and now cross-language integration of the publishing giants, a very complex undertaking, continues to develop. Sargent was already the global “trade” head for the company, which suggested that integration of the publishing strategy and operations across Macmillan (Holtzbrinck’s trade division) companies was already an important priority. Now he is EVP of the entire global entity.

This follows an announcement a few months ago by HarperCollins that it was appointing digital head Chantal Restivo-Alessi to be EVP, International, to oversee the publishing through Harper’s growing foreign language capabilities.

Until very recently, just publishing simultaneously in a coordinated way across English language companies located in different countries was a seldom-attempted challenge. HarperCollins and Holtzbrinck seem to be shooting right past that hurdle and are setting themselves up to publish in multiple languages in a coordinated way, which is a much heavier lift.

The publishers who are doing this are seeing at least two things that motivate them.

One is that selling books is considerably more profitable for publishers than selling rights. This fact has been behind the creation of the global trade publishing behemoths in the English language. Until things began to change in the 1970s, there really were no trans-national book publishing companies. Since then, acquisitions have given us five big global trade book publishing houses. The only American-owned one, Simon & Schuster, and the French-owned one, Hachette, seem to have the least integrated global English trade presences. Simon & Schuster just has less in the way of foreign-based assets. Both Hachette and Penguin Random House have a federated structure by which the local companies report up to the parent, not to a global trade head. Macmillan and HarperCollins have both been more aggressive about integrating their international English publishing efforts.

And now both of them appear to be interested in extending that integration beyond their English-language companies.

The logic behind this kind of integration is both clear and unassailable. In the Internet age, as we’ve seen for a long time, there really is no such thing as “local” publication anymore. Anything announced anywhere is heard everywhere. And it actually requires active controls to stop anything that is available anywhere from also being available everywhere. Because English is so widely known beyond native English-speakers, the English language editions of new high-profile books sell in many countries for which the first language is not English. This has become a new factor in placing non-English rights.

Until the Internet really “arrived” two decades ago, the rights-trading activity could take time and it didn’t matter, even within the English-speaking world. I remember about 20 years ago when my friend George Gibson discovered the bestseller phenomenon “Longitude” by Dava Sobel. He published it in the US and it became a big bestseller. But even though it was a story that took place in England, it took him a year or more to make a sale to a UK-based publisher. (When he did, “Longitude” went on to one of the longest-runs of all time on the UK bestseller lists.)

A story like that would be very unlikely today. Gibson owned those rights to sell. The chances are the search traffic numbers alone would have accelerated the process of finding a buyer. Or else the US publisher, even a tiny one like Walker, where Gibson was at the time, would have released the ebook for global distribution and made some sort of deal for print to be made available as well.

Because the marketing of each and every book starts with the enthusiasm of an acquiring editor, and because each new deal an agent can negotiate is a new opportunity to get a publisher to overpay, both agents and publishers were comfortable with the process as it has always been. Relatively few of the high-profile agented books are even sold for “world English”, let alone with rights beyond the English language. Just like publishers’ value is directly related to the number of accounts through which they find customers for a book, an agent’s value is directly related to the number of deals they can make for each property.

If an author can get the reach they need through Amazon alone, then it is hard to accept a royalty from a publisher of a third or less of what Amazon will pay directly. Amazon, the publishers, and the author community are all very aware of this. It is one of the two main reasons why publishers try so hard to shift share away from Amazon. (The other, of course, is that the bigger Amazon’s share of the market, the more leverage it gives them to push for a bigger share of each sale.)

And if we see a trend where one publishing deal gets an author just about all their revenue, it will also be harder for authors to accept paying a full 15 percent agent’s commission to get it, particularly once the author becomes a global brand. (And the big brand authors are precisely the ones whose books will benefit the most from a coordinated global publishing effort.)

The structural impediments to publishing this way are not trivial. It will be a very long time — not in the working careers of any of today’s executives — before coordinated global publishing is important for any but the biggest books on the list. Most titles that each of the local companies puts out will be territorially constrained, as they have always been.

But it will, indeed, be the biggest ones — probably fewer than five percent of the titles that could earn half the revenue — that the coordinated efforts will affect. These are the books that every big global house needs to sustain itself.

Nielsen, through its Books & Consumer data service, is able to create individual author profiles for approximately 350 authors: those with substantial enough sales to enable digging down into the demographics of their book buyers and getting useful information with granularity. I’d guess those profiles will make popular reading as the publishers develop their global capability, particularly since Nielsen is also tracking across both countries and languages. And those 350 authors are almost certainly among the 500 top candidates for this type of treatment.

Sargent and Restivo-Alessi are blazing a new trail. Integration of publishing efforts this way will affect advances, royalties, workflows, and marketing strategies. They will effectively create “new propositions” to put in front of the biggest authors in the world. Penguin Random House and Hachette, because of their internal structures and S&S, because of its relative US-centricity, will be challenged to keep up. (Until their internal structures change, of course, or until they make some other adjustment. Which they will.)

Agents for the biggest authors in the world will be hearing the new pitch. On the one hand, they’ll be looking at opportunities to do record-breaking contracts. On the other hand, they’ll be doing what used to be two, three, four, or more deals in one and, in the long run, probably making at least some of their authors wonder whether they should have to pay that same hefty commission the next time around. When an author in this category asks for a fee reduction to continue the relationship, I suspect that most of the time, they’ll get it.

Of course, working in multiple languages and territories is something Amazon can also do very well. But they will probably stay out of this competition, at least at the beginning, because it will be a high-advance environment and Amazon has shown no taste for that as a strategy.

Nonetheless, the signs are that the ecosystem at the top of the commercial pyramid is going to have some new distinguishing characteristics. It has been noted many times in many places by many people that the economy the Internet creates favors the winners and exacerbates power law distribution. This is about to become another example.

*********************************************************************

And now the postscript.

In fact, the “structural” differences are not as dramatic as the post describes them, although there are differences and, indeed, HarperCollins and Macmillan are best-positioned to offer and execute on global multi-language and multi-territory deals than the others.

Markus Dohle is the CEO of Penguin Random House. He has the same “authority” as Murray and Sargent do. But Random House has always been highly “federated”, with a lot of power in the imprints. That makes coordination across territories that much more challenging, as does the fact that PRH is twice the size of HarperCollins and six times the size of the other three. Being of a “certain” size is necessary to make global publishing possible, but the larger you are beyond the minimum required, the harder is coordination. It could even be that smaller global publishers — there aren’t many, but Quarto is one example and Bloomsbury another — could execute on this concept even better than the Big Five. On the other hand, smaller publishers won’t compete for the massive books like those of the 350 authors that Nielsen tracks.

In Hachette’s case, Arnaud Nourry in France holds a position above all the companies as well. All the English-language Hachette publishers report to him, as well as others. But since the biggest books have their biggest share of sales in English, and because Hachette too has given great autonomy to the local companies, it is still likely that they would find it difficult to engineer the kind of coordination we’d expect to see from Harper and Macmillan in the relatively near future.

And, finally, Carolyn Reidy of Simon & Schuster is also a global head, but the company doesn’t have nearly the resources across languages and countries that the other four do.

Since I’m adding this post-script, I will also report that a couple of significant agents pushed back at me on Twitter, saying that they were very skeptical of the potential for big company coordinated synergy across the world. They’re saying they’ll be hard to convince. But, then, so did the original piece.

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The publishing world is changing, but there is one big dog that has not yet barked


Recent data seem to show that, for the publishers, the growth in the retail ebook market has slowed down or stopped (at least for the moment), while Amazon’s ebook sales apparently continue to grow. The share of the market controlled by the publishing establishment — the Big Five publishers and others — is starting to be slowly eroded. This does not yet suggest that an author’s best bet is to go out on his/her own and we may be a very long way from that. But it does suggest that life may get increasingly difficult for publishers.

The headline data we saw last week is that Hachette’s ebook sales went down last year. All their sales declined, but ebooks fell faster and the percentage of their business in ebooks is diminishing. How much that has to do with their war last year with Amazon over terms is not clear.

What we’re also seeing and hearing is that publishers might have boxed themselves in with their return to agency pricing. When publishers first “raised prices” by instituting agency pricing for ebooks in 2010, they saw no reduction in ebook sales, which continued to grow. Michael Cader’s analysis (can’t find it in print, but he told it to me) was that publishers may have misread the real impact of price increases because they raised them in a growing market. The number of ebook readers was increasing every day, so those who were put off by the high prices were outnumbered by the new entrants who just wanted to read their books digitally on their shiny new devices.

Whatever is the reason, the anecdotal reports I’m getting suggest that the price increases aren’t being so easily swallowed in the current round of Agency pricing. Amazon may not care about ending discounting from those prices because they don’t need to or want to, but it would appear that the new deals won’t let them. They certainly don’t have the flexibility to do so that they did before Agency came to the marketplace. So the sometimes startlingly high publisher-set prices are prevailing. And, aside from the Hachette numbers that were reported, we’re hearing widespread but totally unofficial reports that big publisher ebook sales are dropping noticeably when their new higher agency prices are activated.

Hugh Howey told me this was happening in a private exchange three months ago. I didn’t believe him. I do now.

We continue to see a shift in market share. Amazon’s share continues to grow, as does Apple’s. Nook’s share continues to shrink. Google and Kobo are harder to read, but both are smaller than the others anyway.

But this is not a zero-sum game and it isn’t simple. It’s Rubik’s Cube complicated.

Some of the change in the market could be due to subscription services taking a chunk of ebook consumption out of the by-the-book retail market. Although Scribd and Oyster appear to have very small market shares, Scribd was so “successful” with some readers that they had to cut back their romance offering; it was apparently costing them too much to provide all the books their romance subscribers could read.

Amazon’s Kindle Unlimited may be having a bigger impact on the overall market. In all these cases, it is the public understanding that the subscription services are “purchasing” the ebooks from the established publishers. (Kindle’s own authors are compensated with a “by the page read” division of a pot that Amazon arbitrarily decides.) But the Big Five aren’t participating in KU and they aren’t putting their new books — the biggest sellers with the highest prices — into the subscription services. So all the reader bandwidth and revenue going through those services might be coming out of the big players’ and big books’ share.

Our friends at Ingram told me another piece of anecdata which may also be at play. They keep track of the number of SKUs that sell 100 copies or fewer and those that sell 10,000 copies or more. The aggregate sales of the former group is growing; the aggregate sales of the latter group is not. What that suggests is that the sales of books that are not really commercial are taking share away from those that are, whether those that are come from publishers or indie authors like Hugh Howey. Whether that particular change is yet impactful, it is inexorable.

The reduction in ebook sales of hot new titles could be starting to affect future deals — one agent told me unambiguously that it is visible — which would be the next step in the indie vision of how publishers disappear. Publishers base their advances on revenue expectations, which, for ebooks, might now be diminishing. If authors can’t get the same big advance as they did before, might they prefer to go it alone and take the bigger share of ebook revenues they can (still) get with a do-it-yourself approach? Obviously, for some, as the equation shifts, that could happen.

But, at the same time, we’re seeing print book sales, and — at least for the moment — print book retail shelf space, holding their own. As long as that’s true, publishers still have a vital role to play. As long as the proposition “we put books on shelves” has value, so do publishers.

In fact, Ingram (not Amazon) offers the complete suite of services a publisher needs to provide, as does Perseus, whose distribution business Ingram tried to acquire in the 3-way deal with Hachette that went sour about a year ago. Both of them can get a book printed, offset in a print run or on-demand. They warehouse and bill and collect. They have a sales force. They do business with all the retail outlets that every publisher does. And they offer all those capabilities on a marginal cost basis. (The big publishers offer a similar suite of services, but generally are less interested in smaller players that Ingram and Perseus are happy to serve.) Whether you publish one book, 100 books, or have a long list, all you need is the rights to the book and the cash to pay your costs and you can buy the logistical capability to match any publisher.

But you won’t have two things that really matter:

the capability to coordinate the many marketing activities that go into maximizing a book’s success in the marketplace, and;

the “brand” that tells retailers they should believe your hype and stock your book before they know for sure it will sell.

For big author brands, the “sure to sell” component might well be in place, but the marketing complications, and the risk (because a lot of inventory could be involved) would not be trivial.

What this means for the future of publishers, or for what will constitute the best business decision for authors, is not obvious. Everybody trying to make money in the future from the books they write will suffer from the problem the data Ingram cites points to: the increasing share of the readers’ attention that will be taken by books not published with serious commercial intent. If publishers lower their prices to compete more effectively with indie-published books and the subscription offers, their revenue will go down but so will the indies’, who will lose some of the benefits they now gain from their pricing advantage.

It is sometimes suggested that publishers need to move out of Manhattan to be competitive, but, in fact, there are many ways to reconfigure aside from that. The service offerings from Ingram and Perseus (and others: one example is that Donnelley also offers publishers the ability to convert manufacturing management and warehousing overheads to variable costs) allow publishers to get leaner and more focused on their core missions of identifying, developing, and marketing content.

What is definitely true is that the share of the reading market held by commercially-minded publishers (not just commercial “for profits”, but also university presses) will diminish as both successful self-published authors and hundreds of thousands of others who don’t succeed (and maybe don’t even care) take their content to market on their own.

The university and academic presses, of course, have a defining characteristic that might well protect them. They require certified knowledge to underpin their books. (Whether you’re publishing about accounting or brain surgery, you need validated authority that will be an insuperable barrier for independent publishing.)

This is not a death-knell for anybody. This is a changing world for everybody. Of the current household names, only Amazon and Ingram are structurally positioned to grow quite naturally in a shrinking overall market. (The publishers can grow by acquiring each other, and PRH and HarperCollins would seem to be in the best position to take advantage of that.) Amazon will sell an increasing share of the books; Ingram will provide more and more services to more and more publishers while they remain the biggest supplier to everybody besides Amazon that sells books. (Perseus can also expand its distribution business.) The roster of publishers will continue to consolidate, as it has been doing pretty relentlessly (except for a recent decade of relative stability which seems to have now unleashed a more recent stage of more extreme consolidation) for at least 40 years. But as long as print is sold in stores and, after that, as long as half of the books are sold by somebody other than Amazon, there will be a need for publishers that most authors will be delighted to allow compensation for.

Let’s remember that there is a very big dog that has not barked. No major author of recurring bestsellers has stepped up to take charge of his or her own output. It is bound to happen someday, and if you’d asked me five years ago, I would have been sure it would have happened by now. Five years ago I would also have figured that one of the big publishers by 2025 would be a version of United Artists, several major authors organized to share an organization and create their own brand. There have been no signs of that yet either. Indie publishing is still growing and it seems that established publishing is at a standstill. But we’re still many years — most likely a decade or more — from any real changing of the guard.

I don’t see myself as a sophisticated reader or analyst of fiction. But I want to offer the opinion that “Go Set A Watchman”, the controversial new release from “To Kill A Mockingbird” author Harper Lee, is a very worthwhile book. And, by my reading, both the story and the Atticus Finch character fit perfectly well with what we read in “Mockingbird”. What changed most between the two books was the circumstances of the south. “Mockingbird” takes place in a time of unquestioned white dominance. “Watchman” takes place in a time when white dominance is under serious threat. It is a more complex time and deals with more complex issues. It is easy to see why a commercial editor in the late 1950s would find “Watchman” a very uncomfortable book to sell and “Mockingbird” much easier to place in the market.

There are dueling opinions on this. I agree with novelist Ursula Le Guin (you’ll have to click on “newest post” if you go there before she publishes her next one; not sure how you’ll navigate after that), not with the bookseller who thinks the book is so bad that the store is compelled to offer refunds to disappointed readers.

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A 10-point strategy for mini-vertical creation


The last post here, where I suggested that publishers should reconsider how they handle first serials, begs a number of follow-up questions. Two people commenting on the post raised the concern that HarperCollins wouldn’t have been able to handle the traffic the “Go Set A Watchman” excerpt would generate. My IT advisors say that is actually a trivial concern. In fact, if News Corp has the capacity in any of its businesses, that capacity could have been “lent” to HarperCollins for the purpose. Or it could have been leased from someplace outside. All it would take is a modicum of advance notice.

But if the challenge of getting the necessary bandwidth is really a trivial one, it is a bit more complicated to come up with a strategy that addresses this new reality. It is fine and dandy to know you’ll “self-publish” book excerpts and drive links and traffic to them to get visibility for the books and engagement with their audiences, but those are tactics, not strategies, and they need to live within a bigger context.

Here’s the overall point. Any business that makes money by selling content must have a direct marketing component to their strategy. For some, including trade book publishers, that should be about having marketing platforms that they own and control, not primarily about controlling the sales transactions. But content can be used to foster audience engagement and the set of engaged potential customers that can be generated is an asset that will become a necessary component of every publisher’s toolkit.

This post is essentially about creating verticals. It should be emphasized that verticals are not an “all or nothing” proposition. You can build out audience-centric interest to highly varying degrees and gain benefits even with an effort as small as where these suggestions start: a landing page.

With that in mind, here’s a battle plan every large publisher should adopt. The strategic approach suggested here can be configured to work for fiction, but it is best to start with non-fiction topics.

1. Look at every topic, subject, or category for which the house has 20 or more backlist titles and which define audiences to which you intend to publish in the future. Identify all the relevant titles you have for each audience. (Here is a hint that no publisher should need: ask your special sales department.)

2. Select three-to-five categories to start. Make your choices based on which ones have the most active backlists and/or the most new titles being planned. The more focused you can be, the better. That is, “baseball history” is better than “sports history”; “knitting” is better than “crafts”; “adventure travel” is better than “travel”. Everything we will suggest will work best if you have a “tentpole”: a title or author that is very famous and popular so definitely include any categories for which that is true for you.

3. Create landing pages for each of those categories under the publisher domain. So those pages would be called something like “publisher.com/baseballhistory” (which doesn’t exist). We’re recommending this approach initially to exploit (and over time to build) the domain authority of the publisher site, which will be reflected in better SEO for each component and, in fact, for everything the publisher posts.

4. While the “landing page” will contain links to all the relevant books that led to its creation, it is best to have rich and unique title-specific copy created specifically for that page, rather than the “canned” marketing copy that already exists. Aiming the copy at people who probably found the landing page through a search will work better both for SEO and to better engage those who come to it.

5. The excerpts offered for each book should not be “first chapters”. Those already live all over the web. Duplicated content is bad for everybody’s SEO. Different excerpts should be posted for this mini-vertical. And every time you post an excerpt to the vertical, promoting that excerpt through press contacts and social media effectively promotes the entire little enterprise.

6. Authors should be offered the opportunity to post relevant content here, to promote themselves.

7. The appeal and power of the mini-vertical will be enhanced if relevant books from other publishers are included as well. This is not necessary but it would add value.

8. Each mini-vertical needs an “editor-in-chief” who will post something relevant on a regular (weekly) basis. But one EIC could handle several of these sites. Certainly one person can handle the 3-to-5 we suggest as the starting group.

9. The mini-vertical landing pages will develop their own SEO juice over time, in direct proportion to how much new content is posted — which can be a lot if there are lots of new books from which to post excerpts, let alone author Q&As or promo videos or other material — and how much what is posted is promoted, which generates inbound links.

10. The point to this whole exercise is engagement. The site EIC should respond to all queries and comments. If excerpts are offered frequently, signing up for free subscriptions to that content should be enabled. Purchasing should be made as easy as possible, preferably with links to all of the top retail vendors. (Offering a direct purchase from the publisher is the least important sales option.)

Starting and managing a handful of these mini-verticals should be quite doable for less than six figures, a trivial investment for any publisher doing $50 million or more in sales and a manageable one for publishers doing much less than that. At the very least, the publisher who does this will build a network of engaged consumers that can be reached for nearly zero incremental cost, reducing marketing spending and multiplying marketing efficiency for new books far into the future. The publisher’s “domain authority” will be substantially enhanced, adding SEO juice and audience for every piece of content they ever post.

But the payoff could actually end up being a site that becomes a world of its own, worth spinning off to its own domain, and capable of being a self-sustaining (or even profitable) business in its own right.

This is a low-risk, high-reward strategy. Some publishers are already pursuing a variant of it. Any publisher without the capabilities it can deliver will increasingly be challenged to be competitive with those who have it.

I don’t mean to imply that there is no “content marketing” among publishers today. The Content Marketing Institute did a profile on Rodale which, being a vertical publisher, has a more obvious path to thinking this way. But Simon & Schuster has vertical sites —  TipsOnHealthyLiving.com and TipsOnLifeandLove.com — and has tried others. Peter McCarthy was in on the building of a number of verticals at Random House. And the genre fiction publishers — perhaps, most notably, Tor — have really tried to talk directly to their readers. But the opportunities to build marketing platforms for publishers that have access to content and to self-interested author labor have hardly begun to be explored.

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Publisher strategies around first serials pretty obviously need to be rethought


This Friday, newspapers on both sides of the Atlantic — the Wall Street Journal in the US and the Guardian in the UK — will publish the first chapter of the much-awaited Harper Lee novel, “Go Set A Watchman”. The licensors who authorized these excerpts are HarperCollins in the US (and they are, of course, News Corp cousins of WSJ) and Heinemann, a division of PRH, in the UK.

I have not seen any reports detailing whether any money changed hands for the rights to publish these excerpts. But, unless it was a lot of money — an amount worth reporting — doing first serial this way of such a newsworthy and anticipated book seems like an anachronism, a mistake.

In the pre-internet days, first serialization to magazines or newspapers was both a way to get substantial revenue (which in most standard contracts was largely delivered to the author) and, certainly more important to the publisher, a way to jump-start awareness of the book and add some firepower to propel the first week of sales that is so important to bestseller list positioning.

But what was true in a print world is not true in an Internet world.

Most people who read the first chapter of “Go Set A Watchman” on either newspaper site will almost certainly not be a regular reader of either newspaper! They will have gotten to the excerpt some other way, through some other link or discovery point. So the “contribution” of awareness and readers from the Guardian or WSJ is likely to be far less than the additional traffic sent to them by the power of the publisher’s content. That’s a hint. It’s backwards!

Just think about what the publishers are giving up by doing these deals. All that traffic and a slew of Google-juicing inbound links could have been coming to their site. Competitors to the Guardian and WSJ, who will probably be reluctant to drive up traffic at a rival, might not link to it, but almost certainly would have if the excerpt were on a book publisher’s or author’s site. The publishers have given up the potential to get email names — perhaps hundreds of thousands of them or more — in exchange for the privilege of reading a bit beyond the first chapter or some other perk. The publisher hosting the content could aggressively upsell the book or ebook, and be driving traffic to their retailer partners, which gets them both goodwill and affiliate revenue. (How far would that affiliate revenue go toward covering any licensing fee they collected?)

Excerpts of major book releases are, in and of themselves, news events that many entities would want to “cover” and would happily link to. In the world of the web, the hosting brand is often of trivial importance, particularly when they aren’t the “source” of the content itself. Sure, people factor the Guardian brand’s credibility into their evaluation of a political story or the Wall Street Journal’s expertise for a financial or business story. But for this book excerpt? The only name that counts is Harper Lee! And the most authentic place to get her content is either from her publisher or her own branded website.

This example writes large that publishers need to reconsider their strategy and tactics around serialization. This is “content marketing” in its purest form. Penguin Random House and HarperCollins are both forward-thinking companies with a lot of digital chops. But, on this one, they’ve underscored that book publishers are often stuck in old models that need to be rethought.

It should be acknowledged that the simple purity of this lesson is muddied a bit because the Wall Street Journal excerpt might well live behind a pay wall. On the one hand, that means fewer people will see it from outside their normal base. (But it’s a weak pay wall; if you Google any WSJ headline, you can see that story without the pay wall.) But the point remains. The appearance of this excerpt will be big news that should generate all sorts of ancillary benefits to the publisher and author. Those benefits will be lost, or at least substantially reduced, by sticking to this 20th century strategy.

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My personal list of what should be top-of-mind for publishers around digital change today


What are the most important digital change issues publishers face?

To prepare for DBW 2016, we need to decide what publishers need to be thinking about and learning about next March, when the seventh annual DBW will take place. It would be extremely limiting for that selection to be based on my thoughts and opinions alone, and we have a process in place to make sure that it isn’t. (More on that to come in the next post here.) But if we were relying on me alone, here’s what we’d be focused on.

1. Ebook pricing. Publishers get anywhere from 50-to-70 percent of the retail price from most ebook retailers. Unlike the print world, where price-setting must take place before the book comes out and is, because the price is printed on the book, very hard to adjust, ebook prices can be changed quickly and frequently.

Pricing variation has historically been the province of the retailer. In the physical world, markdowns were almost never shared: the retailer voluntarily gave away part of their margin to gain market share or to build customer loyalty.

In the agency world that four of the Big Five have now created (with Penguin Random House almost certain to follow on), pricing is not only mostly controlled by publishers, they are the direct beneficiaries of higher prices and lose margin if prices are lowered.

It is true — and the indie authors who like it better when Amazon is in control rather than the publishers often point this out — that publishers have almost no experience with pricing and the impact of changes. But it is also true that the retailers, who do have more experience with it, have different objectives than publishers. Retailers want a competitive advantage against other retailers and, as part of that, they want to build customer loyalty. Publishers want to maximize revenue for each SKU, build awareness of authors, and use one book by an author or in a series to sell other titles under the same brand.

Publishers are starting very near zero on knowledge. How does discounting one title in a series affect the audience’s likelihood of getting started with it and then buying other titles at higher prices? If a book is in the news, is the right strategy to raise the price (to maximize revenue) or to lower the price (to get better market penetration on the back of the news). And is the strategy the same if the story is about the book, rather than the book being about the story? Do pricing strategies need seasonality rules, and how is that different across genres or topics?

All of these are things publishers will have to learn by a combination of experimentation, archiving of information, and analysis. A complicating aspect of this is that the market itself is still changing: a person’s ebook purchasing habits today, when they’re new to it, may change over the next couple of years, as they become more sophisticated consumers. This is a moving target but a very important one. And there is one person who stands out as having looked at this more closely than anyone: Dan Lubart, who owns Iobyte Solutions, and who previously worked for HarperCollins and now is at Hachette.

2. Building direct customer knowledge. What is knowable about audiences through listening and analytical tools today is stunning. It is critical to do audience research on a constant and ongoing basis. Publishers need to keep formulating theses about who their audiences are, then doing research to find where they hang out online and what words they use when they talk about the things the publisher wants to engage them about.

The customer knowledge is essential to do first-class search engine optimization, but it is even more important for a publisher that wants to do any kind of “campaign”. Buying keyword exposure is an exercise in constant experimentation, measurement, and management no matter what you do, but starting a campaign without doing the core audience research is simply wasteful. And what is true of ad campaigns is also true of earned media and traditional marketing campaigns. This is the marketing equivalent of “measure twice, cut once”. Don’t waste time, money, and effort doing something that research could have told you in advance wouldn’t work.

3. Building direct customer contact. Near as we can tell, the big publishers have been building email lists for years. There’s a Shatzkin Files post from the Fall of 2011 citing Tor.com’s having mailed to hundreds of thousands of people the month before, with a very high open rate and getting an extraordinary percentage of those to “take an action”.

But building lists and managing them for maximum effectiveness are two quite different things. And even more complicated is a next-generation challenge: getting publisher lists and author lists working in tandem. It would seem like a win all around for publishers to organize authors whose audiences are similar to email across their lists to everybody’s benefit. But it is easy to see why authors (or their agents or business advisors) would be reluctant to dive into something like that, or to want some control over their use in ways that effectively forestalls collective action.

Even for lists publishers entirely own and control, there is enormous work to do segment them properly and test, test, test to find the most effective ways to use them. And engagement with customers also includes branding and interaction with them in social media and targeted web sites or landing pages that can engage potential customers (and, of course, capture their email addresses as well).

4. New protocols for author collaboration around marketing. We’ve made the point in this space before that the author’s digital presence is an important component of any book’s SEO. A publisher extending its own efforts to make its books discoverable that is not including the author web sites in their analysis is missing a component essential to the success of their efforts.

This is a complicated question that will ultimately back right up to the author’s contract, but where each publisher needs to start is with an understanding of what they want from an author’s digital presence and web site. There needs to be a best practice “ask” and there needs to be analysis of what exists to pinpoint the ways it should be improved. One very alert Big Five house we know has at least an executive or two at a high level who sees the virtue in our suggestion that a graded analysis of an author’s online presence, together with specific recommendations for improvement, should be both a standard and promoted feature for authors of being published by that house. It is hard to imagine that this won’t be normal operating procedure in a couple of years but the time to start working on it, for everybody, is now.

5. Maximizing global sales: distribution and discovery. Publishers, coaxed by global ebook distributors like Ingram, Vearsa, and others, are increasingly aware that English-language ebooks have a global market. But maximizing those sales requires both having distribution to the retailers serving each market and optimizing the title description metadata so that search “works” at many places around the world.

Part of what is required there is — say it again — more research. The search terms that work best for any book may well be different in India or Australia than they are in the US. But the challenges in getting differentiated copy posted correctly in the right places are not trivial, and things don’t work the same in Amazon and Google, let alone in local retailers in each market. We figure that the sophistication of the global ebook distributors will be increasingly useful here, but it will also be necessary for each global publisher to understand their most important markets and retailers for their books to sell most effectively.

6. Building a company-wide understanding of SEO (editorial, marketing, and sales). The understanding of SEO at most publishing houses, from our experience, is both insufficient among the most knowledgeable in the house and grasped at all by far too few people. For the most part, SEO is the province of the “marketers”, but, in fact, it might even be as important that editors and salespeople understand it. The S in SEO stands for “search” but it might as well stand for “sales” or “shelved”.

Editors who don’t understand SEO lack an important tool to direct authors, particularly of non-fiction books, to address what the audience wants. Without SEO understanding, they can’t instantly tell a “bad” title (one that won’t work for SEO) from a useful one.

Salespeople, whether they are covering brick stores or online ones, need that understanding too.

The key to optimizing for search is knowing how the audience searches. This can only be accomplished by research, and it changes with time so the research for a similar book on last season’s list can’t reliably be re-used. That will become clear as we consider the next point.

7. Allocating effort across a large backlist. The biggest opportunity and the biggest challenge for publishers, as they have historically operated and as they are currently structured, is maximizing their opportunities across their backlists. The big houses are dealing with many tens of thousands of titles. We advocate techniques that require some human application so scale techniques have to be used to pinpoint the titles worth an effort.

Although we are developing tools to help digest the external cues that might affect where the focus should be — cues from the news and social graph — each publisher has to start with a combination of knowledge of the list, intuition, and a sense that sales can be improved to pick those titles worth reviewing for better audience understanding and descriptive copy improvement. Almost certainly, titles that are more than a couple of years old will need work for several reasons: the house knew so little about SEO when copy was written; time will have changed the search terms that matter; and reviews and awards and other things from the book’s experience in the marketplace might need to be incorporated.

8. Make sure you ignore what is not important. My Logical Marketing partner Pete McCarthy has worked inside big companies and he urged me to add this eighth point. No company has the people or bandwidth or resources to spend time on things that are not very important. Whether you use this list of mine or make your own, be very wary of expending any energy or capital or bandwidth on anything else.

Of course, DBW itself won’t be relying just on me to make the choices of what to cover and what to ignore. I have already created a much longer list of topics than this for our Conference Council to review. We have them express themselves on how useful each potential topic is in a Survey Monkey poll. We will give our readers the opportunity to take that same poll when we describe the larger list of topics in our next post.

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