HarperCollins

Comparing self-publishing to being published is tricky and most of the data you need to do it right is not available


I have a certain pride of discovery in super-successful indie author Hugh Howey. It was nearly two years ago that I learned about him on a trip to LA to organize a conference that didn’t happen. The Hollywood grapevine told me about his novel-of-assembled-novellas, Wool, which was a sudden major self-publishing bestseller and that he had a movie deal. I got in touch with him and his agent, Kristin Nelson, and learned that he was making $50,000 a month in royalties, and had a host of foreign deals as well as the movie deal. Meanwhile, the publishing establishment couldn’t come up with an offer that would sensibly entice him to give up his indie revenues. I read his book and loved it and then had many interesting exchanges with Hugh and Kristin, which resulted in them appearing on the Digital Book World program in 2013, 13 months ago.

He’s a terrific guy who has achieved a phenomenal success and maximized it in a very clever way. But I think he’s a much better author and self-promoter than he is a business analyst.

At the beginning of the year, Howey offered his advice for publishers which reminded me of an old saw of my Dad’s, which was “when I was a kid, everybody wished their father owned a candy store.” Hugh’s advice for publishers is to eliminate things that annoy him (non-compete clauses, length-of-copyright licenses, New York City offices) and to lower prices, give away ebooks with hardcover purchases, and pay authors monthly.

Now, none of these things is necessarily a bad idea, and some of them will almost certainly come to pass, at least for some authors in some contracts. And I remember when Wiley moved from 3rd Avenue to Hoboken that they figured they got a competitive advantage of permanently lower rent at very little sacrifice of efficiency. But none of them are things a publisher would do just for the hell of it; they’d have to see a competitive advantage or a competitive necessity. The piece he wrote advising the publishers (which he addressed to HarperCollins but which he meant to be generic) didn’t even attempt to prove that these changes were either commercially advantageous or necessary.

But giving this advice to HarperCollins or any other big publisher is not dangerous to anybody’s health. Unfortunately, Hugh’s latest business inspiration — a call to arms suggesting to independent authors that they should just eschew traditional publishing or demand it pay them like indie publishing — is potentially much more toxic to consume. (The agenda here is unclear. Is Hugh most interested in getting more authors self-publishing or in organizing authors to demand better terms from publishers? It’s hard to tell, but there is an agenda, it would seem.)

The long story short is that Howey analyzed a bunch of Amazon rank data (apparently a single day’s worth, 1/28-29/2014, which has so many obvious problems associated with it that all by itself it raises questions about what of value can be gleaned) and from that extrapolated some breathtaking (and breathless) conclusions that go way beyond what the data could possibly tell anybody. The analysis purports to compare how authors do self-publishing versus how they’d do with a publisher and comes to the conclusions that they make more per copy on average self-publishing and maybe even sell more and make better books to boot. (For much more and better analysis of the data biases, I’d check Dana Beth Weinberg’s post on this subject. Her objections and my objections have very little overlap.)

My problem with the whole exercise is that there is a long list of relevant facts not included in the data and therefore ignored in the subsequent analysis:

1. Author revenue from print sales.
2. Getting an advance before publication versus having costs before publication.
3. Unearned advances and their impact on author earnings.
4. Getting paid for doing the work of publishing which goes beyond authoring.
5. Current indie successes where the author name or even the book itself was “made” by traditional publishers.
6. Rights deals.
7. How well Amazon data “maps” to what happens elsewhere. Is it really projectable?
8. The apparent reality: flow of authors is self- to traditionally-published, not the other way around.
9. Publishers can raise royalty rates (or lower prices) when it becomes compelling to do so.

Each of these could be a big or small part of the story, but every one is relevant.

1. Author revenue from print sales. Authors not only make a lot of money on print sales, but print in stores (as opposed to printed copies available through Amazon) is also a marketing element. This all still matters. In a comment on Howey’s site, one author estimates her Amazon sales as anywhere from 10% to 30% of her total sales. Obviously, for some other authors it is a lot more than that, maybe north of 70% of their sales. Which kind of author are you? And if you’re the kind selling mostly on Amazon, is that an inherent characteristic of your appeal or a deficiency in your non-Amazon distribution?

2. Getting an advance before publication versus having costs before publication. Although Howey cites one author who turned down an advance to self-publish, those stories appear to be few and far between. I was really struck by one such author announcing nearly two years ago that he was doing this, but, in the end, that author took a publishing deal — not a self-publishing deal — from Amazon. And the size of the advance is also a consideration that Howey’s analysis doesn’t touch on. It can’t, because that data — however relevant — isn’t available. (But then, can you draw valid conclusions without it?)

 3. Unearned advances and their impact on author earnings. Unearned advances are a substantial part of author compensation. I know of one Big Five house that calculates that they pay more than 40% of their revenue to authors and another which says that number is in the high 30s. That’s not all digital, some of that is print with manufacturing and warehousing and shipping costs associated with the revenue. How can you compare how authors are compensated if you don’t calculate the benefits to authors, meaning the resulting higher percentage of the revenue they’ve taken, of unearned advances? That relevant data is also not available.

4. Getting paid for doing the work of publishing which goes beyond authoring. Frankly, the biggest omission to me is the eliding of the costs — in time and money — of doing the work the house does for an author. Howey mentions that editors and cover designers can be hired. That’s true, and good and competent ones too. But is a good writer necessarily a wise chooser of an editor or of a cover design? How much does it cost if you don’t get the right one the first time? (We know publishers aren’t perfect at these jobs either, but they’re bound to be better most of the time than somebody who hasn’t ever done it before.) And is that how you want to spend your time? Authoring is a job but doing the work of self-publishing is also a job. And it entails real risk. Advising a writer to self-publish without considering these things is like telling somebody who’s a good cook that they might as well just open a restaurant.

5. Current indie successes where the author name or even the book itself was “made” by traditional publishers. Another factor any author self-publishing has to consider is the likelihood of success, which is much greater if the books are backlist (have some fame in the marketplace) or even if just the author has been previously published. Successes like Howey’s, from a total standing start with no prior writing track record, are quite different from others who have reclaimed their backlists and used them as a platform to build a self-publishing career. Now, that data could be obtained. Wouldn’t you like to know how many of the “indie authors” at various income levels were cashing in on what was originally publisher-sponsored IP and how many started from scratch? (It’s more challenging, of course, to assemble the data by the author rather than by the book.) But I sure think it would be necessary to understand before drawing conclusions about who should self-publish.

6. Rights deals. Howey himself has benefited from having a stellar agent who has made foreign and movie rights deals for him across the globe. (She even made a print-only deal for Wool with S&S.) Yes, you can (if you’re lucky) do this like Howey did: finding an agent to represent his self-published material. But that’s another thing to find and manage that comes with the deal (and the advance check you get to cash) if you do a deal with a traditional publisher (although, admittedly, you would probably have had to find the agent in the first place, and self-publishing could be a way to do that.) Nonetheless, you get more rights-selling firepower on your side if you’re with a publisher.

7. How well Amazon data “maps” to what happens elsewhere. Is it really projectable? A massive flaw in the analysis is the biased nature of the data. Amazon’s sales profile is not the same as the market as a whole. (One day of data isn’t a projectable sample either.) One agent pointed out to me that they are weak at selling mass-market fiction, for example, and that their ebook sales tend to the fresh and new, so they don’t get a bump when a mass-market paperback comes out. But we can be pretty sure that Amazon sells ebooks more successfully than the market as a whole, because Kindle has the biggest installed base and Amazon has the most book customers. This bias of sample is compounded by the focus on genre fiction. No matter how big a percentage of those niches is served by Amazon, it is important to remember that it is where they are relatively strongest in relation to the big publishers. If we were comparing literary fiction or biographies — both of which have lots of worthy authors too — the chances are the cost of an Amazon-only distribution strategy, or an ebook-only distribution strategy, would be far higher. And the chances of success would be far lower.

8. The apparent reality: flow of authors is self- to traditionally-published, not the other way around. But I think part of the motivation for this piece was frustration in the indie author community at the fact that many of the best ones get signed up by traditional houses, who view indie publishing as a farm system, and very few established authors will actually turn down an advance to go indie. They’ll reclaim their backlist and self-publish it, or do a short ebook on a subject that is timely and can’t wait for print or be made longer. But there has been very little evidence that I am aware of that publishers are having wholesale difficulties getting authors to come aboard with them on a traditional deal.

9. Publishers can raise royalty rates (or lower prices) when it becomes compelling to do so. Which brings us to the final point that I think is relevant and ignored. As Howey and others have pointed out, the early days of ebook publishing appear to have been good for publisher margins. They can afford to give authors more. (In fact, I encouraged them to do that before their accounts come after them for the extra margin in a post nearly three years old.) But they’re not going to give it out of some spirit of generosity or because Hugh Howey (or Mike Shatzkin) thinks it would be a good idea. They’ll give it when it is a competitive necessity to do so.

So my advice about Hugh Howey’s advice is simple. Totally ignore it if you’re not a genre fiction author; there’s precious little evidence or thinking in it that applies to you. And if you are a genre author, be very clear about the extra work and extra risk you take on in order to get some extra margin. Both will be required for sure whether the extra margin materializes or not.

Self-publishing is definitely an incredible boon to commercial writers and they should all understand how it works. Increasingly, literary agencies see it as their job to provide that knowledge.. It is almost certainly a good idea to self-publish for many writers who have reclaimed a backlist that has consumer equity. It is a perfectly sensible way to launch a career, either before going after the commercial establishment or as a part of the strategy to engage with them. (Editors in the big houses are well aware of the self-publishing successes; it’s a new farm system.) If an author has access to markets, it can be a better way to get short or very timely material to them faster. But to say it has its advantages and applications is a far cry from saying that it is a preferable path for a large number of authors who could get publishing deals.

I can’t “prove” this so I won’t try, but it bears further emphasis that it still looks like the number of authors who start as self-published and then get “discovered” by the establishment and switch over is still larger than the number of authors who say “keep your stinking advance” and turn down a deal to do the publishing themselves. None of the parties involved is stupid — not the traditionally-published authors, nor the self-published authors, nor the hybrids — not even the publishers. And they might not be evil, either. As for self-interested debaters, they exist on all sides.

PS: I HATE long comments. If you disagree with me and want to use my space to make your case, please be concise. (And frankly, although I also prefer you to be concise if you agree with me, I’m made less cranky when I get long-winded support.)

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Publishers do need to sell direct, but here are five things they should at least be started on first


The “Code Meet Print” blog by Glenn Nano recently reprised a subject I wrote about 18 months ago: the benefits that flow to publishers that sell direct. In that piece, I highlighted the disagreement that seemed to exist at that time between my advocacy of direct selling of ebooks particularly and Random House’s lack of interest in doing so.

In the meantime, I’ve been working with Peter McCarthy, building a digital marketing business. Pete was the lead digital marketing strategist at Random House for six years ending shortly before I published the piece. Nano makes the point that only Random House among the former Big Six does not sell ebooks direct now (although Penguin, the other half of the supermerger, does).

But in the year I’ve been working with Pete, I’ve learned with more nuanced perspective where “owning the transaction” fits in the hierarchy of tools and opportunities for publishers to directly influence consumer behavior. It isn’t at the top. So I have a new-found respect for Random House’s reluctance to forge ahead with retailing (although they clearly have been pursuing a direct-to-consumer strategy for years) and a new-found understanding of many other things publishers can do to help themselves with direct-to-consumer book marketing without necessarily executing the final sale of the ebook.

Any publisher who has been awake for the past several years knows that they need to talk to consumers directly where consumers are and can be engaged. Search engine optimization, Facebook and Twitter (and Instagram and other digital venue) campaigns, and consumer databases were practically non-existent five years ago and are now universally-accepted components of the marketing toolkit.

At first blush, it seems like a no-brainer that if you are talking to the consumer, introducing them to a book and persuading them to buy it, then you ought to at least try to get the full margin on the sale by executing the final transaction (as well as, perhaps, learning even more by observing their behavior as they read). But, of course, there are myriad complications.

Selling ebooks with DRM at all costs money for the license, adds complications for the end consumer, and can’t be executed by anybody except Amazon for delivery to the Kindle.

Setting prices is devilishly difficult. Either you resign yourself to being more expensive than many of the retailers or you compete with them on price. That requires technology and complicates the relationship with the sources of most publishers’ sales. It also means the “additional margin” you’re aiming to capture might not be as much as you hoped.

Being a retailer requires customer service. That’s something publishers have no experience with. And the difficulty of delivering it escalates with DRM and with any kind of dynamic pricing policy.

It is not surprising that the first publishers to sell ebooks direct had both the characteristics of being “vertical”, working with the same audiences repeatedly, and of being willing — for whatever reason — to distribute ebooks without DRM, which makes them easily passed along to others without in any way reducing the access of the original purchaser. These publishers — like Osprey for military books and F+W Media for illustrated books on many discrete subjects and Baen and Tor in the sci-fi genre — were anticipating the opportunity that Nano points out HarperCollins is exploiting with Narnia: using content to attract consumers which would lead inevitably to some desire to purchase. And selling direct also enables those publishers to make special offers around pricing or bundling or loyalty that would be much more cumbersome, if not impossible, to execute in collaboration with the existing retail network.

The need to sell direct seems pretty obvious and pretty compelling and there are now a growing number of service providers who can make it possible for publishers to do this on the web and through apps. (We’ll have a number of them talking about that at Digital Book World.)

One thing I learned from Pete is that — at least for a time and maybe still — Random House, apparently uniquely, was able to gain very granular affiliate-code tracking from Amazon. (This was achieved, apparently, merely by requesting it.) An affiliate code is the mechanism that enables publishers (or any other third-party) to be paid a referral fee on sales executed from traffic they send to Amazon (or any other retailer which compensates affiliates for referrals) for a purchase. Publishers normally have one and only one for each retailer to use across all their referrals, so they get sales reporting and payments from each retailer that are consolidated across all their titles and all the campaigns they run for those titles.

That leaves them flying blind on one of the most important metrics in digital marketing: how their clicks convert. Publishers persuading consumers and sending the traffic as an affiliate to Amazon or B&N (or any other retailer) can only possibly know the total number of clicks that went through them to the retailer and the total number of copies of each book they are credited with selling. Painstaking matching could get them a conversion index for a title, but not broken down by campaign or referral source.

Because Random House didn’t have that blind spot, they were, first of all, aware that their conversion rate on clicks to Amazon was very high, much higher than they would expect to get themselves if they tried to encourage consumers to buy direct. So the capture of more margin per sale would be at the expense of losing many sales. But, in addition, the extra margin can get burned up pretty quickly with the costs of running a direct-sale operation. One that provides solid user experiences, customer service, and other now standard eCommerce practices anywhere near today’s customer expectation is expensive — more so when it isn’t your primary business. eCommerce is a huge distraction, especially when it is executed by the folks who are also your digital marketers! That, or additional head count (which further lowers margins), would constitute a publisher’s choices.

When Nano made the suggestion in his piece that publishers move their “direct sale” up in the hierarchy of what they offer the consumer, above Amazon and other retailers, he wasn’t reckoning that this would result in a predictable rise in “cart abandonment”, which would mean sales lost. Nor did he calculate a substantial increase in operating costs.

That granular knowledge also enabled Random House to measure the success of campaigns by the meaningful metric of “books sold” rather than the proxy of “clickthroughs created”. That data made it evident very quickly that the search terms and calls to action that drove the most clicks weren’t necessarily the ones that drove the most sales. And, in addition, Amazon likes it better, and is more likely to invoke their own marketing capabilities on your behalf, if you’re driving traffic for a book that converts.

And all of this leads me to a list of five things I’ve learned in the past year that are really essential for effective marketing by publishers in the digital age. And I think all of these things are more important than, and independent of, whether the publisher controls the transaction or doesn’t.

1. It is necessary to do research to create effectively-SEOd copy for each and every book. McCarthy works with about 125 listening and analytical tools that allow him to find where targeted audiences are on the web, when they’re there (he can tell you the optimum time to tweet or post) and what words they use, enabling optimized search and attracting the consumers with the right “intent” to learn more about books. At the very least, every book needs an hour or two of structured examination of its audiences employing a dozen or more of these tools. Publishers who have their editors or marketers create the book descriptions and other metadata without doing this research are missing a critical trick. (Full disclosure: the Logical Marketing Agency Pete and I have just launched is now selling the service of doing this work at a per-title price that any publisher can afford, and which we think might be a faster, better, and cheaper solution for many than burning their own staff time figuring it out.)

2. Optimizing an author presence also requires research, and the more famous an author is, the more complicated is the challenge of pointing readers to a particular book. We’ve done three big author-centric jobs in the early days of our agency: one helping a major publisher look at the online presence of a major multi-book author they want to woo away from a major house competitor and the others examining the online presences of celebrity authors with complex backgrounds and prior books as well. Author and celebrity networks contain all sorts of clues to how to expand the author’s base, by segmenting it and by finding other celebrities and brands that have a following with similar profiles.

3. Although this is a touchy subject at the time that we’re still living with the Snowden-NSA revelations, it is also essential for publishers to be building their database of consumers and and tracking their knowable attributes, preferably with companion “permission” to email them, but even without. Several years ago, we were made aware by an agent that the enormous email lists owned by Hay House of readers interested in “mind body spirit” books enabled them to out-market big houses in their vertical. What working with Pete has taught us is that starting only with an email address or a Twitter handle, one can learn a tremendous amount about most individuals. They don’t make much noise about it, but we know at least some big houses have databases of consumers that number in the millions. They know very little about many of them, but are able to learn more all the time. Someday, if not already, publishers will be bumping the attributes of a book they want to buy against their database of people they know they can touch to make acquisition decisions.

4. When publishers are proceeding with fully-optimized book metadata, author online presence, and as many proprietary connections as they can muster to deliver free or earned discovery, they will also find opportunities for paid campaigns that can buy them additional attention. But running these media campaigns properly is yet another new skill set that requires developing experience in people and technology to help them. The “media cost” of Facebook or Google advertising is relatively trivial (compared to what media cost in the pre-digital age), but the management of that spending requires expertise and close attention to optimize the messages and the targeting.

5. The opportunities that a digital marketing environment creates for increasing sales of backlist have, across the industry, hardly been explored. If publishers are failing to do the necessary research to deliver optimal metadata on new titles, most aren’t even thinking about it for their backlist. This is a complicated problem. You can’t spend the hour or two we consider minimal necessary research to position a new title across thousands of titles on a backlist on a regular basis. Both monitoring the outside world, news and the social graph, and keeping metadata optimized for changing circumstances are, as yet, problems without a lot of helpful tools (or start-up initiatives) to assist them with yet. But publishers have lived for years in a world where the biggest barrier to backlist sales was the lack of availability of books in stores. As sales made online now exceed sales in stores for many titles anyway, that’s no longer a barrier and a much more proactive everyday approach to selling backlist is called for. A proprietary direct-selling effort can be of only minimal value there until a publisher creates such a heavily-trafficked store that screen real estate can be an effective tool. So other solutions are called for and it is probably unnecessary to say that McCarthy and I are working on this challenge too.

We’ll be covering a number of these issues at next week’s Digital Book World. In addition to the session on “Building Direct Sales Relationships” — featuring Micah Bowers of Bluefire, Sameer Shariff of Impelsys, Doug Lessing of Firebrand and Marc Boutet of DeMarque, and moderated by Ted Hill — we’ll also have several sessions focused on backlist marketing, marketing to (and building) online reading communities, gathering and using consumer data to inform acquisitions and marketing, and how to make the most of all the various social media channels. 

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Looking at predictions from here going back a few years


Prediction posts are common blog- and article-fodder at the end of a calendar year. I don’t think we’ll do one this time around, but I thought it would be fun to review some of the prediction posts from prior years. So pardon the highly self-referential post, but I think reviewing the predictions and reality from the past provides some perspective on the changes we’ve experienced over the past half-decade.

In December 2012, I wrote about “what to watch for” in 2013. I don’t think this was very adventurous, but it was mostly right.

I said that:

1. Overall migration of sales from print to digital will continue to slow down.

2. “Other-than-immersive” books will continue to lag in digital transition.

3. Mergers and consolidation among publishers are likely to become more common, after a long period when they haven’t been.

4. Platforms for children’s books will become increasingly powerful gatekeepers.

5. Marketing for publishers will be a constant exercise in learning and reinvention, and increasingly difficult to separate from editorial.

In December 2011, I steered away from predictions to raise what I thought were the important questions facing the industry coming up in 2012. Despite no “predictions”, this one anticipated a number of developments that mattered, including the challenges Amazon Publishing would face, the difficulty for B&N trying to create a workable international strategy, the lift indie bookstores would get from Borders going out, and the conundrum facing illustrated book publishers as consumption migrates to digital.

That same year, I chimed in with others for Jeremy Greenfield’s annual round of predictions on the DBW blog. I commented on the restructuring of big companies that would result in new positions. And that was before anybody had people with the word “audience” in their job titles. Doesn’t everybody now?

But I really got it wrong about ebook royalties, which I thought back then would go up from the “standard” 25% and, although that may still happen someday, it hasn’t happened yet.

I didn’t write a single consolidated predictions post in December 2010 but I did posts making some predictions. One thing I got right was that ebook sales would continue to rise quickly (some people back then expected a slowdown, but we were still in a more-than-doubling-each-year period though, as noted above in the predictions last year, that slowdown came eventually). I thought bookstores would be headed for very hard times. That was just before Borders’s demise.

I’ve made the point on the blog before that every book purchased online is another nail in the coffin of brick-and-mortar bookselling. … I’m expecting that what brick-and-mortar booksellers will experience in the first six months of 2011 will be the most difficult time they’ve ever seen, with challenges escalating beyond what most of them are now imagining or budgeting for.

I think the next six months will make what we’ve been experiencing for the past year look very gradual. I know smart people who have thought for the past year that there would be some flattening coming soon in the ebook switchover. It doesn’t feel that way to me.

At the same time, I focused on marketing with a suggestion — for topic-specific (vertical) ebook recommendation apps or ebooks — that I still think is out there waiting to be exploited. Maybe Mike Fine’s Mediander will take hold and carry us in that direction. (What has happened instead is ebook notification of ebook price sales, which is, to my mind, not as useful.)

I also saw backlist emphasis as a logical consequence of ebook ascent. I think publishers are still lagging in taking advantage of this the way they could. And that blows the end of this prediction, because I said everybody would see that by the end of 2011. They didn’t. (And we now understand the constraints — of time, timing, and budgeting – that make backlist marketing difficult. Publishers are now looking to tackle the backlist in scalable, data-driven, and efficient ways.)

In December 2009, I made 13 predictions for 2010. One stands out: I said that ebooks would become significant revenue contributors for many titles. That happened. And also accurate was my hunch that “windowing” for ebooks, for a little while the strategy employed by publishers to protect print, would be overwhelmed by circumstances. Windowing really didn’t last long.

In January 2009, I wrote a piece for PW analyzing how my 2008 predictions had held up. I gave myself a pat on the back. I think I deserved it. As I said in PW:

I said the popularity of e-books would increase—that the rising Kindle tide would lift all the e-book boats. That appears to be unambiguously correct.

I said Apple would make an e-book reader out of the iPod and iPhone. They haven’t, but they’ve made it easy for others to do so.

I said B&N would continue to leverage its great supply chain to lengthen its lead over Borders. And, in an incredibly difficult year for all book retailers, B&N has substantially outperformed its closest competitor.

I said the lack of a competitive supply-chain infrastructure would handicap Borders, which would get a new owner. Turns out I was half-right. The lack of a competitive supply chain has been such a handicap that Borders has not yet found a new owner!

I said publishers would push harder to publicize books through the Internet because traditional review channels would continue to diminish. Well, the traditional review channels have certainly diminished, and publishers have increasingly turned to bloggers, Web sites and e-mail blasts to promote their titles. Most publishers now have dedicated staff for Web marketing.

I also said 2008 would be the year of experimentation. In many ways it was: Random with free e-book giveaways; Penguin beefing up its e-book editions of classics; Harper creating an imprint with Bob Miller that has a new business model for authors and a no-returns option for intermediary customers, as well as its Authonomy and BookArmy sites. Experimentation will be curtailed in 2009 because of the difficult economy, so I got that one into the right year.

At the end of 2013, we look forward to a new year with a revised commercial trade publishing landscape, mainly because what was formerly the Big Six is now (to my way of thinking) the Big One and the Following Four. The challenge for publishers will be to hang on to their margins, which will be under assault from a single dominant store network, a single dominant online retailer, and literary agents who know their author clients are reading the same articles they are about how the publishers’ profit has remained healthy through the early phases of the digital transition. The challenge for bookstores will be to stay relevant now that the most avaricious readers no longer must visit them to get their next book. And the challenge for everybody is to make a profit and generate some leverage on the even-diminishing share of the business that isn’t controlled by Amazon.

At this year, the fifth Digital Book World, I’ll start the show with a quick summary of what has changed since we started having the Digital Book World conference in 2010. And the wrap-up panel I co-host with Michael Cader will focus again on “Looking Back, Looking Forward”; what has happened that is significant in the past year and what we expect in the year ahead. We are delighted to have John Ingram, Mary Ann Naples, and Simon Lipskar joining us for that conversation.

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Examining the relationship between start-ups and publishers


We are in another high-funding era for digital start-ups. The book business has always looked ripe for disruption, but never any more so than now. With bookstore shelf space shrinking, ebooks growing in very uneven ways across the types of books that are published, and everything about technology getting cheaper, everything is up for grabs.

It is not a new thing that the world looks different to the companies funded by the revenues from the legacy business than it does to outsiders, some of whom want to bring tech disruption into collision with the legacy business.

Publishers see an ebook business that has been very commercially unkind to the digital versions of books that aren’t immersive narratives. Start-ups and their funders see publishers too stuck in old forms, and unable to break away from a book-style presentation when the content and use cases would call for something quite different.

Publishers see a printed book marketplace that is dominated by Amazon with less and less room for books in stores. Start-ups and their funders see an opportunity to gain further digital discovery by making the content easier for people, and web crawlers, to “see” online. And they also see making digital versions of books easier to “share” as an aid to discovery; publishers often see it as an enabler of unauthorized distribution that could cut into sales.

Publishers see books as products driven primarily by interest in the author or genre (for fiction) or the subject (for non-fiction). Start-ups and their funders see reading as an activity at least partly driven by convenience and availability and the ability to share the reading experience.

Publishers see Netflix and Spotify and think, “How many people read more than a book a month? The subscription model doesn’t really apply to our business.” Start-ups and their funders see that the consumers of all other content really like the subscription model and they can’t see why it wouldn’t work in the book business, too.

So we have, for example, several serious initiatives around subscriptions: dedicated (and often well-funded) start-ups like Oyster, eReatah, Skoobe and 24 Symbols, as well as initiatives from the totally-established Amazon.com and the differently-established Scribd. At the same time, some agents are outspoken in their objection to the whole concept, seeing it as a way that commercial power will pass from the author brand to the subscription brand. Publishers generally pay close attention to what agents say. Whatever the reasons, as of this writing only HarperCollins has broken ranks among the Big Five to place any substantial number of books in subscription services.

If you get many of the start-ups to speak candidly about publishers, they’ll often accuse them of being hidebound, unimaginative, wedded to old ways and models, and still “experimenting” with things that should be well-established.

If you get many of the publishers to speak candidly about start-ups, they’ll bemoan the fact that they too often don’t understand how the business really works or the true commercial imperatives at the publishing houses, which must continue to sign up and please authors and harvest revenues that still come overwhelmingly from sales of one item at a time to one consumer at a time through intermediaries.

At Digital Book World in January, we have five elements in the program to address the relationship between start-ups and established publishers.

First: we are running a survey of start-ups and publishers to get them each to talk about what they expect from the other. If you work for a start-up or your job at a publisher includes meeting with and evaluating start-ups, please respond to the survey! We will announce the results at DBW.

Second: Ron Martinez, who has a start-up (Aerbook), partly financed and supported by an industry leader (Ingram) and a long background in tech, patents, and design, will speak about the relationship between start-ups and incumbents.

Third, Fourth, and Fifth will be three panels exploring the question from three sides.

A panel of start-ups, which will include Martinez and Andrew Rhomberg of Jellybooks and two others we’ll pick after we see the survey results, will talk about what it takes to get traction with publishers, what publishing, marketing, or ecosystem problem they’re addressing, and explain their own vision of a path to success for their enterprise.

A panel of publishing business development people, including Rick Joyce of Perseus Books Group and Leslie Hulse of HarperCollins, will talk about how they view start-ups. What makes them give start-ups a meeting? What makes them engage? How much buy-in do they need from the rest of their company to be able to work together?

Finally, a panel of investors in start-ups, three of which are owned or controlled by existing publishing entities (Ingram, Macmillan, and Harvard Common Press) will talk about what persuades them to fund a start-up and what disruption they see on the horizon for publishing from the start-up community.

Very good publishing minds from three continents around the world, including Arthur Attwell,  Javier Celaya, and Brian O’Leary, have expressed themselves recently on this very problem. Although I disagree with chunks of what each of them has to say (as Jeremy Greenfield’s interview with me on the DBW blog makes clear), they individually and collectively express the real challenge of finding both workable paths to the future and workable ways for innovators to work with incumbents to get there.

The post from Jeremy triggered an exchange on Twitter among Rhomberg (from whom it inspired a thoughtful post), Peter Turner, and me which surfaced another important point. An incumbent’s job is to continue to maintain economic viability. A start-up’s objective, often, is to “change the paradigm”. If the paradigm does change, the incumbent needs to roll with that, but they don’t need to be an instrument of change. A start-up often does. That is an inherent difference in perspective that a start-up can’t afford to ignore.

As a guy who questioned why anybody would want another device just to read books when Amazon introduced the Kindle, I’m the first to admit that predicting in advance how an innovation will do — including the observations I made with such conviction in the DBW piece — is rarely a slam dunk.

It isn’t likely that our sessions at DBW will help anybody predict which innovations will succeed in the future, but it might help both start-ups and incumbents develop more mutually productive approaches to engaging with each other. That’s certainly the intention.

Don’t forget to respond to the survey if you are either a start-up or in a role at a publisher that involves meeting with or evaluating them. We’ll be collecting responses through next Monday, November 18.

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Now HERE is an experiment that looks like it worked and is worthy of replication


The new opportunity to publish a book without printed inventory has been popularized primarily by self-publishing authors and by new fledgling publishing enterprises like Entangled and Byliner following in the footsteps of earlier pioneers like eReads and Ellora’s Cave and, more recently, Open Road. This changes the economics of publishing substantially, taking a very large part of the risk out of it and decreasing a publisher’s dependence on hundreds of stores to individually agree to commit their own capital resources to display printed copies.

There have been some experiments with no-inventory publishing from the major houses, all in genres. Last year, HarperCollins launched HarperTeen Impulse and Random House launched the digital-only imprints Loveswept, Hydra, Alibi, and Flirt. And Harlequin had preceded them early in 2009 with Carina Press. In fact, these digital innovations have already given rise to what I believe is premature concern from some agents that publishers will carry this “no printing” thing too far!

Much of the promised innovation has been around publishing shorter works, works that might not have lent themselves to printed versions anyway, but they also were a way to reach out to self-published authors. Now Italy’s RCS Libri has come up with a really imaginative use of no-inventory publishing — also in a genre — as a way to test not only the appeal of a new author’s work but also the ability of fledgling authors to promote it. The concept appears to have succeeded commercially on its first attempt; it will be interesting to see whether it can be replicated by RCS Libri and by other publishers in other countries.

RCS Libri  set up a new publishing arm called “Rizzoli Lab”, a new imprint dedicated to experiments in digital. For the first effort of Rizzoli Lab, they came up with a really nifty idea. It is a series of books called You Crime, by which RCS Libri is creating a new kind of collaboration they call “co-publishing”, by which they mean that they are combining the efforts of a publisher with the efforts authors provide as self-publishers.

You Crime has four published ebooks from Rizzoli Lab, each with four short crime stories within. Four of the sixteen stories, one in each book, are written by well known Italian crime writers. The other three stories in each book are by fledgling writers, whom the Rizzoli editors found by looking at submissions but then examining the authors’ presences on the Internet. They obviously have huge numbers of people who wish to publish with them. In addition to judging the writing quality of submissions and limiting to one genre (only crime: no romance, no fantasy), they tried to evaluate the authors’ attitude toward digital and their past experience with self-publishing. They refer to what they did as “digital editorial selection”. Since RCS Libri is investing in the entire initiative (and marketing of the series, but not author marketing) they wanted to be sure they had good content to offer to the readers and strong marketing efforts to let them know it was there. Of course, their editors knew how to judge quality content. What was new was the evaluation of the fledgling authors’ digital marketing potential.

According to Marcello Vena, the digital head at RCS Libri under whose leadership this has all happened, the established authors participated in the project at least partly because it provided interim exposure to the public between their major books. Of course, everybody got royalties and the established authors got a bigger share.

The twelve fledgling authors were charged with driving traffic, awareness, and sales of the book their work appeared in. Meanwhile, RCS Libri worked with the powerful national newspaper in their corporate family, Corriere della Sera, to promote the You Crime series generically and run its web site.

As it turned out, all four books in the You Crime series sold quite well. They all made the top 50 (among over 4,000 titles) for Rizzoli throughout the entire Italian ebook market (including in the Kindle store). RCS Libri promoted the series as a competition, like X-Factor. The fledgling authors were expected to add their title-promotion efforts to the series branding done by Rizzoli and Corriere della Sera. And now at least some of those writers will have their own full-length novels published by Rizzoli, having been introduced to the reading public through this vehicle.

Vena calls this new form of publishing “co-publishing”, where an established publisher effectively partners with aspiring writers, bringing established writers into the project to help with their content and their brands. He sees the authors and publisher as “co-responsible” for driving readers to the book.

I don’t know whether the competitive X-Factor aspect of this or the “co-publishing” label are the key elements. Of course, they might be. But, regardless of that, the concept of using established writers to entice sampling of new writers is definitely a very cool idea, and doing this in a “digital-first” publishing paradigm, seriously reducing investment risk, makes complete sense.

Obviously, we want to see this work again before we leap to the conclusion that it will work every time, or even regularly, but having four successes out of four and a large number of fledgling writers picked up for full-novel treatment is a powerful statement on behalf of an imaginative experiment. I think we should expect to see this tried again in other markets. And before too long.

Of course, we are putting together a panel including RCS Libri at Digital Book World 2014 to talk about “no inventory publishing”. That’s one of several pieces of programming we will have around “new models”. We’ll also feature leading innovative publishers and suppliers talking about subscriptions, new direct sales channels, agile content publishing models, and new product forms for non-narrative content. Register by November 8 for the best rate. 

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No-inventory publishing changes everything for everybody and nobody will escape making adjustments


A somewhat overwrought article in Wired calling ebooks an “abomination” because they “price people out of reading” provokes thinking about how much the business models for the trade book business are changing. The article’s weakness stems from its focus on the pricing decisions publishers are making in selling print and ebooks to libraries when those changes are taking place in a larger and indivisible context. The industry is finding less and less uniting what it has been for the past 70 years, since the end of World War II and the advent of paperbacks, and what it will be in a future that is already being disruptive but not necessarily clear.

This is reflected on a micro level in a discussion that arose at our Marketing Conference last week from a question asking “what is a book”? That question used to have a physical answer which described an object, not necessarily describing what content it contained. We’re getting away pretty fast from requiring a book to be printed and bound; the words of an author feel no less real or worthy to many of us coming from a screen. Screen delivery is also relieving the need for a book to have any minimum length, which printed books transacted individually require for physical (we want them thick enough to bind with a spine) and commercial (selling and tracking an individual item practically requires a minimum price) reasons.

I think the questioner in this case was also trying to pull us into a disussion of video, audio, interaction, and linking, which I resist for two reasons. One is that, so far, the preponderence of ebooks that have sold any appreciable quantities have not had any of those attributes. They’re just the same words as in the printed books made reflowable for a screen. The second is that my world is the world of book publishing. My belief is that if books were to become something heavily dependent on video and audio, they won’t be made by people who today are book publishers. They’ll be made by movie studios and animation houses and digital game creators. In that case, discussion of them belongs on some other blog.

Restricting one’s thinking to assume that the future of books encompass only digital versions of what has existed as a book for the past several hundred years doesn’t, by itself, make the future clear. The changes in business models and in the configuration of the industry provide plenty of potential variation that, from my perspective, is more useful (and more fun) to think about than trying to redefine the book itself.

One of the things that has characterized books for me is the incredible diversity of markets they reach. Trade publishing has always had remarkably low barriers to entry compared to other media. It has always been easier to publish a book and make it work on some level than to launch a newspaper or a magazine, or make a movie or a TV show or a record. It costs less and the distribution channels have always been relatively democratic and accessible to outsiders. The cash comes back slowly, and profits are often elusive, but you don’t need a fortune to publish a book.

Because books inherently require a small number of sales to make money (the breakeven point gets raised by big advances to authors, but, if the author guarantee is low, most books will recover core production costs on the sale of a few thousand copies and, in some cases, less than that), they frequently target what any other industry would consider mini-markets. A publisher that mines a niche can profit on something incredibly esoteric. For example, the chances are that Osprey, a military history publisher, has made money on books about wars you’ve never heard of. But their audience has and, because they know their audience, everybody wins.

The giant general trade publishers have built big and expensive machines that can make a book a mass sensation and put it in front of the public in a big way. Other publishers have pursued other models. HarperCollins or Simon & Schuster might pay big money to an author and build an organization that can maximize marketing impact on pub date. Other companies have specialized in a market like craft books or art books or computer books, not paying the same advances and necessarily having a different emphasis in their distribution and marketing strategies.

But what has united all the business models was the commitment to make and market a book, which meant printing inventory. The minimum investment to publish a book was much less than the minimum investment to publish a magazine or a newspaper or to make a film or a record. But there still was an investment.

And that brings us back to something that made books special for their authors: the prestige conferred by somebody (preferably somebody highly professional with a brand name like some publishers have) making a unique investment in their content. That’s an investment that’s not sold as part of a magazine, or on the back of a star’s name, but in one person’s work: the author’s. When the subject of what a book was came up at our conference, one observation from a publisher of books about public affairs was how much the speaking fees of their authors went up when a book of theirs was published. The mere fact of the book conferred credibility on the author that raised their value in the marketplace, regardless of how the book sold. (Or didn’t.)

This is something inherent to the definition of a “book”. This is, also, likely to change.

The core change in publishing economics that will ultimately change the shape of the commercial industry is that the already-low investment required to publish a book has plummeted even further. As printed books become less important, then the investment required to fund them becomes less important too. Already we have seen many authors — I’ve written about John Locke and hosted Hugh Howey on the Digital Book World stage, but there are scores of others — build a career as an author without any significant print sales. We have seen other authors with long backlists, some who had only achieved modest success for publishers, turning the opportunity for higher margins and direct audience contact into financial bonanzas in digital publishing.

Repeated demonstration of the fact that it is totally possible to achieve fame and fortune as a writer without a publisher does not escape the attention of any author. Many literary agencies, the players closest to the hopes and aspirations of narrative text book authors, have been gearing up to provide digital services, primarily at first for established authors who want to self-publish their backlists. But by doing this they also create leverage for their authors in their negotiations for bigger advances and better terms from publishers, and they stamp themselves as able to continue to serve an author who decides publishers are no longer for him or her.

That means that publishers, who would theoretically always have been interested in maximizing a book’s revenue for the author and themselves, are goaded more than ever to do so. That in turn means every aspect of the business model gets questioned. Are library ebooks cannibalizing the sales of ebooks from stores? Might they? The question has to be asked. Does the fact that ebooks don’t wear out with repeated lending, as printed books do, require some different policy to make a library pony up again for frequently-loaned book? (HarperCollins has introduced such a policy.) Should a library that uses its copy of an ebook to satisfy many readers pay more than an ebook reader who has practical (and contractual) barriers to sharing? (Random House is trying this.) While some authors are asking themselves whether publishers are essential for them anymore, which makes sense, doesn’t it also make sense for publishers to be thinking hard about how the digital revolution might change their relationship with libraries?

In fact, nobody in the value chain in between the author and the reader of a book can be complacent about their position: not the agent or publisher or library, but also, quite obviously, not the bookstore, online or physical. The printer and warehouse operator must expect a shrinking share of the book business. No-inventory publishing, by lowering the barriers to entry for a written book of narrative text nearly to zero, is assuring that an ecosystem built around the reality that book inventory was the industry’s greatest cost will change profoundly.

The assertion that ebooks are making books less affordable to most people is total hogwash. For every book not available to be lent as an ebook by a library, there are probably ten from established publishers that are half the price they were before, to the consumer and to the library. And there are countless others which would not have been published before available directly from authors, which their sales tell us are valued by many readers, that are dirt cheap, priced less than the commercial transaction system for print could even consider. And the books the author of the complaining article wrote about that come with higher prices or some sort of other licensing restrictions as ebooks, are still (at least for now) still available in print at the long-traditional prices and terms.

We’re going to see marketing departments of publishers expand and sales departments contract as book distribution patterns change. We’re going to see more and more commercially viable titles launched with a no- or little-inventory-in-place model, starting with ebooks and print-on-demand availability as a low-risk launch strategy. We’re going to see books launched as serials, growing to a length determined by audience response, not based on a pre-publication plan. We’re going to see booksellers and libraries publishing and publishers building on book audiences to sell other things. And we’re going to see more and more virtual sources of books for consumers: publishers selling direct, of course, but also did you notice that Tesco is now in the game?

We’re going to see a lot of change as players of all sizes, in all parts of the publishing value chain, adjust to the “weightlessness” of a business shedding and shifting its biggest capital requirement: inventory cost. Picking on one tactic or another by one player or another, particularly from the perspective of preserving legacy behavior, is not likely to be very illuminating or helpful. The ability to put a book into the marketplace in a way that can reach more than half its audience with no inventory investment, making it possible to sell books and rights globally and only later, if it is warranted, put a bigger bet down on the book — combined with the increasing number of entities that have knowledge that could inform content and direct contact with a real market — is going to be transformative. Everybody in the chain but the author and the reader are fighting for their lives.

Smart publishers recognize that they have to completely rethink their business models and propositions in a no-inventory publishing world. Authors and agents are doing the same thing. So are many bookstores and libraries. The players in the publishing ecosystem who don’t rethink their business practices in fundamental ways will probably be relieved of the burden of thinking about them at all before long.

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We got lucky with the speakers we booked for Publishers Launch Frankfurt


Branch Rickey, the fabled baseball executive who gave us racial integration, farm systems, and a host of great teams over fifty years, used to say “luck is the residue of design”. I’d like to think he was right, because we have really been lucky with our Frankfurt show for Publishers Launch, which we present in partnership with the Frankfurt Academy.

The first little lucky break was that we booked Charlie Redmayne to speak when he was CEO of Pottermore. Then earlier this summer he moved back to HarperCollins to become their UK CEO. And now his appearance at Publishers Launch Frankfurt will be his first public address since making the switch from the biggest author online play to running the UK operations for one of the industry giants.

We’d also had the idea that there were big online communities of readers that publishers could increasingly use for marketing. GoodReads had started out with the intention of being a gathering place to discuss books, but Wattpad and Scribd did not. Wattpad was a place for writers to expose their work and get critiqued by other writers; Scribd was a YouTube for documents, a place to put and find all manner of word-and-picture content online. But over time, both grew (as did GoodReads) to become large communities of word-interested people, perfect for book promotion. And when we booked them all a few months ago, both Wattpad and Scribd were well aware of the opportunity they afforded publishers.

But good luck has intervened in all three cases. GoodReads got bought by Amazon, validating (and complicating) their position as a leading gathering place for book readers. Wattpad has done a few promotional tie-ups, but a deal they did with the innovative publisher Sourcebooks that includes a line of co-published YA books and ebooks got a lot of attention. And Scribd just last week announced a new ebook subscription service, with the opening coup of landing a large number of backlist titles from HarperCollins catching everybody’s attention.

Needless to say, all three of their leaders — Otis Chandler of GoodReads, Allen Lau of Wattpad, and Trip Adler of Scribd — will have a bit more to tell our audience than we had bargained on.

We signed up Jonathan Nowell, the CEO of Nielsen Book, to talk to us about markets in transition. Nielsen has a view through both book metadata and book sales data of how markets are behaving in many countries; we wanted Jonathan to give us some clues about where we might see what has happened in the US and UK in a non-English marketplace. In the meantime, Jonathan’s company made a little fresh news too, buying the business intelligence units from Bowker in the US.

Of course, there’s a lot more at the show next Tuesday in Frankfurt. We’ll have Ken Brooks (now SVP for Global Supply Chain at McGraw-Hill) talking about how publishers should use data. We’ll have Russ Grandinetti of Amazon speaking about their view of markets in transition. Marcus Leaver of Quarto and Rebecca Smart of Osprey, two CEOs of extremely innovative global companies that are not Big Five sized, will talk about how they use being nimble and audience-focused to succeed. Micah Bowers, the CEO of Bluefire, will talk about what a DRM-free world would really be like. And Octavio Kulesz, an Argentine publisher/researcher who studies book markets in the developing world, will give us some insight into development that is quite different from what we’ve experienced in rich countries.

And we’re delighted to be hosting a panel of German publishing players about the transition in that market, which might become the first outside the English-speaking world to show real signs of disruption. It appears that this topic hasn’t even gotten as much discussion in Germany as we think it should; we’re delighted to be hosting a conversation that should be of great local interest far from where we live.

Our Frankfurt conference runs next Tuesday from 8 to 2, ending early to allow our attendees to make other meetings on what is always a busy book fair schedule.

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7 starter principles for digital book marketing learned from Peter McCarthy


Times are changing in publishing and publishers know it. Almost every publisher recognizes that their value to authors, and therefore their future, is dependent on their ability to deliver effective marketing at scale. In this day and age, that means digital marketing, which also has the characteristic of being “data-driven” marketing. And not only is that a science that is really less than 10 years old, it is changing all the time. Ten years ago many of the most important components of digital marketing for books today — Twitter, Facebook, Goodreads — barely existed or hadn’t been born yet. They certainly didn’t matter.

Publishers can’t address their digital marketing challenge by simply spending more because the choices in digital marketing are endless. They have to be smart about what they do. Which means they have to be smart about something for which there is little established wisdom and no deep experience inside of publishing houses.

For a large part of the past year, I have been learning about digital marketing for books from the man whom I will regard as The Master until the day comes when I meet somebody who knows more. He’s Peter McCarthy. Pete started his career with nearly 3 years at The Reader’s Catalog, New York Review of Books, and the Granta family of publications. Reader’s Catalog formed part of the backbone of Bn.com 1.0. Then Pete spent six years at Penguin in the early digital days helping them build a DAM system and put out ebooks for the first time, followed by six years at Random House pioneering their digital marketing efforts.

Pete has made the point repeatedly that much of what he knows, does, and is teaching me is already well understood in the modern world of branding and marketing. The distinctions among psychographics, demographics, and behavior, and their importance in marketing, were new to me but are familiar stuff to people who sell Pepsi or Toyotas. Pete’s really invented something in publishing by looking for comparable products that aren’t other books, but outside publishing they know all about seeking comps that aren’t precisely the same as their own product. The techniques Pete employs to find audiences in people that are like the known audiences for a book are standard tools in consumer marketing outside publishing.

But that doesn’t mean publishers can just hire big digital agencies to help them. It won’t work. Because while publishing can use techniques that sophisticated marketers are using to sell other products in other places, the truly more complex world of books will be hard for them to cope with. And marketing budgets for a title that are rarely five figures, often three figures, and sometimes less than that don’t fit the best agencies’ idea of “workable”, either.

The big agencies would actually have no clue how to deal with thousands of highly differentiated products at the same time, which have some interconnectedness to them (because they’re all books, so Amazon author pages have to be optimized for all of them, for example) but mostly are unrelated. And not knowing that causes lost value two ways:

1. They don’t have techniques to apply mass optimization across hundreds or thousands of highly differentiated “products”, because the work they do doesn’t require it;

2. They don’t have the capacity big publishers need to run hundreds (or maybe even thousands) of campaigns at one time with realtime “budgets” (or “go, no-go” gauges).

So the big agencies wouldn’t know how to deal with a publishing house. The granularity would frustrate them and they’d freight each ISBN (publishing speak for “SKU”) with too much overhead.

That has left most publishers on their own, with service providers delivering some by-title assistance (you can hire somebody to do an author’s tweeting for them), but with the publishers themselves left to sort out how to make maximum use of a book or author’s digital footprint and social media presence to drive sales. And it is not really surprising that Pete McCarthy, having had the opportunity to meet the marketing challenge across thousands of titles and authors and hundreds of genres, topics, and imprints, would have figured out a lot of things that elude the publishers who aren’t digital marketing sophisticates and the digital marketing experts who rarely, if ever, encounter the granularity and product diversity that characterizes book publishing.

I’ve learned a lot from Pete, but I’ll never catch up to him and I won’t even try. He uses more than 100 different digital tools to help him understand followers in various social platforms and who they are. He is using a marketer’s understanding of each individual’s demographics, psychographics, and behavior (and behavior’s subset, intent), to define the groups of people he sees clustering. That, in turn, helps him find groups of people who are similar to the ones who already like the author or the book.

Pete has articulated many principles which make a lot of sense, even to somebody who didn’t know about demographics and psychographics and who has not worked his way through even a handful of “listening” tools, let alone a hundred or more.

1. The digital marketing menu contains nearly an infinite number of items. That results in a tremendous amount of wasted effort spent trying things that a little research would have indicated will never work.

2. The key to making sales is to put the right message in front of the right person at the right time. Research finds the right people; testing finds the right message and the right time.

3. The various tool sets will allow you to profile the “followers” of a book or author in Facebook, Twitter, or LinkedIn (or by securing an email address) and it will enable you to understand for each of them what kind of following they have. This is critical research to do before you invest effort and time in actual marketing.

4. Another key research element is to carefully pick your nomenclature. Tools can also tell you how common various words and terms are in searches made through Google, Amazon, and other venues. This informs the best choices for metadata tagging, of course, but it could also affect a book’s titling.

Understanding the book and author’s digital connections and the right language to describe the book you’re selling are “foundational” elements; everything flows from them.

5. The whole concept of marketing “budgeting” needs to be rethought. While the trap or danger in digital marketing is its infinite number of possibilities, the opportunity is that the results of efforts are visible and measurable. So everything that is tried should be measured and evaluated, continued it if is working and either altered or terminated if it is not.

This reality collides with the historical practices and commercial realities of publishers, particularly big publishers. Editors, who have to sign up the books and keep agents and authors happy, want to tell agents and authors what their marketing budgets and efforts will be. Whether the book is selling or not, agents and authors don’t want to hear that the marketing spending was cancelled because the efforts weren’t adding value. But a house can’t just add to the budget when something is working and not cancel anything that is not, or they’ll go broke.

6. The whole concept of “time” also needs to be rethought, both “time on the clock” (work people do) and “time on the calendar” — not just how long programs run (as above) but also when they take place in relation to the lifecycle of the book. In the digital era, whether books are well-represented in stores at any moment is not necessarily the key determinant of how well they’ll sell, so pushing a backlist book that might be thinly distributed but which is suddenly timely is perfectly sensible (“the calendar”). And it wasn’t that way five or ten years ago when marketing efforts wouldn’t be extended if books weren’t in the stores. It is also true that the external costs of digital marketing could be very low but a campaign could consume a lot of in-house time (“the clock”) with copy creation, design, and posting.

7. The key to successful digital marketing is to do the research that finds the right messages and targets, test the messages to the targets looking for a defined result, measure the impact, and then adjust the messaging and targeting. Pete calls that “rinse and repeat”. The objective is to find replicable actions that provide results with an ROI that can be continued until the ROI stops.

With Peter McCarthy’s help and in conjunction with Digital Book World, Cader’s and my Publishers Launch Conferences has organized a Modern Book Marketing Conference to lay out the core tenets of digital marketing for publishers. (So we can all learn from Pete McCarthy.) 

After Pete opens the day by introducing his basic approach, we’ll have a panel of top publishing strategists — Rick Joyce of Perseus, Angela Tribelli of HarperCollins, Matt Litts from the Smithsonian, and Jeff Dodes of St. Martin’s Press – talk about how they apply digital marketing in their companies. Then Murray Izenwasser of Biztegra, a top digital marketing company, will clarify the core principles of using consumer demographic, psychographic, and behavioral data before Susie Sizoler of Penguin covers how publishers can build powerful customer databases and reader insights. Marketers Matt Schwartz of Random House, Rachel Chou of Open Road Integrated Media, and Brad Thomas Parsons of Houghton Mifflin Harcourt will  talk about how they promote, including a “lightning round” of commentary about how and when to use the most important venues and tools: Amazon author pages, Twitter, Facebook, Goodreads, and many others.

We will have a round of speed-dating, so attendees can meet with key sponsors and expert speakers in small groups and get their individual questions answered. And we’ll conclude the day with Erica Curtis of Random House on best practices for measuring and analyzing your marketing ROI, and two panels. The first, on “how digital marketing changes budgeting and timing”, will feature case histories from Sourcebooks, Running Press, and at least one other publisher. The second on the new collaboration required among authors and marketers, will feature agent Laura Dail, outside marketer Penny Sansevieri, inside marketer Miriam Parker of Hachette, and an editor still to be selected.

This Marketing Conference is co-located with our Publishing Services Expo, which I described in a previous post, and attendees of the Marketing Conference are welcome to sit in on any part of PSE as well. At the breaks, sponsors and many of the speakers from both events will be available to the audiences for both events.

Full disclosure and a teaser “announcement”: Pete McCarthy and I are forming a digital marketing agency to apply his knowledge on behalf of publishers, authors, and agents. We’ll reveal more details, including our starter assignments, over the next few weeks.

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Publisher margins today may be enviable, but it will be a big challenge to keep them that way


The major publishers have apparently worked themselves into a very strong commercial position at the moment with the transition to ebooks. I say “apparently” because the data that gives the most recent rise to that understanding — a presentation by HarperCollins of the current economics — is somewhat incomplete.

What Michael Cader reported in Publishers Lunch on June 4 — about which agent Brian Defiore commented on the Aardvark blog the same day — is that HarperCollins CEO Brian Murray had laid out the standard revenue and cost structure for hardcovers versus ebooks for shareholders. What it showed very starkly is that:

1. (Even though) revenues (the top line) for ebooks are lower on a unit basis than they are for hardcovers;

2. (And) royalties for ebooks are also lower on a unit basis than they are for hardcovers;

3. (Still) unit margins for publishers net of manufacturing, distribution, returns, and royalty costs are considerably higher for ebooks than for hardcovers.

So the authors working on the contractual rates make less per unit on the ebooks than they do on hardcovers and the publishers make more. The joker in that last sentence is “working on the contractual rates”.

The biggest authors don’t, and that’s how this situation has been allowed to happen.

The savviest agents for the biggest authors don’t negotiate contracts in the same way the rest of the world does. They figure out in concert with the publisher how many copies they think the book should sell (big authors with long track records are somewhat more predictable than the rest of the universe, which is one more reason their books are so desirable to the publishers) and get an advance that is equal to a startlingly high percentage of the revenue that sales level would produce.

The advance is not expected to earn out (and, believe me, with advances calculated this way, they almost never do). That means the royalty rates are irrelevant. So they can have their star authors sign the boilerplate contract, permitting the publisher to say — almost truthfully — that they don’t pay more than 15% of cover price royalty on print or more than 25% of net royalty on ebooks (among other things).

So Murray’s chart is accurate, except that it doesn’t cover the commercial reality — even though it reflects the actual contracts — for all the biggest books.

But that doesn’t change the fact that, the chart being out in the open, there’s an adverse reaction from beyond the agent community to what looks very much like big publishers improving their financial position at the expense of authors. What other reaction could there possibly be? The Authors Guild is upset and blogger-reporter Porter Anderson catches some additional commentary from Defiore.

At the same time, publishers are doing battle on the other side of their business, with retailers looking to increase their margins as well. This is not just about Amazon. They dominate online sales and are indispensable for that reason. But Barnes & Noble is nearly as dominant in terrestrial retail and have apparently been engaged in a dispute with Simon & Schuster for months which has reduced the presence of S&S’s books in their stores. The just-announced financial results for B&N make it very clear that they’d be motivated to be extremely covetous of any additional margin they can squeeze out of their trading partners.

When ebooks started to become commercially important, which we date to the launch of the Amazon Kindle in the fourth quarter of 2007, publishers faced the challenge of reducing overheads required for print publishing as the demand for print declined. Quite aside from what was (and is) the unpredictability of the rate of the change, this is not an easy challenge. The printing you’re ordering may be smaller, but you still need to set type, design a book, and order a printing. The number of copies you’re shipping and processing as returns might be smaller, but most big publishers owned their own warehouses so it wasn’t a simple matter to reduce the cost of that component either.

In fact, it would appear that returns may have declined more than print sales have, and even more drastically as a percentage of overall sales since ebooks don’t get returned at all. All of this has been good for publisher profitability. In fact, seeing the data we see now, one might wonder whether the publishers were being self-destructive when they went through great gyrations (including everything that landed them in the lawsuit Apple just finished for them all alone and which was expensive for them to settle) to preserve print sales at the expense of ebooks. They tried windowing — withholding the ebook from the market for a while — and then, famously since the DoJ involvement, maintaining somewhat higher prices on ebooks at retail.

But, of course, they weren’t being self-destructive. As I’ve written repeatedly, putting books on shelves is the publisher’s primary value proposition; as the need for that declines in importance, so do they. The bigger margins of the current environment will be extremely difficult to maintain. Agents for the big authors will be looking for an even higher percentage of the projected revenue as it shifts to digital. Since advances from publishers for other-than-the-biggest titles are also declining, those next-tier authors will find self-publishing or publishing with smaller houses that pay lower advances but higher ebook royalties an increasingly tempting alternative. Most of all, the biggest retailers will keep pushing for more margin. And most publishers won’t have the stomach for the lengthy fight S&S has undertaken (particularly since there is no evidence, yet, that S&S will prevail in the argument).

The big publishers who are reinvesting their current margins to develop the value proposition that will be important in the future — and that’s “digital marketing at scale” — might still be able to prosper as the transition progresses. But their trading partners on both sides — authors and retailers — will be relentless at chipping away at any “excess” margin they perceive. Michael Cader has pointed out that Amazon, making a margin of less than 1% of sales, has little reason to be sympathetic to publishers complaining about how hard it is to achieve double-digit margins. Barnes & Noble will need more margin from publishers every year to keep stores open in the face of declining sales.

Authors will be tempted to try something other than the old-style deal in direct proportion to two factors: how much the sales move online and how effective they can be at getting the word out on their books on their own digital backs. The first factor is out of the publishers’ control (and difficult to predict); the second means that the most desirable authors below the very top tier will become the hardest to retain.

I offered the advice some time ago that publishers should raise their author royalties as insulation against being hit up for margin by the retailers. At the time, one major publisher CEO said to me that there was merit in the advice I was giving, but it was “pretty hard to make changes like that with the DoJ in your shorts”. So perhaps we’ll see some overt moves to raise that 25% ebook royalty rate sometime soon since the DoJ problem seems to be in the past.

I’ve felt for a long time that what authors (agents) should work toward is a fixed amount-per-copy-sold as an ebook royalty and just get out of the percentages business on ebooks, which, as we know, can have their prices change on a frequent basis. I know that would be resisted by the publishers, but it makes a lot of sense.

But the current state of affairs says pretty emphatically what I’ve felt all along: the incumbent management of the big publishers is damn smart and has managed a very tricky transition extremely effectively. Where they’ve brought things as of today is an impressive feat, even if it will be almost impossible to sustain.

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Anybody Press is the new member of the Big Six (for ebooks, at least)


Bowker reported last week that 12% of the ebooks being bought now are self-published. There was skepticism about the methodology from The Digital Reader and Good e-Reader says Bowker’s data should be taken “with a grain of salt”. But the exact number doesn’t matter; the trend does. The share of the consumer ebook dollar going to books that aren’t coming from publishing entities means that the new Big Six for ebooks are the ones we know well — Penguin Random House and the four (HarperCollins, Hachette, Simon & Schuster, and Macmillan) that among them add up to about their size — plus Anybody Press.

And Anybody Press is almost certainly growing faster in ebook sales than any of the other Big Six.

This is happening almost solely with individual authors and still mostly with authors who are not in demand by the commercial publishers. Although it does happen that authors turn down their next deal to self- or unconventionally-publish (which publishing with an Amazon imprint, even under advance-against-royalty terms, still is because there’s to date no effective retail distribution), it’s still rare for that to happen.

The self-publishing or Amazon-publishing route still requires pretty much giving up on bookstore or other retail distribution. (Or so it has seemed. The news that Amazon has sold a million of “The Hangman’s Daughter”, an unknown number through the paperback licensed to Houghton Harcourt, may be contradicting that notion. Except we don’t know how many Houghton Harcourt has sold.) But the ebook royalties are higher, so it is a balance that deserves, and gets, constant review by agents and authors as the share of sales through bookstore or other retail distribution continues to decline.

If I were the business development manager for Anybody Press (and, on some consulting projects we are working on, I am) I would see lots of target markets for growth. I’d encourage my targets to keep doing the calculation of what the sales times royalty rate is for the “bought online” portion of the market versus what the sales times royalty rate is for a conventional deal that gets you the “whole” market. As the “bought online” share grows, more and more genres and authors will find that giving up the retail sale in favor of a bigger share of the revenue per sale online is to their financial benefit.

And the way things are developing — “Hangman’s Daughter” aside — you might not have to give up the store sale forever.

The “Wool” deal, where Hugh Howey sold only print rights to Simon & Schuster, hasn’t really been replicated yet for anything else that big, but it will be. (Successful indie authors John Locke and Bella Andre have done different versions of the same trick.) Royalty rates on ebooks from big publishers are bound to go up (while royalty rates for print books will probably go down). These will change the details of the calculations as they transpire.

Another way to make the jump from purely online sales to a publication strategy that includes print in stores is to use print-on-demand technology from Ingram’s Lightning Source. That’s how Open Road, which began life as an opportunistic ebook-only publisher, has chosen to manage print beyond Amazon. As has Byliner. (You can always deliver print with Amazon by working through their CreateSpace capability.) Now, that’s not the same as being published with an advance sale in the stores on pub date, but it does mean that if somebody walks into a Barnes & Noble or an indie bookstores and asks for your book, they’ll be able to order it for delivery in a day or two.

So aside from the market share fight big publishers will have with each other, there’s going to be a continuing market share fight between Anybody Press and the commercial industry. And for some time to come, Anybody Press is going to be winning. The question, like the question about online (and Amazon) market share growth is: where does it stop?

Big publishers do have ways to fight back. Putting together our upcoming (September 26) Marketing Conference with Peter McCarthy, who used to plot digital marketing strategy for Random House, I’m learning what can be accomplished when scaled technology and expertise are employed by engaged title-and-audience knowledge. And, particularly viewed in a global context and aside from straight narrative books, the print-at-retail component has a long way to go before it becomes irrelevant. But when I say that, I mean “many years”, not “many decades”.

This amorphous but growing competition is the “atomization” concept I wrote about recently in action. It can’t be neglected in the consideration of any branch of publishing’s future. In fact, indie entities, which is the way I think about atomization, are more likely to be disruptive on a larger scale than indie authors have been so far. So we might have Any Organization Press growing even faster in the next few years than Anybody Press has for the past few.

What people spend for books won’t necessarily shrink drastically, but where the money goes will shift drastically. The challenge for today’s leading revenue producers will be to find the ways their business models can adapt to the shift.

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