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Headliners galore will address Digital Book World 2015


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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What makes books different…


Before the digital age, retailers that tried to sell across media were pretty rare. Barnes & Noble added music CDs to their product mix when the era of records and cassettes had long passed. Record stores rarely sold books and, if they did, tended to sell books related to an interest in music. For those stores, it wasn’t so much about combining media as it was about offering a defined audience content related to their interest, like Home Depot selling home repair books. For the most part in pre-Internet times, books, music, and video each had its own retail network.

But when media became largely digital in the first decade of the 21st century, the digital companies that decided to establish consumer retail tried to erase the distinction that had grown up dividing reading (books) from listening (music) from watching (movies and TV). The three principal digital giants in the media retailing space — Amazon, Apple, and Google — all sell all these media in their “pure” form and maintain a separate market for “apps” as well that might contain any or all of the legacy media.

The retailing efforts for all of them are divided along legacy media lines, acknowledging the reality that people are usually shopping specifically for a book or music or a cinematic experience. Most are probably not, as some seem to imagine, choosing which they’ll do based on what’s available at what price across the media. (This is a popular meme at the moment: books “competing” with other media because they are consumed on the same devices. Of course, only a minority of books are consumed on devices, unlike the other media. Even though this cross-media competition might be intuitive logic to some people, it has scarcely been “proven” and, while it might be true to a limited extent, it doesn’t look like a big part of the marketing problem to me.)

It seems from here that Amazon and Barnes & Noble have a distinct advantage over all their other competitors in the ebook space because, with books — unlike movies and TV and music — the audience toggles between print and digital. And this might not change anytime soon. The stats are scattered and not definitive, but a recent survey in Australia found that ninety-five percent of Australians under 30 preferred paperbacks to ebooks! Other data seem to indicate that most ebook readers also read print. To the extent that is true, a book shopper — or searcher — would want to be searching the universe of book titles, print and digital, to make a selection.

It should be more widely understood that the physical book will not go the way of the Dodo nearly as fast as the shrink-wrapped version has for music or TV/film. It hasn’t and it won’t. There are very good, understandable, and really undeniable reasons for this, even though it seems like many smart people expect all the media to go all-digital in much the same way.

Making the case that “books are different” requires me to unlearn what I was brought up to believe. My father, Leonard Shatzkin, used to ridicule the idea that “books are different”, which was too often (he thought) invoked to explain why “modern” (in the 1950s and 1960s) business practices like planning and forecasting and measuring couldn’t be applied to books like they were to so many other businesses after World War II. In fact, Dad shied away from hiring people with book business experience, “because they would have learned the wrong things”.

But in the digital age, and as compared to other media, books are definitely different and success in books, whether print or digital, is dependent on understanding that.

First of all, the book — unlike its hard good counterparts the CD (or record or cassette) and DVD (or videotape) — has functionality that the ebook version does not. Quite aside from the fact that you don’t need a powered device (or an Internet connection) to get or consume it, the book allows you to flip through pages, write margin notes, dog-ear pages you want to get back to quickly, and easily navigate around back and forth through the text much more readily than with an ebook. There are no comparable capabilities that come with a CD or DVD.

Second, the book has — or can have — aesthetic qualities that the ebook will not. Some people flip for the feel of the paper or the smell of the ink, but you don’t have to be weirdly obsessed with the craft of bookmaking to appreciate a good print presentation.

But third, and most important, is the distinction about the content itself. When you are watching a movie or TV show or listening to music through any device, the originating source makes only the most nuanced difference to your consumption experience. Yes, there are audiophiles who really prefer vinyl records to CDs and there probably are also those who will insist that the iTunes-file-version is not as good as the CDs. And everybody who has watched a streamed video has experienced times when the transmission was not optimal. There are almost certainly music and movie afficionados who will insist on a hard goods version to avoid those inferiorities.

But the differences between printed books and digital books are much more profound and they are not nuanced. In fact, there are categories of books that satisfy audiences very well in digital form and there are whole other categories of books that don’t sell at all well in digital. That is because while the difference between classical music and rock or the difference between a comedy and a thriller isn’t reflected in any difference between a streamed or hard-goods version, the difference between a novel and a travel guide or a book of knitting instruction is enormous when moving from a physical to digital format.

For one thing, the book — static words or images on a flat surface, whether printed or on a screen — is often a presentation compromise based on the limitations of “static”. The producer of a record doesn’t think “how would I present this content differently if it is going to be distributed as a file rather than a CD?” But the knitting stitch that is shown in eight captioned still pictures in a printed book could just as well be a video in an ebook. And it probably should be.

In fact, this might be the use case for which a consumer would make a media-specific decision. If you know what knitting stitch you need to learn, searching YouTube for a video might make more sense than trying to find instructions in a book!

Losing the 1-to-1 relationship between the printed version and the digital version adds expense and a whole set of creative decisions that are not faced by the music and movie/TV equivalents. And they are also not a concern for the publisher of a novel or a biography. But these are big concerns for everybody in the book business who doesn’t sell straight-text immersive reading. The point is that screen size and quality are not — and never were — the only barriers in the way of other books making the digital leap.

So even though fiction reading has largely moved to digital (maybe even more than half), most of the consumer book business, by far, is still print. Even eye-catching headlines like the one from July when the web site AuthorEarnings (organized and run by indie author Hugh Howey, who is a man with a strong point of view about all this) said “one in three ebooks” sold by Amazon is self-published, might not be as powerful at a second glance.

Although Howey weeds out the ebooks that were given away free, the share of the consumer revenue earned by those indie ebooks would be a much smaller fraction than their unit sales. The new ebooks from big houses, which is a big percentage of the ebook sales they make (and that AuthorEarnings report in July said the Big Five still had an even bigger share of units than the indies), are routinely priced anywhere from 3 to 10 times what indie ebooks normally sell for. So that “share” if expressed as a “share of revenue” might be more like five or ten percent. It really couldn’t be more than 15%.

(In fairness to Howey, he tries to make the point that indie authors earn more from lower revenue because their cut is so much bigger and he makes the argument that they are actually earning more royalties than the big guys. He also tells me that he calls some S-corp and LLC publishers “uncategorized”, even though they are almost certainly indies, in his own attempt to be even-handed. In fairness to the industry, I will point out that his accounting doesn’t take unearned advances into consideration, and since most sales of big house ebooks are of authors who don’t earn out, that lack of information really moots the whole analysis about what authors earn. Another big shortcoming of the comparison is that most published authors are getting a much more substantial print sale than most indie authors.)

But indie authors on Amazon are the industry high-water mark of indie share and ebook share. They are almost entirely books without press runs or sales forces, so they are almost entirely absent from store shelves. And they are also entirely narrative writing.

The facts, apparently, are that even heavy ebook readers still buy and consume print. There is not a lot of clear data about whether “hybrid readers” make their print-versus-digital choice categorically or some other way. There is some anecdata suggesting that some people read print when it is convenient (when they’re home) and digital when it is not. There are a number of bundling offers to sell both (offered by publishers and one called “Matchbook” from Amazon), which certainly seems to say that publishers believe there’s a market of people who would read the same book both ways at the same time!

What that all would seem to say is that the retailer selling ebooks only is seriously disadvantaged from getting searches for books from the majority of readers.

Do we have any independent evidence that selling to the digerati only — selling ebooks only — might limit one’s ability to sell ebooks? I think we do. It would appear that B&N has sold roughly the same number of Nooks as Apple has iPads. (This equivalence will probably not last since Nook sales seem to be in sharp decline.) That is somewhat startling in and of itself, since Apple is perhaps the leading seller of consumer electronics and B&N was entirely new to that game. Nook also seems to have — at least for a while — sold more ebooks than Apple. (This “fact” may also be in the rear view mirror with the apparent collapse of Nook device sales.) I will be so bold as to suggest that this is not because Nook has superior merchandising to the iBookstore. More likely it is because the B&N customer is a heavier reader than the Apple customer and prefers to do his or her book shopping — and even his or her book device shopping — with a bookseller.

[Correction to the above paragraph made on 11 Sept. I misheard and therefore misreported something that was caught by a reader in the comments below, but I should also correct here.  Apple has sold ~200M iPads but are only roughly 12% of the ebook market whereas B&N has sold only about 1/20th the number of Nooks and are about 18% of the ebook market. That fact makes little sense to anyone in Silicon Valley but speaks to how book audiences really behave. We all know a very high % of Nook owners are active store buyers.]

There is one more huge distinction between books and the other media and it is around the motivation of the consumer. While sometimes TV or movies might be consumed for some educational purpose, most of the time the motivation is simply “entertainment”, as it is with music. While analysis of prior video or music consumed and enjoyed might provide clues to what should be next, figuring out what book should be next is a much more complex challenge.

And the clues don’t just come from prior books consumed and enjoyed. Books are bought because people are learning how to cook or do woodworking, or because they are traveling to a distant place and want to learn a new language or about distant local customs, or because they are going to buy a new house or have suddenly been awakened to the need to save for retirement. You can’t really suggest the next book to buy to many consumers without knowing much more about them than knowing their recent reading habits would tell you.

But not only do (most of) the ebook-only retailers not know whether you’re moving or traveling, they don’t even know what you searched for when you were looking for print. And, even if they did know, operating in an ebook-only environment would make many of the best suggestions for appropriate books to address everyday needs off limits, because many of those books either don’t exist in digital form or aren’t as good as a YouTube video to satisfy the consumer’s requirements.

Indeed, it is the sheer “granularity” of the book business — so many books, so many types of books, so many (indeed, innumerable) audiences for books — that makes it so different from the other media.

Of course, there is one company — Google — that is not only in the content business and the search business but which also handles “granularity” better than any company on earth, down to the level of the attributes and interests of each individual. Google not only would know if you were moving or traveling, they would be in a great position to sell targeted ads to publishers with books that would help consumers with those or a million other information needs. (They also know about all your searches on YouTube!) But because Google’s retailing ambitions are bounded by digital, they are walking past the opportunity to be the state-of-the-art book recommendation engine. They’re applying pretty much the same marketing and distribution strategy across digital media at Google Play. They aren’t seeing that book customers are both print and digital. They aren’t seeing that books are, indeed, different.

When the day comes that they do, this idea will look better to them that it might have at first glance.

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Barnes & Noble and managing the digital transition


We keep making the case that the split that matters when trying to foretell the future of the book business (and everybody in it) is not “print” versus “digital”, but “bought online” versus “bought in stores”.

Of all the major retailers, only Barnes & Noble has a stake in all four of the meaningful transaction streams for trade books: print in stores, devices in stores, print online, and ebooks. (All devices are available online.) Amazon has no store presence. Kobo has a minimal store presence through independent retailers but has no print business. Apple has no store presence for content at all and doesn’t sell print online. And Google seems to only tangentially deal with any of the non-digital content businesses.

In fact, B&N is in a fifth “segment”: college bookstores. That segment was the only one that showed revenue growth in their latest reporting, although even in that segment same store sales showed a slight decline. College textbooks having been slow to move to digital has helped preserve that business, but it would be a weak bet to expect that to last forever, or even for many more years.

What this means is that Amazon, Kobo, and Apple are firmly planted in parts of the business that are growing. Kobo and Apple only sell ebooks and Amazon sells print too, but, in general, the migration to online buying and ebook consumption is going to continue so the sales taking place in the environments in which they operate will continue to grow. Whatever their share, they will be taking it from a bigger and bigger pie.

B&N, on the other hand, gets most of its sales from print in stores. That is the component of the sales which is declining and bound to continue to decline. That means that B&N, uniquely, has the challenge of keeping its customers as they switch their mode of buying and consuming books.

The retailer announced their latest quarterly results this week and, at least superficially, they are not encouraging. Sales of devices are down. Sales of digital content are down. Sales of print in stores and online are down. The company points out that book sales in general took a hit because the two most recent book sales phenomena, “Hunger Games” and “Fifty Shades of Gray” are running out of steam and haven’t been replaced by The Next Big Thing(s) yet. But in the absence of sales information about print and ebooks from Amazon (which data is normally well-masked in their overall reporting), we have no basis for comparison. And comparison is what we need to know how B&N is doing and what their future holds.

In other words, are Amazon’s online and ebook sales declining because of the lack of a replacement for “Hunger Games” and “Fifty Shades”? Or is B&N not only losing sales, but also losing share as the market migrates from stores (their strength) to online (Amazon’s strength)?

There really is no “industry” data to help us get at an answer to that. For a few years in the prior decade, Idea Logical did some sales data analysis work for a number of publishers large and small. Each publisher gets clear reporting of its sales in a granular-enough way to examine this. Of their B&N sales, they know what is digital and what is print, and they know what is sold in stores and what is sold by BN.com. At the time that we were doing this work, which ended before ebooks became a significant portion of the commerce, it appeared that Amazon sold about 10 times as many books across most lists than BN.com did. (Of course, at that time at least, B&N stores sold more than Amazon.)

Barnes & Noble is in a unique position. Every other player is looking to capture customers migrating from old patterns to new ones, whether switching from buying print in stores to buying it online (Amazon) or switching from reading print to reading ebooks. Only B&N is trying to keep customers who came to them for print in stores.

In 2010 and 2011, it appeared they were doing very well at just that, selling lots of Nook devices in their stores. It appeared that there were a large number of heavy book readers who had been unwilling to jump to digital. Perhaps they wanted to see and touch the devices first. Perhaps they wanted to see that many friends and family of theirs had made the leap before they would. Or perhaps they just wanted their trusted book vendor, Barnes & Noble, to offer them the ebook opportunity.

The anecdata suggested (there was no clear objective data to prove) that, following the launch of Nook in the Fall of 2009, B&N’s format shot up pretty quickly to a market share in the neighborhood of 20-25%, with Apple (initially) taking about 10% with the iBookstore. Amazon’s Kindle declined from more than 90% of the market to around 60%.

Then some things changed in the marketplace. The DoJ suit effectively ended publisher-set pricing. Apple took the direct link to the bookstore off all the iOS apps except their own. And tablets and phones increased their share of the ebook market in relation to dedicated ereaders. Again, relying on anecdata where no industry data exists, reports suggest that the B&N/Nook share has declined, Apple’s iBookstore has risen, and Amazon has perhaps come back a bit. (Amazon, Apple, and Kobo have a much bigger global footprint than B&N, although that probably doesn’t matter much in the US market.) Certainly, the numbers from B&N reporting that digital content sales have declined in real terms strongly suggests a reduction in their US market share. Overall digital content sales have almost certainly not declined.

It is beyond B&N’s power — or anybody else’s — to do much to affect overall consumer behavior. People will buy and read in the way that the current combination of price, convenience, and technology motivate them to. In the abstract, it would seem that a company that has a foot in all the markets would have a better chance to capture people switching buying or reading modes than a company with a more limited offering. It would seem that way, but it isn’t working out that way. B&N has to figure out how to make their ubiquity work in their favor which, except for a year or two around the debut of the Nook, they haven’t managed to do yet.

The facts tell us that Barnes & Noble failed years ago to make its store customers into online customers. They’ve been sharing customers with Amazon since Amazon began. Indeed, the skill sets a corporation needs to run a successful online business aren’t the same as they are to run a chain of physical stores. But it can be done: the office supply retailer Staples is the second-largest online retailer in the US. I think if I were at B&N I’d be asking somebody up there how they did it.

BN.com has been the weak link in the Barnes & Noble chain since they launched it under joint ownership with Bertelsmann. When the company was run by strong merchants, they didn’t pay close attention to it. For the past few years, the company has been run by an ebook-focused management and they didn’t improve it. In both cases, BN.com’s success was secondary to another agenda. It is ironic that the current management, rooted in finance and operations, seems to have focused on this core — perhaps existential — strategic problem, with improvements in BN.com promised shortly.

Another aspect of the B&N reporting was that major shareholder and Chairman Leonard Riggio announced that he is “suspending” his interest in buying the stores. Whether that is an indication that he’s less confident of their future than he was before or whether, as the announcement says, he just feels that B&N as a company needs to concentrate on making the Nook-and-store combination work more effectively, is not something anybody but he and his closest advisors know for sure.

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The totality of the relationship is what matters


Like a marriage, relationships between people and companies are seldom made or broken on the back of one transaction or one kind of transaction. They are bigger and more complicated than that. That point was driven home in my house over the weekend by the dustup between Time Warner Cable and CBS, which resulted in both our local Channel 2 and Showtime being removed from our service. That meant that Martha couldn’t see the last episode of “Dexter”, a show she has loyally followed for years.

Although, as of this morning, it is still not clear to us whether CBS pulled their programming as a negotiating ploy or whether Time Warner booted it to strengthen their own hand, it seems evident that the broadcast networks want to move to pay-channel remuneration from the cable systems that use them, among other programming, to get us to use their services and pay their bills. (In our case, that’s north of $300 a month for TV, internet, and telephone service.) Pulling just one brick out of that wall — the CBS-owned programming — has us immediately questioning the whole bundle.

We say we’re confused about this because TW customer service, and some news reports, said that CBS pulled the programming. But the Times contradicts that.

“Indeed, timing seems to be the dominant factor driving the dispute. CBS has continued to insist that it would make its programs available to the cable company throughout the negotiations and that the cable company acted now to remove them from its service because Time Warner Cable would lose leverage as the football season got closer — a point the cable executives do not dispute. They acknowledge they need to push the issue now.”

I remember that when we had RCN — an alternative provider — one “price” we paid was that we didn’t get Channel One, a NY news channel. We didn’t switch to Time Warner for that reason (I can’t remember what the motivation was; probably a price offer at the time) but we weren’t losing popular series or can’t-miss sports like Tiger Woods’s golf victory yesterday or the NFL games coming on CBS.

My reaction was anti-Time Warner immediately, and to start investigating alternatives. But since some accounts suggested that CBS had pulled the programming to gain the edge in negotiating, Martha reserved a large part of her annoyance for them. If they can pull programming she’s been following closely for years in this way, she reasoned, then she can’t trust them not to do it again. Her solution is to reconsider becoming loyal to any CBS (or Showtime) series in the future. She says she will immediately stop watching “Ray Donovan” for that reason.

But I think it is easier for her to find substitute dramatic series than it is for me to find a substitute for NFL football. Both of us are annoyed at the moment, but how we respond depends on the totality of our relationship with CBS. CBS is apparently counting on us to punish Time Warner, reasoning that TW is producing a large-scale relationship on the back of their programming.

Publishers will want to watch how this plays out. CBS really has a small fraction of the total possible programming, comparable to the sliver a large-ish but not supersized publisher might have. The new Penguin Random House combination, on the other hand, has about half the most commercial book titles in the marketplace. How will anybody run a functioning bookstore without those titles? (In fact, Amazon backed down from its own mini-boycott of Macmillan in 2010 because it would have upset the totality of their relationship with their customers.)

This “totality of the relationship” point is going to become more important to us, but it is not new. In 2010, when five of the Big Six publishers had gone to Agency pricing — reducing their revenue-per-ebook-sold in a vain attempt to re-engineer the ebook marketplace into one  in which publishers controlled the selling price — a sales executive at one of them was querulous about B&N’s apparently unwillingness to “punish” Random House for continuing wholesale terms. “We largely did this for B&N,” was the executive’s complaint. He really couldn’t understand why B&N was, effectively, letting Random House “get away” with staying out, effectively gaming the change to its own advantage.

Of course, the fact that B&N lived with Random House’s ebook selling policy was not because they weren’t unhappy with it. It was because so much else in their relationship worked so well. With Random House having invested in systems that enabled them to provide vendor-managed inventory, they were probably B&N’s most profitable trading partner. B&N wasn’t going to cut off its nose to spite its face. On the whole, they did well in the Random House relationship, even if a high-profile component of it wasn’t to their liking.

The same principle applied, in different ways, when Apple started to enforce its requirement that in-app sales pay a 30% “toll” to Apple. Since that requirement would have effectively made profitable ebook sales impossible, the other ebook vendors — Kindle, Nook, Kobo, and others — complied by taking the direct link to their stores out of their apps. So, from that day (until now), you can only buy ebooks for iOS devices directly from the app if you’re buying from iBookstore. That’s annoying, and it certainly has had the effect of increasing sales at the iBookstore at the expense of their competitors for readers using iPads or iPhones to read books. (iBookstore share has reportedly jumped since then. Of course, they also have added Random House titles, which they didn’t have at the beginning and which certainly diminished the totality of their customer relationship until they did.)

But many iOS-device customers who are satisfied with the totality of their experience with Kindle or Nook or Kobo continue to shop with them, even if it is less convenient. And Apple has apparently decided satisfaction with the total iOS experience might be too badly damaged if they took the step of prohibiting the apps for other platforms entirely.

One senior executive from a big publisher was recently expressing frustration at what it took to set up a functioning direct relationship with consumers, opining that publishers couldn’t sell ebooks profitably one-at-a-time. Only a subscription model of some kind could work. That’s likely to be true, but underscores again that there needs to be a relationship larger than individual transactions to enable individual transactions.

Amazon has operated on this principle for a long time; it is the core of the logic behind Amazon Prime, which entices a customer to stay loyal with a variety of incentives, the most obvious of which is “free” shipping.

And that brings me to a point worth considering in today’s news about the evolving ebook marketplace. The Department of Justice has asked for changes that are intended to be punitive to Apple. Certainly the suggestion that Apple be forced to allow in-app sales without compensation would be. It is likely that iBookstore sales will suffer almost immediately if they are no longer the only ebook vendor on iOS devices with a link straight to the store from within the app.

But with the DoJ’s desire to totally liberate the book marketplace from price controls, they could also be setting up the whole incumbent ebook business, including Amazon and the others as well as Apple, for an entirely new kind of competition based on total relationships that aren’t being contemplated.

(Caution: this coming bit of future-think will only work effectively for ebooks in a DRM-free environment. My own hunch is that DRM-free is coming before long for unagented and midlist books, particularly those of an instructional nature. It should be noted that F+W Media, one of the largest active “books to use rather than read” publishers, already sells DRM-free.)

Let’s say you’re a seller of home improvement tools, fixtures, and services, like Home Depot or Lowe’s. Wouldn’t you like to have all the searching for books on those subjects taking place on your site, so you knew who was looking for new bathroom fixtures and who was looking for robin’s egg blue paint? What if you made your site a destination for that kind of searching by offering no-margin pricing on all books in that category, combined with enhanced metadata for those titles in the subject area(s) that matter to them? (Metadata enhancements will come from the knowledge of the specialists at a vertical retailer who think about what is in a book differently than a book publisher or retailer would.) How about if you sweetened the pot further by offering customers a credit on their purchase of a sink or a can of paint based on their book and ebook purchases?

Or let’s say you’re a law firm that specializes in bankruptcies and divorces. You could do the same thing, perhaps enhanced with your lawyers’ (and their clients’) highly relevant commentary on whether one book or another was particularly useful in a real-life circumstance.

On the hard-copy side, these vendors can set themselves up with Ingram or Baker & Taylor to fulfill print as well. But since margin-free transactions are baked into the strategy, whether or not they make the sale wouldn’t be the central concern. They want the interested traffic and the information that come from the searches. That’s the payoff.

(At the moment, there is a below-cost selling war on print taking place between Overstock.com and Amazon.com, sparked by Overstock.com’s announcement that they’d sell at 10 percent below Amazon’s prices. This is an attention-grabbing device for Overstock.com, not a sustainable strategy, and Amazon is demonstrating that by driving many books into a downward pricing spiral in response. The most damaged parties will be BN.com, and all the bookstores. Overstock will gain some share, but mostly at the expense of those who don’t have the breadth of total experience being provided by Amazon, which will be everybody else that sells books. Amazon will just use the challenge as an opportunity to demonstrate again that they won’t be undersold.)

Whatever you sell, the books on the subject are of interest to the customers for your goods. If the ebook marketplace is further court-mandated into unprofitability, it is probably just a matter of time before books which are used rather than read will become part of the “totality of the relationship” with a vendor who doesn’t sell books for a living. They’ll be the ones who can benefit from being the front end.

And that is a sustainable reason that selling books for a living is going to continue getting harder to do.

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More thoughts on libraries and ebook lending


On Thursday of this week, I’ll be at the Charleston Conference appearing in a conversation organized by Anthony Watkinson that includes me and Peter Brantley. Brantley and Watkinson both have extensive backgrounds in the library and academic worlds, which are the milieux of most attendees at this conference. I don’t. I am being brought in as a representative of the trade publishing community. Watkinson believes that “the changes in the consumer area will break through into academic publishing and librarianship.” I am not so sure of that.

I am imagining that what creates interest, and concern, among all librarians about trade publishing has been the well-publicized tentativeness of trade publishers to serve the public libraries with ebooks in the relaxed and unconcerned manner with which they have historically been happy to sell them printed books. Big publishers have expressed their discomfort with ebook library lending in a variety of ways. Macmillan and Simon & Schuster, up to this writing, have declined to make ebooks available to libraries at all. HarperCollins instituted a 26-loan limit for ebooks with libraries a little over a year ago. They received apparently widespread — certainly loud — criticism when they announced the policy, but it seems now to have been accepted. Penguin and Hachette delivered ebooks for lending and then stopped. Now both are putting toes back in the water with experiments. And Random House raised their prices substantially for ebooks delivered to libraries for lending.

So, six for six, the major publishers have struggled publicly to establish a policy for ebook availability in libraries.

The concern, as I’m sure my conversation-mate Peter Brantley will point out, extends to what rights libraries have when they obtain ebooks. I’ve expressed my belief before that all ebook transactions are actually use-licenses for a transfer of computer code, not “sales” in the sense that we buy physical books. When Random House declared the opposite in the last fortnight — that they believed they sold their ebooks to libraries — it only took Brantley a wee bit of investigation to find that Random House’s definition of “sale” didn’t line up with his.

Of course, his doesn’t line up with mine. I believe (he’ll correct me on stage in Charleston, if not in the comments section here, if I’m wrong) Brantley accepts the one-file-transferred, one-loan-at-a-time limitation that has been part of the standard terms for libraries since OverDrive pioneered this distribution over a decade ago. That control enabled ebook practices to imitate print practices (except for the “books wear out” part, which Harper was addressing with its cap on loans). Without it, one ebook file transfer would be all that a library — or worse, a library system — would need of any ebook to satisfy any level of demand. The acceptance on all sides of that limitation says clearly to me, without resort to any other information or logic, that there is an agreement — a license — that the library recipient of an ebook file accepts in order to obtain it.

People who spend a lot of time with libraries and library patrons are quite certain that the patrons who borrow books and ebooks often also buy books and ebooks. (Library Journal offers patron data that supports that idea.) Although library services are many-faceted and not primarily designed to serve as marketing arms for publishers, the libraries themselves see the ways in which they aid discovery by their patrons.

And they also see the patrons that couldn’t afford to buy the books or ebooks they borrow and therefore wouldn’t and couldn’t read them if they weren’t available in the library. Since these patrons become part of a book’s word-of-mouth network by virtue of being able to read it, it looks like this behavior by publishers is not only anti-poor and anti-public, but also counter to the interests of the author and the publisher itself. (In fact, most publishers acknowledge the importance of libraries to the viability and marketing of the midlist although that, until very recently, was adequately addressed with print alone.)

And, the libraries point out, the one-book, one-loan limitation means that all the hot books have long waiting lists anyway, so many patrons just cut to the chase and buy the ebook rather than wait. (In fact, schemes by which the libraries themselves can sell the ebook are beginning to develop as well.)

The view from the publishers’ perspective (and, it is important to add, from the perspective of the agents of many highly-compensated authors, who have enormous influence over publishers’ thinking) is quite different. Libraries, which can be the core market for many books published by academic and professional publishers, are more likely to be around 10 percent or less of an adult trade book’s sale. So the risk-reward calculation starts with a sharp limitation on what is the expected “reward”.

The risks are harder to quantify because they are much more complicated than just trying to figure out how many of the loans of an ebook licensed to a library cost the publisher a sale of that ebook through retail channels.

The big publishers are acutely aware that the ecosystem of bookstores they’ve depended on for a century is giving way to something new, which appears to be a mix of retail ebook platforms, community book information sites like GoodReads, author-based marketing, and, of course, publisher efforts to reach potential book buyers through community- and list-building, SEO, and collaboration with other websites.

Consumers will, of necessity, be changing their shopping habits as they migrate from reading print books to reading ebooks. Right now, as ex-Random House marketer Peter McCarthy points out, the key decision is which retailing platform they use. If you buy a Kindle, NOOK, Apple, or Kobo device, you’d be inclined to buy from their platform. It would definitely be easiest and on a Kindle, Nook, or Kobo device, it is really the only practical choice.

But on an Apple device or a tablet computer (or a laptop or desktop, for that matter, although fewer and fewer people will read ebooks on them), the consumer is actually free to use any of the ecosytem apps and, if they want to, choose by price. McCarthy makes the case that doing that on a title-by-title basis will become increasingly unusual. He’s probably right.

But we’re nowhere near the final stage of ebook development. It is going to get easier and it is going to become more widespread. Ultimately what concerns publishers is a vast reservoir of ebook content available on one website (your local library’s, or even a not-so-local library’s) for free while the merchants are trying to make you pay. That’s why such programs as KOLL (Kindle Owners Lending Library) have not gained favor with big publishers.

It really isn’t hard to imagine that in a pretty short time, libraries and KOLL (and some fledglings like the recently-announced “maybe we’re the Spotify of ebooks, or maybe we’re not” Oyster subscription service or Spain-based 24 Symbols) have robust selections available for free (libraries), as part of a broader offering (KOLL), or for very cheap (Oyster’s and 24 Symbols’ aspiration). If that happened, how many customers could be drawn away from the ebook retailer sites and effectively removed from the market for title-by-title purchasing of new books?

How many? Well, we don’t know how many. That’s precisely the concern.

Another thing we really don’t know is what is the future of public libraries. As the relative utility of a building full of printed books declines, libraries correctly point out that they serve many other functions. One that is often cited today, but which I think will be more dated than the printed books aggregation ten years from now, is that libraries provide hardware and Internet access for people who otherwise wouldn’t have it. As devices and bandwidth get cheaper, and the social and commercial benefit of having everybody connected grow and become universally acknowledged and appreciated, that deficiency is likely to be cured by other means.

What is an ongoing need that is not likely to go away is the need for librarianship. The more sources of information there are and the more sophisticated people become about demanding the right information for any task or need, the more that professional help navigating the choices has value. But how will that help be delivered? Online, I reckon, not in a building that you go to and seek out the help. I don’t know the business model yet, but I do know that communities are going to be sorely tempted in the years to come to devote the cash they now spend on public libraries with books and computers in them to providing wider access to more materials through the Internet and providing the information experts, the librarians, outside the confines of a building full of the materials. The materials — with a variety of access and payment models — will be virtual and the librarian will help you get what you need at the price you want to pay for access.

And all of that sounds, and seems, a lot like what booksellers do today (except a lot more complicated).

Which brings us back to publishers and their concerns. Right now, the biggest publishers’ biggest worry is that they will end up in a world where Amazon is the only path to a majority of their potential customers. (Right now, for trade publishers, that number is probably more like 20-30 percent.) That’s why three of the biggest publishers (one being Penguin, so ultimately, this could involve Random House as well) are continuing to struggle to launch Bookish, a strategy that looks increasingly dubious to me. It is why they were so eager to help Apple launch the iBookstore and why they root from the sidelines for NOOK and Kobo and Google to be successful competitors.

Anything that takes business away from the ebook retailing network might be depriving one of Amazon’s competitors of the oxygen they need to compete. (That’s one of the reasons Bookish is looking like a bad idea.) But, more important, with the Internet now making it pretty easy to deliver a selection of reading material larger than anybody will ever plow through at rock-bottom prices, having libraries offer and promote free ebook availability could foster habits that will cost authors and publishers customers in the future.

Of course, all of this is speculative. The library community’s belief that making ebooks available through them will stimulate sales of those books is speculative. But so is the fear of the commercial authors and publishers that libraries in the digital age will have a significantly different impact on reading and purchasing habits than they did for print.

When the problem is lack of information, one of the best antidotes is to enable flexibility and experimentation. That’s why I’m very pleased to be working with Recorded Books on a new ebooks-for-libraries program that will give publishers enormous flexibility in how they structure the license for each book: with granular, title-by-title control of availability, price, a number of loan limit, or a time limit. This requires RB to also give libraries the information and dashboards necessary to manage their ebook collections in ways their print book collections never required. The flexibility will mean that publishers can experiment with a variety of models. The multiplicity of models will be a nuisance for libraries — although RB can do a lot to mitigate it — but it will make a lot more ebook titles available by giving each publisher the ability to control the risks as they see fit. Recorded Books expects to put the program in beta early in 2013 and roll it out by Q3.

It is my hope and belief that the various models offered and the libraries’ reaction to them (agreeing to the licenses or not) will lead to some consensus-forming around particular formulas for these deals. Of course, everything is temporary because everything is changing. And that will continue to be true for quite some time.

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Going where the customers are might be an alternative to selling direct


The news that Faber in the UK has partnered with a company called Firsty Group to offer direct-to-consumer services to their distribution clients again calls the question about publishers selling direct. In my recent post about the likely outcome of the DoJ settlement being accepted by the Court, I said I was re-thinking my admonition that all publishers should sell direct because it would appear that Amazon (and all retailers) will now be free to discount ebooks to their heart’s content and therefore can undercut any publisher’s prices if they want to.

It would appear that the wholesalers would have the most to gain from publisher-direct selling. The win for them would be complicated, because the ones with the most to lose would be the retailers who are the wholesalers’ best customers. But, ultimately, as Amazon demonstrated clearly nearly two decades ago and, most recently, F+W Media proved again, anybody can become a retailer of a large selection of print and digital books simply by setting up an account with Ingram or Baker & Taylor. (Amazon started out by having the wholesalers ship the books to them which they then re-shipped to the consumer. F+W works with Ingram on the same model, probably because their own books are combined in many of the orders and they’d lose margin unnecessarily if they had Ingram ship their books.)

Ingram brings a staggering selection of printed books through its warehouse holdings and the millions of titles available to print-on-demand through Lightning, as well as the Ingram Digital ebook wholesaling capability that represents most of the ebooks published. (Setting up distribution for an agency publisher through Ingram also requires the active cooperation of the publisher.) Baker & Taylor is trying to couple its Blio ebook platform, which handles illustrated books but does not have anything like the title selection Ingram has, with its warehouse print inventory, to provide a slightly different combination of titles.

The bottom line is that you don’t have to own inventory to offer a wide selection.

Phil Ollila of Ingram expanded on their approach to direct selling. They provide what they’re good at: inventory and fulfillment and the database of titles. They refer publishers to other service providers for the “cart and card” component of ecommerce. There are a variety of reasons, including potential tax issues involving “nexus” and the requirements of PCI compliance, the rules about what you have to do if you’re storing consumer data, that Ingram prefers to leave that portion of the business to specialists.

But Ollila also reports that Ingram found recently, surveying the top 100 web sites for which it does digital fulfillment, that about half of the top sellers were publishers. A few of them are selling books from other publishers, but most are just selling their own ebooks very successfully. So either my theory about Amazon undercutting these publishers on pricing is just wrong, or they haven’t turned their attention to these “competitors” yet.

Any business the size of a major publisher which has the ability to sell digital downloads (with or without the ability to sell printed books too) would find useful opportunities to employ it. Or, put another way, not having the ability to complete transactions with consumers would constrain a publisher’s ability to build the direct relationships with end users that so many believe are essential to the future of publishers. Being able to offer distribution clients what might soon be seen as an essential capability for publishers is probably what motivated the Faber deal with Firsty.

One vision of the future that appeals to me is that every web site that has any substantial traffic could offer books and/or ebooks as a combination service to its audience and enhancer of its revenues. I thought this would be the proposition we’d get from Open Sky when they first came on the scene but they changed the business model away from providing that capability. A fledgling retailing platform called Zola Books has a variation of this idea — individually curated “stores” that they host — built into their planning. I liked the idea when Open Sky had it originally and still do; it will be great if Zola can pull it off.

The creative minds at Random House have come up with a different approach to capitalize on the potential for the widely distributed retailing model. They’re prototyping it with Politico, which has a huge audience of the politically-interested.

Random House now merchandises Politico’s “Bookshelf”: its hosted bookstore. The store displays a wide range of titles from all publishers, divided by political category, on which you can click through for additional information. Then you can buy, offered a choice of retailers. I saw the choices Amazon, Barnes & Noble, Politics & Prose (a local store in Washington, DC) and Apple’s iBookstore.

In addition, on the bottom of many, if not all, of the Politico stories, there is a row of additional book offerings called “Related Books on the Politico Bookshelf.” The books in that row below the stories are all Random House books.

Aside from curating the store, which gives Politico both value-added information for its site visitors and an additional revenue stream from affiliate sales (which they presumably share, although I don’t know the commercial arrangement), Random House can help Politico publish.

Random House is developing technology to help them curate the offerings of all publishers for the Politico store. This is no small feat from a standing start. But building the technology that can curate from metadata has additional value. They learn how to combine the metadata associated with the title file with what they can learn about sales ranking and placement by observing what is happening at other retailers. And they’re learning about their competitors’ lists as well in a different way than they ever had before. It seems likely that this knowledge will someday help inform acquisition decisions for new books and the positioning — timing and pricing as well as marketing emphasis and metadata creation — of the books as they publish themselves.

This approach gives Random House what amounts to a gatekeeper position for book offerings to Politico’s substantial site traffic. If they’re acquiring a book appropriate to that audience, they have that marketing exposure and sales opportunity to factor into their revenue calculation (and into their pitch to the agent that they’re the “right” publisher). Other publishers’ books will be sold there too, of course. But they aren’t the gatekeepers, so they can’t be as confident of the boost, and they certainly can’t promise it to an author. And Random House has the exclusive opportunity to exploit the “related books” shelf on each story page.

Meanwhile, Random House is developing the curation and merchandising tools that will enable them to do similar things on sites that have robust traffic for different topic verticals. If the Politico experiment works, they have a very appealing capability to put in front of all of the most heavily-trafficked sites for which a curated book offering would be an attractive value-add.

Random House has essentially chosen to develop bookstores without cart and card. They’re not collecting customer names with their ecommerce or building an installed base of consumers whose credit cards they have on file. Rather, they’re organizing somebody else’s traffic to be distributed to the retailers they are already doing business with.

And, of course, in the same way that Amazon started out relying on the wholesalers for books before they went to buying most of their inventory direct, Random House can install the ecommerce engine any time they like and add a “buy direct from us” button to the choices.

I see this as building future distribution with a trade publisher’s mentality, which is “I don’t need to own the customer; I need to reach the customer and I’m perfectly happy doing that through an intermediary that does lots of work to attract the customer.” If the combination of curation and publishing tools that it can offer site owners like Politico is sufficiently attractive, one could imagine Random House building a network of high-traffic sites with very extensive consumer reach which would, in effect, comprise a new distribution model.

The Random House approach has opened my eyes. It has long been clear to me that the web would organize people by vertical, as it has, and that ultimately specialized content would be found and transacted within the verticals. I leaped to the conclusion that the publishers needed to be the vertical, or own the vertical, in order to thrive in that environment. That is essentially the strategy being executed by F+W Media and Osprey, to name two outstanding examples (both of which have recently made an acquisition that substantially increased their size, F+W of Interweave and Osprey of Duncan Baird).

But Random House is showing another way: becoming the book specialists for the verticals. It is too early to know whether the experiment being executed at Politico will turn into a replicable business model. But it sure is a smart idea to try.

While I was Googling doing some research for this post, I was stunned to see this on the site for the Firsty Group [see update below] that I refer to at the top. It was disturbing to see that they’ve been lifting my posts verbatim and posting them without attribution to their own site. (In fairness, there is a link, but you have to intuit that it is there to find and use it!)

On reflection, it appears that what they’re doing is just publishing our RSS feed, which a) does include the whole post and b) leaves out any “author” name. In that case, this copyright violation is actually being done “unconsciously.” I’m checking out whether that’s true with this post, because they certainly wouldn’t be posting something where I call them out for copyright violation except in an automated way!

Once we see what happens with this post and confirm my hunch that the behavior is automated, we’ll send a polite takedown notice and suggest that Firsty change its policy to post only the first X words of an RSS with a link through. (We are also exploring changing our RSS feed, but we actually don’t want to inconvenience people who are using it legitimately.)

I cast no aspersions on Faber here. They’re a great company and I’m sure they and Firsty deliver a solid service together.

***Very quickly as this post went live, we got an extremely apologetic note from Firsty explaining that, indeed, they were working from the RSS feed, and they indeed did have a protocol of cutting off the article and then linking through. For whatever reason, it wasn’t working on my stuff and, apparently, only on my stuff. They did a takedown while they investigate and fix and asked that we agree to allow them to continue to host our RSS samples after they had. Of course, we agreed. Great to know that it was a mistake and that they were alert enough to jump on it quickly. All’s well that ends well.

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The ebook marketplace is about to change…a lot


Now that the DoJ’s response to the public comments has made it overwhelmingly likely that the settlement it negotiated with Hachette, HarperCollins, and Simon & Schuster will be accepted by the Court, it is time to contemplate the changes we’ll see in the ebook marketplace in the next couple of months.

The settlement requires the three affected publishers to inform retailers working under agency agreements that they can be released from them. Ten days is alloted from the time of the Court’s acceptance for that to take place. Then the retailers have 30 days to terminate their agreement and then the publishers have 30 days from receiving that notice to actually end it.

So the process could be almost instantaneous, if the publishers served notice immediately, the retailers responded immediately, and the publishers reacted to the response immediately. Or it could take as long as 70 days from the Court judgment, if everybody used the entire time alloted by the judgment.

Assuming that Amazon acts with competence and alacrity in its own interests (and I’d expect nothing less), the entire process could take no more than 40-45 days with them. (Each retailer can be on its own clock.) That should liberate Amazon from most pricing constraints on the three settling defendants’ books by the middle of September.

There’s a bit of confusion in the settlement language here. In the same paragraph, IV-B, that lays out the 10-day, 30-day, and 30-day requirements as described above, it also says that 30 days after “entry of the Final Judgment” (the starting gun for everything), the Settling Defendants take “each step” required to terminate or not renew or extend the agreement. Or maybe the language makes sense to a lawyer but I’m just confused. It seems like they’re asking for results before the first 30-day period would have expired.

The settlement, which ostensibly does not eliminate agency agreements (although it clearly eviscerates them), requires that any new agreements not allow publishers to dictate final sale prices by the retailers, except to cap them (in an unwieldly way we’ll consider below in more detail) and also disallows any “most favored nation” (MFN) clauses protecting any retailer from the impact of other retailers’ pricing decisions. These restrictions are specified to last for two years for each retailer, starting from the date the old agreement’s price-controlling clauses are mooted, whether by the agreement being terminated or by the publisher notifying the retailer, in writing, that the offending clauses will not be enforced.

It is back to the drawing board for new agreements. Ostensibly they can be “agency” agreements by which the publisher sets a price and pays a commission for sales based on that price. But since agency agreements were actually attractive because they achieved what is now deemed illegal price parity across the marketplace, these publishers must be rethinking the efficacy of the model. I would be.

So new contracts will be needed between the three settling publishers and all the retailers. And they’ll need to be crafted, negotiated, and signed within a maximum 70-day window.

Anybody responsible for this who remembers what a combination marathon-and-sprint these negotiations were in 2010 won’t be planning any 2-week vacations over the next few months.

There is one big fat joker in the settlement. The publishers are allowed to negotiate agreements limiting the retailers from discounting from the publishers’ (now) suggested prices. The settlement allows the publisher to prohibit discounts on their books which in the aggregate over one year exceed the margin the retailer has earned on those books.

In principle, that isn’t complicated. Retailer A sells ebooks with a retail value of $1 million in a year and would earn $300,000 in commissions. They have to charge customers at least $700,000 for those ebooks, or they’d be in violation of a contract that the settlement allows the publishers to negotiate.

In practice, monitoring and enforcing that might be a nightmare. It requires either reporting or tracking of ebook sales and the prices at which they’re transacted which is far more robust than what has been required or done so far. But even with perfect data, it’s still extremely difficult to assure compliance, particularly if a retailer is inclined to “spend” its whole allotment of discount margin. The wording of the settlement would seem to require allowing discounting that exceeded the margin earned over the course of the year, as long as the cumulative discounts were under the stipulated cap at the end.

What that also means is that retailers can’t work with price-matching bots alone. It isn’t sufficient for Retailer A to monitor Retailer B’s pricing and automate meeting or beating it because Retailers A and B aren’t selling the same quantities of each publisher’s other books and therefore don’t have the same “budget” for discounting. This is a game of three-dimensional tic-tac-toe. The retailers have to watch each other and, at the same time, watch how their discounting to consumers stacks up against the allowances they are earning through above-cost sales for each of the three settling publishers.

And the publishers need to watch the sales of each of the retailers, presuming they are provided with data they don’t now get to allow it, to make sure each one is staying under its cap.

We can’t make too many assumptions here. The settlement rules allow a publisher to negotiate a discounting cap based on total margin, but they don’t require a retailer to agree to it. And there is no acceptable punishment specified for a retailer breaking the cap, so that will have to be worked out in the negotiations about to take place (if they haven’t already started).

One thing the DoJ was completely right about is that the whole agency idea breaks down if it isn’t applied across most of the Big Six. Random House demonstrated that for the first year of agency when they stayed out and reaped an immediate double bonanza. By sticking with their wholesale pricing model (by which the retailer gets 50% off a wildly unrealistic ebook price that would be almost impossible to sell very many copies at), they got more money for each copy sold than they would have under agency (by which the retailer only gets 30% but of a much lower, realistic, selling price). And, at the same time, Random House ebooks benefited from the aggressive discounting (led by Amazon but matched by other ebook retailers) at which their high-profile titles, alone among the Big Six competitive set, were offered to the consumer.

In fact, it was made clear by Apple to the publishers when they were recruited for the iBookstore that the store would only open if at least four of them signed on. Apple was probably thinking that without having a critical mass of top-flight titles, their store would have no appeal and not be worth operating. What publishers may have been thinking about is that if were a lot of Big Six titles being discounted because they weren’t covered by agency rules, the ones that weren’t would be at a tremendous competitive disadvantage.

It seems that the necessity for concerted action to make agency work is a core element of DoJ’s thinking that collusion was required to implement it. But the specific allegations of collusion (the Picholine meeting that took place long before anybody was thinking about agency or an Apple bookstore and the various instances where publishers are alleged to have told each other whether they were in or out of the program) seem very weak, particularly when you acknowledge that they all knew “four or no store”.

Something that one comes away with from reading the settlement language is that we might see some very different terms in the replacement contracts. DoJ’s suspicions were aroused by the great similarity among the agency contracts and they seem to be asking that they not look so similar when they are renegotiated.

This could drive any number of changes. Publishers could return to a wholesale model. Publishers could try to change the agency commission, now uniformly fixed at 30%. It even seems like publishers are being told that the commissions don’t have to be uniform across retailers (although negotiating different terms would seem to violate the spirit of the Robinson-Patman Law that a previous generation of publishers grew up believing required them to give the same terms to all like sellers. There is a R-P exception for contractual relationships, however.)

In fact, there is language in the settlement agreement which seems aimed at stopping publishers from even revealing the details of these agreement in case one of their competitors could find out. (One might assume an agent with clients at more than one house would be able to figure out the commercial terms from their royalty statements. Actually, one would assume that a responsible agent wouldn’t be waiting for a royalty statement to find out.)

So the settling publishers have to negotiate new deals. The other agency publishers (Macmillan and Penguin who are fighting the legal battle and didn’t settle and Random House, enjoying one more big delayed benefit from having stayed out initially which is that the collusion argument certainly can’t be stretched to cover them) will have to rethink their pricing as they see what happens in the changed marketplace.

It is a safe prediction that one of the stories of Christmas 2012 will be the extent to which the agency publishers dropped prices from what they were permitted to charge to meet competition, driven by Amazon.

Remember that the permissible discounting constraint is an annual number. There are any number of strategies Amazon could pursue (and I wouldn’t presume to be smarter than they’ll be about choosing the right one), but if they chose to press their opportunity to the max this Christmas, they could cut prices to the bone — way below “cost” — and figure to make up the margin in the 9 months that will remain the first year of the contract.

Whatever they do, the agency publishers will have to respond in their pricing too.

It’s an equally safe prediction that a consequence of that will be that fledgling authors living at the lower price points will lose market share. That will not be obvious and nobody will actually notice.

Of course, B&N and Kobo also have to figure out a pricing strategy and a means to execute it.

Apple has to completely rethink what it will do as a retailer because publisher price-setting has been severely crippled and they never seemed to want to do it themselves.

And I have to think again about whether my conviction that publishers need to sell direct to the end consumer stands up in a world where Amazon is free to turn its pricing guns on any competitor and make them look like extortionists no matter what price they charge consumers for their ebooks.

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Royalty Share CEO Bob Kohn alleges DoJ violates the Tunney Act


According to Bob Kohn, an attorney and the CEO of Royalty Share, the Tunney Act very clearly requires that the Justice Department publish (and it was thought originally that this meant “print”) all the public comment they got within the alloted comment period. Kohn says that’s what the law states clearly, as upheld in a prior Court decision.

That period ended on June 25, a deadline which the government missed. Kohn wrote a letter to the court on Monday to keep the DoJ accountable to the public. It looks like the DoJ backed down yesterday, asking the Court to give them until July 20 to publish comments, at least two weeks before the government files a motion with the judge on August 3. This was acceptable to Kohn, as it was consistent with what he asked for. But he still maintains that the DoJ has been in violation of the law since June 25.

To DoJ’s response that what is asked is too demanding — that they need time to review the responses and prepare them for publication — Kohn says “the DoJ can’t have their cake and eat it, too.” He points out that the law allows an extension for DoJ to publish the responses, but only by asking for and receiving an extension in the public’s time to submit responses. If the DoJ didn’t like the law as drafted, Kohn says, they have had 30 years to ask for changes in the law and they never have.

Since it appears that the vast majority of the 800 letters received came near the end of the public comment period, it would seem that an extension might have served the public interest.

But it wouldn’t have served the DoJ’s interests. And it wouldn’t have served the interests of those who want to use what looks to me like a trumped-up allegation of collusion to ratify the settlement agreed to by three companies (two of which have parent companies that own TV stations and have very good reasons to avoid picking fights with the government that licenses them).

(At the time of a publishing industry fundraiser for Obama on June 18, it had been reported that there were 150 responses. Reasonable people at the event disagreed about whether that number was impressively large or not. That apparently four times that many came in during the last week should grab anybody’s attention.)

I said a “trumped-up allegation” of collusion. Two points stand out to me in making that characterization.

One is the inclusion — nay, the trumpeting — of the Picholine dinner in September 2008 as evidence of the conspiracy to implement agency pricing. The evidence in favor of DoJ’s contention is that all six big publishers were in the same room. But the evidence against it is that, at that time, nobody except perhaps a small number of people at Apple knew there would be an iPad, an iBookstore, and an agency model implemented 18 months later. In a word: this “evidence” is ridiculous.

The second is the juxtaposition of the fact that Apple told the publishers “unless there are four, there will be no store” (my attempt at memorable phrasing) with the “allegation” that publishers were asking (and telling) each other whether they were in or not. If Apple told them that — which I contend was only revealing to trading partners a pretty obvious and sensible business decision — then the publishers had no need to confer with each other. So suggesting these reports of what one publisher might have said to another proves “collusion” is only slightly less ridiculous than the Picholine “evidence”.

Since these two elements comprise the most frequently-reported and -cited elements of the collusion case, I think the characterization of the collusion case as “trumped-up” is a reasonable one

Perhaps it is because I’m a Democrat, but I don’t see “collusion” between DoJ and Amazon as the most likely explanation for the suit and the disaster the settlement could engender. What I see is a failure of understanding of what the publishing business is and does, the role publishers and retailers play in it, the impact the Internet is having on it, and what the inevitable impact of forbidding publisher-set pricing will be.

I tried to lay that out clearly in a talk I gave last Monday at George Washington University’s fifth annual Conference on Ethics and Publishing. I think the slides are pretty self-explanatory. I hope you’ll give them a look.

I want to repeat only one point from that speech here. Amazon’s behavior is self-serving, but it is not evil! It is both futile and wrong to blame something in Amazon’s character for the industry’s troubles. Amazon’s shareholders are not primarily interested in the health and well-being of the book publishing ecosystem; they are primarily interested in the growth of Amazon’s value. It is the job of everybody working there to do what they can to enhance it, within the limits of the law and their interaction with their trading partners.

But it is our job as a society, and the DoJ’s job, to think about what the rules of the road should be to deliver what is best for all of us. I have no doubt that if the rules, for example, required retailers to respect all publishers if they wanted to sell on the Agency model and not pick and choose which ones can, Amazon would still do fine.

If this settlement is accepted, I’m pretty sure very few of their trading partners or competitors will.

There’s a lot at stake. It is bad enough that DoJ has pushed the industry in a direction that strengthens the strongest player. It is worse that they’re doing it in a way that is tending to stifle and reduce the impact of public comment. And if, as Kohn alleges, they are doing it in a manner that clearly violates the letter of the law, that would be adding considerable insult to devastating injury.

We had our first free Publishers Launch Conferences webinar yesterday previewing our Publishing in the Cloud conference that will take place on July 26. What was really cool was that a huge percentage of our audience stayed through the entire hour. That tells us that the subject of cutting costs and extending capabilities through Cloud service offerings is one that many in publishing need to know more about.

We’re still offering a deep discount ($150 off the $495 full price) through the end of the day on Friday. An impressive roster of speakers and sponsors, most of whom will be available for the “Conversations with the Experts” session, means that all our attendees will be able to get personalized answers about whatever is their concern.

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Auletta’s New Yorker piece is good orientation for thinking about the DoJ case


Writing about the lawsuit the DoJ has instituted against Apple and five leading publishers is very hard. It’s a big issue and doing it justice requires navigating two very large and complex bodies of knowledge: anti-trust law and the trade book publishing business. Whenever I write about it, I feel handicapped because I don’t know much except what I’ve read lately about anti-trust law.

I just know the industry. And I know the arguments for “collusion” or “conspiracy” are mostly built on illogic or misunderstanding of what is called “evidence”.

And I know that all prosecutors have the right and responsibility to decide what cases are worth making. It is on that basis that I think the DoJ is terribly wrong in pursuing this case, that the consequences of doing this will be dire for the industry and the reading public, and — again apologizing for not knowing anything about anti-trust law — that this action will lead directly to a real and obvious monopoly which will have to be addressed at some future time.

Except then it will be too late to undo the damage or to rebuild what will have been destroyed.

The June 25, 2012 issue of The New Yorker has an article by Ken Auletta called “Paper Trail” which is a sympathetic synthesis that untangles and clarifies a complex web of law and behavior. Except for a single sentence where Auletta attributes Microsoft’s investment in a new venture jointly owned with Barnes & Noble to be primarily driven by the desire “to produce a more popular tablet computer” (I think there were other motivations that were more important), I don’t take issue with his presentation of the facts.

(Bob Kohn, the founder and CEO of RoyaltyShare, who is a lawyer experienced and knowledgeable about the issues and who filed his own comments with the DoJ, provides an alternative view to those of the legal experts chosen from academia by Auletta. He is surprised that Barry Hawk of Fordham Law School failed to come up with the well-known 1979 BMI v CBS case, decided by the U.S. Supreme Court, as a relevant precedent, and that Tim Wu of Columbia Law School could not understand the obvious point that Amazon was selling the ebooks at a loss to lock people into their ecosystem, where prices could obviously be raised later. But I’ll leave it to the lawyers to argue the law. On the business side, Auletta’s facts were solid and his choice of interviewees on all sides, quite aside from yours truly, was excellent.)

Reading Auletta inspires me to extend or re-emphasize a few things he said or touched on, some of which I learned from his piece.

I perhaps should have known, but didn’t, that Hachette USA had lobbied the Justice Department to examine Amazon’s predatory practices. (And frankly, had I known, I would never have reported it. I’m not a reporter; I’m an independent synthesizer, analyst, and articulator. There’s a difference.) Auletta reports that Hachette made what should be the very powerful argument that their copyrighted material was being used to sell Kindle devices and “drive bookstores out of business”. The point is accurate (and since Auletta’s reporting on an appeal that was made in 2009, also prescient) but elides an even bigger one.

Kindle was locking people into the Amazon purchasing ecosystem. What publishers saw, very early in the game, really, was that Amazon was aggregating customers that would soon find it difficult to get an ebook from any other source. In the parlance: their switching costs would be high. And they were the industry’s best customers.

(I mean, imagine this! “They’re locking customers into their platform with our books by selling them at a loss!” How would any business react? And do you think you need to “collude” with your competitor to come to the same conclusion? Give me a break.)

I was at the least reminded by Auletta’s piece, though perhaps I should already have been aware, that Apple had stipluated to all the publishers that they wouldn’t open iBookstore unless four of the Big Six were on board. That fact gives rise to a series of obvious observations that surely haven’t been mentioned often enough.

1. If that’s true, then all the chatter about publishers discussing their intentions to proceed is one very large and very red herring. Apple had made it clear that there would be four or no store. That’s all any of them needed to know.

2. How could Apple have proceeded any other way? As it was, the biggest of the Six (Random House) holding out really handicapped iBookstore and the Agency Five. Not only did it give Random House (and Amazon) a whole lot of price-advantaged brand-name-author books (with Random House also collecting the higher wholesale-pricing cut from the retailer), it kept those many desireable titles out of the iBookstore.

Most of the other publishers seemed unimpressed with the share iBookstore took of sales in 2010 even though the Random House books weren’t competing. But everybody was delighted with the additional reading screens delivered by iPads that brought them, as well as Random House, a lot more ebook sales through the other ebook retailers.

I don’t think that iBookstore would have been viable for Apple without four of the Big Six. It was perfectly reasonable for Apple to have made that business determination. It would have been irresponsible of them not to have done the calculation. Is Justice saying that, knowing that, they shouldn’t tell a potential trading partner if they were asked?

If the law actually prohibits this, which seems impossible, please change the law. And if you can’t change the law and if you have to choose which one is a smart one to enforce, this is a good “skip”.

3. A lot has been made of the fact that Apple has required the publishers to let them price-match. Now we know that Apple drove the deal. They said to the publishers, “we’ll let you set the price. as long as you don’t make us look like monkeys in relation to the print book price. But, of course, you can’t require us to sell at a price disadvantage, so you have to allow us to match any lower price.” How could Apple, or anybody else, do it any other way unless they were fools? They couldn’t allow themselves to be locked into a price that made them look extortionate to the consumer. They were proposing the terms on which they’d provide their proprietary access to their devices. Isn’t this a reasonable demand?

If the law prohibits this, please change the law.

I really liked the fact that Auletta emphasized, for the first time in any widely-distributed story I can remember, that the publishers going to agency sacrificed significant revenue by doing so. He quoted agent Simon Lipskar praising them for being far-sighted, willing to accept a hit on their watch to build a sustainable ecosystem. He quoted a CEO who estimated that $100 million was the aggregate hit to profits in a year.

Part of the $100 million that publishers lost provided some of the $200 million that Auletta reports Nook invested in delivering and launching the Color Nook. That’s a consumer benefit provided by the competition that is provided by agency pricing. The same is true of Kobo devices and Amazon devices, which are getting better and better and cheaper and cheaper thanks to the subsidy provided by the sale of publishers’ content.

If the law prohibits this, please change the law.

The most poignant part of the piece to a relative insider was Auletta’s reporting on the much-derided Picholine dinner in September, 2008. David Young of Hachette is reported to have organized it to welcome Markus Dohle, the new CEO of Random House, to New York. Anybody who knows David Young, as I am very pleased to have done for years, will recognize this immediately as the friendly and gracious behavior that is entirely characteristic of him.

As Auletta makes clear, this dinner took place before Apple had even announced it was going into the book business. In fact, I think it was still in the period when the Jobs pronoucement that “people don’t read books” was the prevailing wisdom from Silicon Valley.

And if the law prohibits this, and makes it part of a conspiracy, you’re making me happier than ever that I wrote a book on the New York Knicks instead of going to law school.

Auletta’s piece concludes on a telling, and chilling point. John Sargent spells out how small publishing is in relation to the giants now influencing its fate, which Auletta identified as Amazon, Apple, Facebook, Google, and Microsoft. Their strategies all involve the book business in some way. Sargent’s observation that books, by which he means the book publishing ecoystem that has built up around paper over the past 300 years, could become “roadkill in a larger war” gives pause.

It is increasingly easy to imagine. And it is worth considering seriously before it is a fait accompli.

It isn’t Amazon’s job to figure out what the book business needs to look like. They’re doing their job, which is to maximize the opportunities for their business as they see them within the rules of the game and the limitations imposed by competition and their trading partners.

Seeing that it isn’t their job means recognizing that it is everybody’s job. A lot of people need a better understanding of what publishing does and is for that to happen. I think the DoJ is making it very clear that smart people with a lay knowledge of the publishing industry routinely misapply what they think they know from other places.

Publishing one book is complicated, although a bit simpler if digital only. Publishing 200,000 books a year, which is what the industry does, is infinitely more complicated and made only more so by digital opportunity. Nobody from some other place — any other place — has entertained equivalent workflow, operational, administrative, and financing complexity.

I think the Auletta piece is valuable because it exposes the lie in the cartoon picture of “Greedy Big Publishing” stiffing the poor novel-reader while the selfless heroes at Kindle fight to save them two or three bucks a book. (And never mind that the price of your reader dropped by 50% because the guys across the street are offering one too.)

It isn’t Amazon’s job to do the PR for the other guys either.

I am speaking on approximately this topic at the 5th Annual GW Ethics & Publishing Conference at George Washington University on Monday, July 9th. 

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If the government makes agency go away


The Wall Street Journal reports that the Justice Department has notified the Agency Five (Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster) and Apple that it plans to sue them for colluding to raise the price of electronic books. I have no standing to comment on the law here. But if this does mean the end of the agency model, it would seem to be a cause for celebrating at Amazon and a catalyst for some deep contemplation by all the other big players in the book business.

Agency pricing, for those who have not been following the most important development in the growth of the book market, enabled the publishers to enforce a uniform price for each ebook title across all retail outlets. This was Apple’s desired way to do business, and it addressed deep concerns the big publishers had about the effect of Amazon’s loss-leader discounting.

Although the WSJ article and Michael Cader’s follow up in Publishers Lunch make no “agency is dead” declaration and there are quotes from publishers and others indicating that there are a range of possible outcomes, including a version of agency that is modified to allow some discounting, everybody in the industry now has to contemplate what it would mean if the agency model is legally upended.

To Amazon, it would mean they would be free to set prices on all books again, including the most high-profile and attractive ones that come from the big trade houses. That is an opportunity they are likely to seize with loss-leader discounting of the biggest marquee titles.

To Barnes & Noble, it would mean they have to devote cash resources to ebook discounting that they might have preferred to dedicate to further development of the Nook platform, maintaining the most robust possible brick-and-mortar presence, and improving the user experience at BN.com. Unconfirmed stories abound that B&N is about to announce an international expansion. Whether that will produce cash flow immediately or require it for a while is not yet known. For B&N’s sake, it would always better if it were the former, but if they’re about to fight discounting wars, it might be critical.

To Kobo, it would mean that they also will need to devote cash resources to subsidizing price cuts to match Amazon. With their new ownership by Rakuten, they should have the capital they need to fight this battle. They must be glad that deal got done before agency was upended.

To Google, it would mean that the bookstore service piece of their ebook business will suddenly be highly challenged. Many independent stores might be pushed out of the ebook game completely; it certainly would be extremely difficult for them to support competition with Amazon’s prices. To Google itself, with their new Google Play configuration, it means they will have to both spend more margin and more management energy to be a serious competitor in the retail marketplace. There’s no clear evidence that they have the interest at the top to do that, although they certainly would have the resources.

To Apple, it would mean that their entire iBookstore model is in question. They apparently didn’t want to take on all the normal responsibilities of a merchant, which would include setting prices. Now they may have to.

To all the big publishers, including Random House (the one of the Big Six not being sued, because they stayed out of agency for the first year and therefore were not considered part of the “collusion”) it would mean that they will have to painfully reverse the re-pricing and systems adjustments they went through to implement agency in the first place.

Smaller publishers and distributors might be beneficiaries if agency is eliminated, but they might not. The agency model is a great advantage for those publishers who are able to fully implement it. But that is only six publishers — the Big Six — because Amazon has simply refused to let anybody else sell to them that way. That creates problems for the smaller publishers but an even more threatening one for distributors. All but the Big Six, if they want to sell to both Amazon and Apple, must operate a “hybrid” model, selling Apple on agency terms and Amazon on wholesale terms. The two are inherently in conflict. What is ultimately a threat to the distributors is that distributees that desire agency terms, and many would. might seek distribution deals from one of the Big Six. (It might be coincidental, but it is worth noting that IPG, the company having a fight with Amazon at the moment over terms, is a distributor.)

Of course, we don’t know how the Big Publishers will respond if they’re forced off agency. It’s long been my opinion that the 50% discount for ebooks is unworkable. It leads to ridiculous and unrealistic retail prices. (Publishers operating on the hybrid model have to have two retail prices: one on which to base the wholesale discount and another at Apple operating agency-style. It’s crazy.) Would the big publishers, if they couldn’t do agency, keep the 30% discount and their current prices? Would they go back to the 50% discount and jack the suggested retail prices back up? If they did the former and nothing else changed, the smaller publishers could be at a much greater disadvantage than they are now.

Over time, the biggest losers here will be the authors. The independent authors will feel the pain first. Agency pricing creates a zone of pricing they can occupy without much competition from branded merchandise. When the known authors are only available at $9.99 and up, the fledgling at $0.99-$2.99 looks very attractive and worth a try. Ending agency will have the “desired” effect of bringing all ebook prices down. As the big book prices are reduced, the ability of the unknowns to use price as a discovery tool will diminish as well. In the short run, it will be the independent authors who will pay the biggest price of all.

But, in the long run, all authors will just get less. They will join the legion of suppliers beholden to a retailer whose mission is to deliver the lowest possible price to the consumer.

Seth Godin has recently made the argument that this is simply inevitable. Perhaps it is. The laws of supply and demand would support that contention. But from my personal perspective, I don’t like seeing the government hasten the process along.

But what about the reader? The reader gets lower prices, cheaper reading. What the reader won’t see is that s/he’s not getting what s/he won’t pay for. Some of the best books won’t get written and the biggest casualties will be in the area of highly-researched non-fiction, like major biographies, in my opinion. Twenty years ago they used to say that a conservative was a liberal who’s been mugged. I’m not about to become a conservative, but I sure see how easy it is for the government not to understand how their decisions might affect the dynamics of a business. Or, in this case, a culture.

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