Ingram

The most recent post here laid out a future for trade publishing that will be less and less about traditional publishers and more and more about non-traditional publishers delivering books into the marketplace without the financing or “approval” of a profit-seeking publisher. That’s a radical change from the industry we’ve seen grow over the past 100 years when book sales in retail stores of all kinds have been the primary revenue source for publishers and authors.

Obviously, the likelihood of what that post predicts coming to pass is dependent on the validity of the argument that a substantial amount of commercially viable publishing will take place without the funding of the commercial trade publishers. Of course, “commercial viability” is a function of the publisher’s objectives; the new book publishing entities have ways to win that aren’t just about the profit they make publishing their books.

Books have a mystique and symbolic power, for a reason. For three centuries, they have been at the center of high-value communication of stories, information, and ideas. The number of entities that generate content that fits that description is far larger than the number of book publishers, and includes entities that wouldn’t be thought of as publishers of any kind at all.

Because delivering a book requires managing a huge variety of details and because selling one effectively has always needed a multi-faceted organization and an investment in inventory, until recently only companies dedicated to the business of books could effectively publish them.

Not anymore.

Because of ebooks and digital distribution, it is now possible for any content packaged as an ebook — if marketed effectively to its target audience — to find its readers (or to be found by them). The big publishers of today are all grappling with how to re-connect with their readers in an information universe that has been redefined. Meanwhile, the networks by which they have always connected with readers in the past — bookstores and mass merchants and even libraries — are becoming less and less relevant as readers increasingly read on devices and find what they’ll read through their online interactions.

But where there are challenges and painful adjustments in store for the biggest publishers, there is vast new opportunity for just about every other enterprise that connects to a lot of people and knows something about what those people want to know. And companies are increasingly figuring that out.

Jeremy Greenfield is the editor of the Digital Book World website; we partner with DBW to deliver their annual conference. Long before the post last week “predicting” that entities that aren’t book publishers would become book publishers, Jeremy had been keeping a list of them. It’s impressive. When we asked Jeremy what was on his list, he sent us this note:

Most recently, Scientific American launched a series of ebooks. American Express Publishing launched an ebook line with Vook. The Atlantic began to publish its own ebooks. USA Today published USA Tomorrow, a collection of expert predictions about the future of America. Harlequin and Cosmopolitan magazine inked a deal to publish several ebooks a month together. Newsweek/Daily Beast entered into a partnership with Vook to publish ebooks. Playboy launched a series of shorts for the Kindle, the Washington Post announced an e-book program, and the Chronicle of Higher Education, a trade publication focused on the higher education field, launched an e-book business. Other notable companies to jump into the space are magazine publishers Conde Nast and Hearst and NBC News, a division of NBC Universal. And the Wall Street Journal has recently rejuvenated its e-book program.

In addition to these, we know of more: the New York Times, the Toronto Star, the Chicago Tribune, the Boston Globe, TED Books, Esquire, the Guardian, Wharton Business School, the US Army, Provincetown Public Library, the Saturday Evening Post, Xiamen Bluebird Cartoon Company of China, cartoon-producer Fred Seibert creating Frederator Books, and Scott Rudin and Barry Diller’s Brightline, and many others.

Of course, all of these are content-producing entities; many of them are even print-content producers. But it simply wasn’t in their power to decide to become book publishers until the world changed.

Three companies which started out with content-generation ideas of their own — Vook, Byliner, and Atavist — are frequent partners for these new publishers, as are existing publishers from Big Six players to Perseus’s Constellation, Ingram, new ebook publishers Open Road, Diversion and Rosetta, and other companies like INscribe and PressBooks. (Not all of these have gotten into this game yet, but they certainly all will.) These companies are serving the first wave of fledgling publishers and the aspirants so far have been content-generating companies.

Some of those we’ll soon see wouldn’t think of themselves as content creators. Before long, I’d expect to see every museum, every historical society, every consulting firm and law firm and accounting firm joining the party.

For example, a law firm of our acquaintance sent us a notice last year that key members of their team had put together a “White Paper” about changes in trademark law. I called the partner there that I knew and asked “why don’t you publish it as an ebook?” He said, “I don’t know.”

Another attorney to whom I told the story patiently explained to me that intellectual property like this was created to be given away to lure clients to the firm and impress them. Why, I was asked, should we publish it as ebook? What would we gain?

That’s pretty simple. Somebody will go to Amazon and search “trademark law”. You want to come up! And, in fact, you could price your White Paper at $100. It wouldn’t be great for sales, but you’d get the discovery benefit and you’d be putting a marketplace value on what you’re giving away for free. You win twice.

The next wave will be everybody else: every brand with a following, a meaning, a reputation, a website. The next group will need editorial services which presents a whole new set of opportunities for writers, agents, and, especially, packagers. And it will present an opportunity for me to elaborate more on atomization in another post.

Of course, we’ve got this subject covered at our upcoming Publishers Launch Conference at BEA on May 29. The program is starting to take shape, and we’ll have a panel called “Outsiders: New Book Publishing Operations from Media and Content Companies”. Steve Kobrin of Wharton Digital Press, Alison Uncles of the Toronto Star, and David Wilk, just appointed the publisher of Frederator Books, will be speaking on it. Each of their programs is quite different from the others, as are their objectives. But all of them are heading up businesses that would scarcely have been conceivable five years ago.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1. eBookstore alternatives to the established players.

2. Enabling social connections among readers of books.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The announcement late last week that Random House is starting three digital-first imprints was just the most recent example showing that publishers are exploring new business models. Just days earlier we got news of the partnership between Simon & Schuster and Author Solutions making S&S the third major publisher — preceded by Christian publishing titan Thomas Nelson and dominant romance publisher Harlequin — to put their name to an offering in the “author services” sector.

One might say that S&S is the first of the Big Six to take such a big step in this direction, except that Pearson, Penguin’s parent company, actually bought Author Solutions a couple of months ago and HarperCollins bought Thomas Nelson last year. So, in fact, three of the Big Six are now involved with author services and it is four out of six if you remember the other recent big news, that Penguin and Random House are merging. (And that’s not counting more modest initiatives like HarperCollins’s “Authonomy” or Penguin’s “Book Country”.)

I remember being on a panel in Canada a few years ago with Carolyn Pittis, the very smart digital pioneer from HarperCollins, who referred to the way most publishers did business — buying the right to exploit copyrights and then monetizing them — as one possible business model for a publisher’s organization. She explicitly mentioned “author services” as another one. That was before her company had launched Authonomy, a couple of years before “Book Country”. In other words, big publishers have been thinking for a while about “author-pays” models (just as the professional publishers have).

This really all follows the lead of Amazon, which has made a practice for years of selling a la carte every component of its own value chain. I was just reading an ebook called “The Amazon Economy” published by The Financial Times (an example of a non-book publisher adjusting its own business model to include being a book publisher, about which more on another day) that suggested that Amazon actually makes more money making its infrastructure available to others than it does using it to sell stuff.

In other words, there is potentially profit in deconstructing one’s value chain and selling access to it in pieces.

In a sense, publishers have known this for a long time. They’ve made the part of their operation that handles things after the books exist: warehousing, distribution, credit and collection, and sales available to other publishers for years. Some publishers, like Random House, have built distribution into a significant business with its own management structure within the corporation. Perseus, which as a publisher is itself a roll-up of a number of smaller houses, has built a distribution service that has more than 300 clients. Ingram, whose core wholesaling operation combined with the Lightning subsidiary they built in the 1990s to provide print-on-demand and later digital services, has a comparable publisher distribution offering.

But what Author Solutions — and a host of less robust (and largely cheaper) competitors — has shown is that there is also very widespread demand for the services that precede the actual delivery of books ready for sale.

I have no way except inference to know how Nelson and Harlequin are doing with their author services offering powered by Author Solutions, but the fact that Penguin parent Pearson bought them and S&S has now done this deal certainly suggests that ASI has a good story to tell. Of course, they are market leaders because they make money, and they make money by having good margins. And the prices announced for the services for the Archway initiative — ASI’s project with S&S — are higher than those services could be purchased for elsewhere. That doesn’t mean they won’t sell lots of aspiring authors on using them.

This is all very logical, but also very tricky. Most publishers — at least until very recently — would have thought about the services they sold in a distribution bundle as “commodities”, widely available and highly comparable. It is true that any of the major publishers, many minor ones, and distributors even beyond Ingram and Perseus can deliver the core capabilities: active accounts with all the major retailers, the ability to transact with them and collect the money, and placement of the messages of availability throughout the supply chain. Obviously, they all strive to do these things better than the next guy and to justify charging a point or two more because they’re better at it.

But further up the value chain the publishers’ pride and belief in a qualitative difference between what they have and what the next guy has is much greater. Publishers generally believe in their editors and marketers more than they believe in their sales forces and warehouses. (Buddies of mine in sales 20 years ago used to say, with conscious irony, that there were two kinds of books: editorial successes and sales and marketing failures.) They see their time and bandwidth as precious. They are far more reluctant to make that time available for rent and, in fact, it would appear that all three of the big publisher deals with Author Solutions rely on ASI to provide those capabilities. They’re not coming from the publishers themselves.

All of this sidesteps another important component of successful publishing: the coordination of all these activities. Successful publishing is the result of a lot of very small decisions: in editing, in presentation (both the book itself and the metadata, like catalog copy and press releases, that support it), and, increasingly, in the SEO tags and signals about “placement” that are included in the book’s digital file or marketing metadata. In the digital age, these things can change over time. Every day’s news — about UN votes or Pentagon sex scandals or anything else — could call for a change in the metadata around a book published a month or a year ago to make it more likely to be shown by the search engine queries being placed today.

(The FT ebook on Amazon, which I recommend, makes it clear that Amazon also sells “coordination” on the retail side as an extremely important, and apparently much-appreciated, value-add.)

Indeed, whether to put more effort into a book or stop paying attention to it is — or should be — based on an analysis of sales and search trends, as well as more old-style measures like the reviews it is getting.

In the old pre-internet days, publishing books was like launching rockets. Most crashed to the earth, some went into orbit. But the publisher’s efforts — most of the time — were limited to the launch. Then the marketing team could move on. This was not a way of doing business that was appealing to authors, but it was consistent with the realities of the marketplace. The big book chains wouldn’t keep a title in stock if its sales appeal wasn’t evident at the cash register within 90 days. Without copies of a title in the stores, there was no point to the publisher pushing it.

That’s something that has changed dramatically in the digital age. With some titles and genres achieving half their sales through ebooks or online bookselling, there is no longer a time limit on marketing effectiveness. In what is a subject we will certainly explore at a future conference, this must be causing traffic jams in publishers’ marketing departments. They can no longer be counting on the older titles making way and clearing marketers’ schedules to work on newer ones.

Open Road is a digital-only publisher that works primarily, but not exclusively, with backlist. (Recently they seem also to be specializing in books brought in from offshore publishers and in helping illustrated book publishers break into ebooks.) What impressed me when I met with them a year ago was that they didn’t distinguish between “frontlist” and “backlist”. They marketed to the calendar and the events and holidays everybody was thinking about, not to the newness of their books. I believe this actually brought increased relevance to their marketing. Obviously, this was also making a virtue of necessity because they didn’t have a flow of “new” books to tout. But it also capitalized on the new situation: that the books don’t suddenly become largely unavailable because retailers throw them off the shelves.

A by-product of the extended sales life of books is that it makes it easier for publishers to cluster them for marketing purposes. Now four books on a similar topic can be pushed in unison, even if they were published months or even years apart. Open Road has made ample use of that reality.

These are challenges and opportunities that compel publishers to rethink the organization of their marketing departments and the deployment of their marketing resources. It is an opportunity for a publisher to extend its value to an author if it pushes an author’s book six months or a year later when a related title hits the marketplace or a news event makes an older book newly relevant. Since authors are increasingly able to do some useful things on their own behalf to capitalize on these opportunities, they will be increasingly impatient with publishers that quit on their books too soon..

There are things the author just can’t do. They can’t adjust the book’s metadata and add tags. They can’t push for or buy promotional screen placement from the retailers when somebody else’s new book makes them suddenly relevant again. Authors also don’t have the benefit of arriving at marketing best practices and rules of thumb by examining performance data across various groupings of titles: large title sets, categorized sets, comparable-selling sets, and others. They’re counting on the publishers to do that.

The publisher’s role in coordinating and managing a myriad of details has always been one of its principal value-adds and it can be even more so in the digital age. But only if they actually do it, and there’s precious little indication that they intend to do it for the titles they’re being paid for.

Jane Friedman (the blogger and expert advisor to writers, not the CEO of Open Road) points out that her alma mater, Writers Digest, and Hay House — the vertical publisher in mind-body-spirit that has done so well interacting with their reading audience — also did ASI deals. She points out that the big successes we all know about among self-published authors — John Locke, Joe Konrath, and Amanda Hocking being the headline names — didn’t go through ASI. Jane takes issue with the ASI promise to help publishers “monetize unpublished manuscripts”. It’s hard to dispute that publishers who are primarily in business to pay authors to publish them could be walking a fine line having a business model right alongside that charges authors for services that are unlikely to lead to them making money.

On the other hand, Random House has made an emphatic statement about the value legitimate publishers can bring with the success of “Fifty Shades of Gray”, originally a self-published story and now, very much thanks to the biggest publisher, the biggest commercial success of all time. No self-published book has come close and it will be a very long time before one does. I see their digital-first imprints (which they are not the first to launch, but seem to be the first promoting aggressively to the self-publishing diaspora) as a step toward a different business model that recognizes the new commercial realities of publishing. It enables lower-investment publishing — the authors in these digital-first imprints are unlikely to receive advances at levels commensurate with most Random House books — and perhaps they’ll get less editing attention too. Marketing is simplified by the fact that print isn’t involved and therefore retail stores aren’t either. So the threshold for profitability is much lower and, as we have learned, they can still decide to give any book in these new imprints the “full treatment” — print copies stacked up in stores — later on if they want to.

It is too early to judge whether the tie-up between publishing houses and author services offers will produce value on all sides. All these publishers now have or will have, at the very least, a stable of self-published authors that are contributing margin to them and in which they have a financial stake (even if they didn’t have to invest to get it). There is definitely inherent conflict between trying to make the most money one can from an author hiring publishing services and recruiting authors and books that will be commercially successful.

But publishers still know how to make books with commercial potential sell better than mere civilians do. Whether ASI and their partner publishers can find the formula that makes the promise inherent in a publisher’s brand productive for authors that hire services under it is a question that will be answered in the months to come.

Having more companies trying to figure it out certainly improves the odds that somebody will (and ASI has every interest in spreading best practices as they emerge). And more and more cheaper services for those aspects of self-publishing that really are commodities means that ASI and all its partners are going to have to demonstrate convincingly that they can add effective marketing to their offering mix if they’re going to be around ten years from now.

Michael Cader and I are doing our first Authors Launch show, in partnership with our friends at Digital Book World, on Friday, January 18, the day after the 2-day DBW 2013 will end. The question of where the line gets drawn between publisher efforts and author efforts is a major topic. We have a great roster of experts to serve as faculty: the aforementioned Jane Friedman, along with Porter Anderson, Jason Allen Ashlock, Dan Blank, ex-Random House marketer Pete McCarthy, co-authors Randy Susan Meyers and M.J. Rose, Meryl Moss, and David Wilk. Among the publishers speaking will be Matt Baldacci of Macmillan, Rachel Chou of Open Road, Rick Joyce of Perseus, and Matt Schwartz of Random House. This is a conference really intended for published authors rather than self-published, but it will teach skills and insights for any author willing to invest time and effort to sell their book.

“It’s become very, very clear to me that digital trumps print, and that pure digital, without any legacy costs, massively trumps print.” — David G. Bradley, owner of Atlantic Media, quoted in The New York Times on September 24, 2012.

The magazine business isn’t the book business, but…

For the better part of two decades, many people have seen the potential quandary the digital transition posed to big successful full-service publishing organizations. If distribution no longer requires scale, what does that mean to the companies that not only succeeded by creating distribution at scale, but which also are largely locked in to their high-cost, high-maintenence infrastructures?

This was one of my concerns when I delivered my “End of General Trade Publishing Houses” speech at BookExpo in 2007. When bookstores go away, I figured, it would become absolutely necessary but would be very hard for publishers working across audiences to adjust to being multi-niche. And it seemed to me that the big organizations built to deal with thousands of dispersed retail outlets at scale would be far too expensive to maintain when the outlets weren’t there. And stepping down the overhead level wouldn’t be easy.

There’s no shortage of understanding of this challenge. All big publishers are looking for new ways to apply scale to gathering names, analyzing data, improving discovery, social marketing, and creating partnerships with others that can provide audience reach.

Several companies have built business strategies around the expectation that traditional publishing organizations are going to have to get smaller and change the way they staff their print value chain. Among the biggest players, Donnelley, Ingram, Perseus, and even Random House fit that description: offering a variety of ways for publishers to offload everything except the functions that are absolutely core to publishing: editorial selection and development, rights management, and marketing.

The companies that offer the print value chain solutions also have digital services, of course, but they have competitors in that space that specialize in providing what demands scale for digital publishing. The competitors tend to start their service offerings further up the workflow than those that started by focusing on scalable distribution. Two new partnerships announced last week suggest the emergence of new commercial models for publishing.

The big eye-catching announcement was that Barry Diller and Scott Rudin, both with Hollywood roots, are putting substantial investment — announced as $10 million, but they could certainly add more when and if they want to — behind a new commercial trade house called Brightline to be led by publishing veteran Frances Coady. Brightline will partner and build its books with The Atavist.

Perhaps less noticed, but pointing in a similar direction, is that agent and entrepreneur Jason Allen Ashlock has set up a new niche publishing imprint to do crime and suspense books, working on the PressBooks platform created by Hugh McGuire.

The publishing ambitions here are quite different, but the point they make about the direction of publishing’s future are very much the same.

Diller and Rudin backing Coady would appear to be poised to compete with major publishers for major books. You don’t put $10 million into play as your initial investment to sign up a bunch of previously self-published or genre fiction authors. And The Atavist’s bookbuilding capability was built with a Hollywood consciousness in mind. They have not only designed what they do so that it rather elegantly accommodates links (allowing them to be made either very obvious or very unobtrusive), The Atavist always envisioned that its own publishing of serious topical non-fiction would have a potential cinematic or TV iteration. Their standard contractual agreement cuts them in on those rights which it was very much in their vision to reserve for themselves and develop.

This is not to imply that Brightline will need in any way to depend on The Atavist’s original commercial vision or contracts; they will certainly have their ideas about both.

Ashlock’s ambitions, at least initially, appear to be more modest. As the proprietor of a young and developing literary agency, he would need to acquire titles that don’t have the kind of advance-against-royalties requirement that Brightline would feel comfortable with. So he’s announced his publishing enterprise, called Rogue Reader, which will do “crime fiction”, apparently only one title per month and also apparently previously little-known or unknown writers.

The message here is that we see a similar answer coming from the opposite ends of the continuum of investment and power of what the genesis of a successful future publisher might look like. Both an ambitious well-funded highly-commercial list headed by a publishing veteran and fledgling authors publishing in a niche under the direction of a young entrepreneur with much less seasoning are being launched on new publishing platforms which have copious capabilities to do digital publishing efficiently. These new publishers can treat the diminishing print-in-store marketplace as a bit of an afterthought because there are more and more sources from which to purchase those capabilities for as long as they are needed.

And since the need for those capabilities is diminishing, and since there are so many companies that own them and can’t suddenly not own them, the chances are that the cost of obtaining those capabilities from somebody else is likely to just keep going down.

We are getting closer to the day when all a publisher really will need to “own” is the ability to acquire and develop good books and ways to reach the core audience for them persuasively and inexpensively. Diller and Rudin, with their Hollywood roots, certainly have access to many of the great story-creators and storytellers. Through connections to lots of people with marketing platforms plus the extensive network of connections through Diller’s IAC collection of web properties, they also have the capabilities to promote them.

Could any publisher build scaled web marketing capabilities more effectively than IAC? Diller’s team seems to be figuring they can rent everything else besides the core capabilities and be competitive. I think that’s right.

Ashlock doesn’t have their reach, but by sticking to “crime fiction” he thinks he can build a community around what he’ll do that will enable effective and efficient marketing. And as an agent, he’s in a good position to recruit good projects, although he will deal with the conflicts involved in turning somebody who comes to him as a literary agent seeking a publishing deal with another house into his own author. The ethics of this question have been hotly debated. One prior experimenter of this type — agent Scott Waxman who started ebook publisher Diversion Books — seems to have given up agenting in favor of being a fulltime ebook publisher. It will be interesting to see how this plays out for Ashlock.

Both Brightline and Rogue Reader will undoubtedly be building out their development. We can expect them both to announce soon how they’ll handle putting books in stores. One would imagine that the business development teams at all the companies with big distribution capabilities are knocking on Brightline’s door. One book a month isn’t necessarily as attractive and publishers won’t want to encourage agents to become competing publishers, but I would imagine Rogue Reader will be able to find more than one company with these capabilities willing to answer their phone calls as well.

Rebecca Smart, the CEO of Osprey, was at our office last week let our friend Hannah Johnson of Publishing Perspectives capture a couple of minutes of video about what she’ll be discussing at Publishers Launch Frankfurt on October 8. It’s a quick example of the out-of-the-box thinking which will be coming from 18 different presentations at our 10:30-6:30 event. 

At lunch a few months ago, Brian Murray, the CEO of HarperCollins, expressed dissatisfaction with the term “legacy” to describe the publishers who had been successful since before the digital revolution began. For one thing, he felt that sounded too much like “the past”. “We need to come up with a different term,” was his assessment and he suggested that perhaps “full-service” was more apt.

I find I keep coming back to “full service” as an accurate description of the publisher’s relationship to an author. That’s what the long-established publishers have evolved to be.

It would be disingenuous to suggest that publishing organizations were deliberately created as service organizations for authors. They weren’t. In fact, as we shall see, the service component of a publisher’s DNA was developed in service to other publishers.

My Dad, Leonard Shatzkin, pointed out to me 40 years ago that all trade book publishing companies were started with an “editorial inspiration”: an idea of what they would publish. Sometimes that was a highly personal selection dictated by an individual’s taste, such as by so many of the great company and imprint names: Scribners, Knopf, Farrar and Straus and Giroux, for examples. Random House was begun on the idea of the Modern Library series; Simon & Schuster was started to do crossword puzzle books.

That is: people had the idea that they knew what books would sell and built a company around finding them, developing them, and bringing them to market.

And the development and delivery to the market required building up a repertoire of capabilities that comprised a full-service offering.

The publisher would find a manuscript or the idea for one and then provide everything that was necessary — albeit largely by engaging and coordinating the activities of other contractors or companies — to make the manuscript or idea commercially productive for the author and themselves.

The list of these services describes the publishing value chain. It includes:

select the project (and assume a financial risk, sometimes relieving the author of any);

guide its editorial development (although the work is mostly done by the contracted author or packager);

execute the delivery of the content into transactable and consumable forms (which used to mean “printed books” but now also means as ebooks, apps, or web-viewable content);

put it into the world in a way that it will be found and bought (which used to mean “put it in a catalog widely distributed to opinion-makers or buyers” but now largely means “manage metadata”);

publicize and market it;

build awareness and demand among the people at libraries and bookstores and other distribution channels who can buy it;

process the orders;

manufacture and warehouse the actual books or files or other packaged product;

deliver;

collect;

and, along the way, sell rights to exploit the intellectual property in other forms and markets, including other languages.

It has long been customary for publishers to unbundle the components of their service offering. The most common form of unbundling is through “distribution deals” by which one publisher takes on some of the most scaleable activities on behalf of other smaller ones. It has reached the point where almost every publisher is either a distributor or a distributee. Many are depending on a third party, quite often a competing publisher, for warehousing, shipping, and billing and perhaps sales or even manufacturing. All the big ones and many others, along with a few companies dedicated to distribution, are providing that batch of services. It is not unheard of for one publisher to do both: offering distribution services to a smaller competitor while they are in turn actually being distributed by somebody larger than they.

An assumption which influenced the way things developed was that the key to competitive advantage for a publisher was in the selection and editorial development of books and in their marketing and publicity, which emerged organically from their editorial efforts. All the other functions were necessary, but were not where many editorially-conceived businesses wanted to put their attention or monopolize their own capabilities.

About 15 years ago, working on VISTA’s “Publishing in the 21st Century” program, I learned the concept of “parity functions” in an enterprise. They were defined as things which can’t give you much competitive advantage by doing them well but which can destroy your business if you screw them up. This led to the conclusion that these things were often best laid off on somebody else who specialized in them, leaving the publisher greater ability to focus on the things which truly and meaningfully differentiated them from competitors.

Another driving force here was the way that bigger and smaller publishers look at costs and scale. If you’re very big, it is attractive to handle parity functions as fixed costs: to own your own warehouse, have a salaried sales force, and to invest in having state-of-the-art systems that do exactly what you want them to do. If you’re smaller, you often can’t afford to own these things anyhow and, on a smaller base, fluctuations in sales could suddenly render those fixed costs much too high for commercial success.

It is therefore more attractive to smaller entities to have these costs become variable costs, a percentage of sales or activity, that go up when sales go up but, most importantly, that also go down if sales go down. And the larger entity, by pumping more volume through their fixed-cost capabilities, subsidizes its own overheads and improves the profitability and stability of its business.

One of the things that is challenging the big publishers — the full-service publishers — today is that the unbundling of their, ahem, legacy full-service offering has accelerated. You need scale to cover the buyers and bill and ship to thousands of independent accounts. If you’re mainly focused on the top accounts — which today means Amazon, Barnes & Noble, Ingram, and Baker & Taylor for most general trade publishers — you might feel you can do it as well or better yourself with one dedicated person of your own.

And if you’re willing to confine your selling universe to sales that can be made online — print or digital — you can eliminate the need for a huge swath of the full-service offering. Obviously, you give up a lot of potential sales with that strategy. But the percentage of the market that can be reached that way, combined with the redivision of revenue enabled by cutting the publisher out of the chain, has made this a commercially viable option for some authors and a path to discovery for others.

So the consolidation of business in a smaller number of critical accounts as well as the shifting of business increasingly to online sales channels has been a challenge for some time that larger publishers and distributors like Perseus and Ingram have been dealing with.

But now the need for services and the potential for unbundling is moving further up the value chain. The first instances of this have been seen through the stream of publishing efforts coming directly from authors and content-driven businesses like newspapers, magazines, and websites.

To the extent that the new service requirements are for editorial development help and marketing, it gets complicated for the full-service publishers to deal with. The objective of organization design for large publishers for years has been to consolidate the functions that were amenable to scale and to “keep small” the more creative functions. So it is a point of pride that editorial decisions and the publicity and marketing efforts that follow directly from the content be housed in smaller editorial units — imprints — within the larger publishing house.

That means they are not designed to be scaleable and they’re not amenable to getting work from the outside. It’s much less of an imposition for somebody in a corporate business development role to ask a sales rep to pitch a book that had origins outside the house than it is to assign one to an editor in an imprint. The former is routine and the latter is extremely complicated.

But what does this mean? Should publishers have editorial services for rent? Should they try to scale and use technology to handle editiorial functions — certainly proofreading and copy-editing but ultimately, perhaps, developmental editing — as a commodity to assure themselves a competitive advantage on cost base the way they do now for distribution? Should publishers try to scale digital marketing? Should they have teams that can map out and execute publishing programs for major brands?

The way Murray sees it, a major publisher applies a synthesis of market intelligence and skills that can only be delivered by publishing at scale. He believes that monitoring across markets and marketing channels along with sophisticated and integrated analysis of how they interact provide an unmatchable set of services.

The scale challenge for trade publishers to collaborate with what I’m envisioning will be an exploding number of potential partners is to find ways to deliver the value of the synthesized pool of knowledge and experience efficiently to smaller units of creativity and marketing.

There is plenty of evidence that publishers are thinking along these lines. The most obvious recent event suggesting it is Penguin’s acquisition of Author Solutions. Penguin had shown prior interest in the author services market by creating Book Country, a community and commercial assistance site for genre fiction authors. Penguin suddenly has real scale in the self-publishing market. They have tools nobody else has now to explore where services for the masses provide efficiencies for the professional and how the expertise of the professionals can add value to the long tail.

There are initiatives that stretch the previous constraints of the publisher’s value chain that I know about in other big companies, and undoubtedly a good deal more that I don’t know about. Random House has a bookstore curation capability that they’ve coupled with editorial development in a deal with Politico that could be a prototype. Hachette has developed some software tools for sales and marketing that they’re making available as SaaS to the industry. Macmillan has a division that is developing educational platforms that might become global paths to locked-in student readers. Scholastic has a new platform for kids reading called Storia that involves teachers and parents that they’d hope to make an industry standard. Penguin has a full-time operative in Hollywood forging connections with projects that can spawn licensing deals. Random House has both film and television production initiatives.

These developments are very encouraging. One of the reasons that Amazon has been so successful in our business is that our business is not the only thing they do. One of the elements of genius they have applied ubiquitously is that every capability they build for themselves has additional value if it can be delivered unbundled as well. Publishers were comfortable with that idea for the relatively low-value things that they do long before they ever heard of Amazon. It is a good time to think along the same lines for functions which formerly seemed closer to the core.

Speaking of which, many of publishing’s most creative executives will be speaking as “Publishing Innovators” at our Publishers Launch Frankfurt conference on Monday, October 8, 10:30-6:30, on the grounds of the Book Fair. 

We did a free webinar with a taste of the Frankfurt conference last week and it’s archived and available and worth a listen. Michael Cader and I were joined by Peter Hildick-Smith of The Codex Group, Rick Joyce of Perseus, and Marcello Vena of RCS Libri.

Dominique Raccah of Sourcebooks, Helmut Pesch of Lubbe,  Rebecca Smart of Osprey, Anthony Forbes Watson of Pan Macmillan, Ken Michaels of Hachette, Stephen Page of Faber, and Charlie Redmayne of Pottermore (as well as Joyce and Vena) will all be talking about initiatives in their shops that you won’t find (yet) going on much elsewhere. And that’s just part of the program. There is a ton of other useful information — about developments in the Spanish language, the BRIC countries, the strategies of tech giants and how they affect publishing, and much more — that will make this the most useful single jam-packed day of digital change information you’ll have ever experienced. We hope to see you there.

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.

I’ll admit that I would have thought a few years ago that by the time we got to the point when more than a third of unit sales for major houses had gone digital — and perhaps more than half for fiction — that the future shape of the book business would be discernible. But, at least according to what I learned from one Big Six house last week, we have reached that level of ebook uptake and despite that, the business still looks very much as it has. It seems impossible to me that it will stay that way.

Here are a few bits of information that came onto my radar last week.

One Big Six executive told me that ebook sales in their shop had reached the mid-30s as a percentage of units sold. That broke down to about 50% of fiction units and 25% of non-fiction.

Nonetheless, that same executive noted a real slowdown in the rate of ebook growth. This is to be expected as the base of sales grows, of course, but it slowed down faster than this house expected. They had seen a 120% increase in ebook units in 2010 and figured they’d see an 80% growth in 2011; it came in at 60%. In short, the rate of increase was cut in half.

These numbers gave this particular executive reason to believe that print demand was begining to stabilize and that it was reasonable to assume that 50% print units might persist into the future, with commensurate new stability for brick-and-mortar stores. I have since been told that a leading executive at another of the Big Six houses shares the same expectation, or hope. Perhaps they all do.

On the other hand…

Another publisher, substantial but not Big Six, has seen much more explosive growth continuing in ebooks and, for that publisher, unit sales for fiction have already gone to well beyond 50% digital.

A paper by the accountants-consultants at Deloitte in the UK, reported in the Guardian, predicts a decline of 40% in all brick-and-mortar stores over the next five years. That’s because books are not the only item for which sales are migrating from brick stores to online. We’ve already learned that books are among the items most susceptible to online purchasing for a myriad of obvious and well-established reasons. We also know that buying public in the US is at least as receptive to online purchasing as the British.

I’ve written time after time after time about the diminishing retail network for books and its potential impact. I have always seen this as existential for big trade houses, whose distinguishing value proposition for authors remains their ability to put books on retail shelves. (There are other things that matter, but I’d argue that all of them put together don’t equal that.) Publishing printed books is a complex endeavor best done by a large organization that can perform its various functions — warehousing, shipping, billing, commissioning the manufacturing, sales representation, and contact with marketing megaphones — at scale.

A proliferation of online marketing channels with real influence could once again challenge the under-resourced (authors working alone or smaller publishers) or otherwise-preoccupied (Amazon) who are trying to substitute for what the big publishers do. So far, the platforms that matter (to the extent they do…more on that below) have been limited in number, Facebook being the most prominent one. (One sales executive said to me yesterday, “Facebook isn’t a platform. It’s a requirement.”) If Tumblr becomes really important and Pinterest really were the next Facebook and, over time,  online influencers become as dispersed as our 20th century media world was, it opens up opportunity for big organizations to add value that smaller ones can’t.

So even if the Big Six optimists are wrong that their business proposition will be preserved by a slowing switch from print to digital (and, with no more knowledge than they have, my intuition against their intuition, I wouldn’t bet a dime that they’re right), perhaps we’re heading for a world where any author in her right mind would want a publisher to cover all the digital marketing bases, with the help of technology and dedicated staff, rather than trying to do it herself.

Nobody’s predicted that yet that I’m aware of, but let me be the first on the block to acknowledge the possibility.

The future of bookstores and the future of publishers if the bookstores diminish much futher in importance should be one of the most important topics on the minds of all stakeholders in the book business. We’re going to try two different ways to explore it at our next Publishers Launch Conference, taking place at BookExpo on June 4. Both of them involve one of the distinguishing features of our events: delivering insightful data about our industry that is not delivered by other industry conferences.

All of the current industry data reporting, including the recent effort called BookStats put together by the AAP, BISG, and Bowker, are unable to isolate sales and inventory in stores by type of book. To plan future publishing programs (and to sign up books this month and next), publishers need to understand with some level of granularity whether it is true that stores are shifting their buying (and selling) from immersive reading to illustrated books and, if so, which illustrated books. Among the reasons that the industry stats fail to capture this properly is that they don’t look beyond the sales publishers make to wholesalers to find out what happened with the books the wholesalers bought.

But the wholesalers know whether the book they just sold went to a brick store, a library, an online store, or an individual. We’ve been fortunate to get Phil Ollila of the Ingram Content Group to examine his company’s records to give us a more detailed and granular understanding of what is really happening in the retail marketplace. Are bookstores really stocking fewer novels and more illustrated books? Is the proportion of sales made online versus in stores changing at different speeds for straight immersive books and illustrated books? Ingram is mining its data to come up with answers to those questions. Ollila will report some findings at our conference.

We will also have a data-rich and sobering presentation from Peter Hildick-Smith of the Codex Group. Hildick-Smith and his team have been surveying book consumers on a quarterly basis for nearly a decade. Their work is high-level and expensive and is normally only available to the big companies that can afford to subscribe. But Hildick-Smith sees a crisis ahead for the industry in his data, and he cares enough about our collective future to want to sound an alarm. He’ll be doing that our June 4 event.

And what he sees and documents is the critical role bookstores play in consumer discovery of new books and authors. He demonstrates with data and logic that SEO and social media are totally inadequate substitutes. Hildick-Smith thinks a future without bookstores will be very different than the present. He makes the case that author brands established in the bookstore era will be largely unchallenged when the bookstore ladder gets pulled up and future authors can’t climb it. And he believes that publishers don’t appreciate that all measures, even desperate measures, are called for to preserve the brick store base as long as possible.

When you start trying to figure out how publishers could do that, you appreciate very quickly that you’re tackling a very challenging problem.

Six decades ago, long before there was any bookstore crisis, my father, Leonard Shatzkin, then at Doubleday, recognized that bookstores were the publishers’ lifeblood. He didn’t see the logic in giving bigger discounts to wholesalers than to retailers. After all, wholesalers primarily put their books in warehouses waiting for orders that publishers’ marketing efforts and a book’s inherent appeal create while retailers put them on shelves in front of customers, stimulating demand. His solution, implemented ever-so-briefly, was to eliminate the wholesalers’ discount differential and offer them the same terms as retailers.

Unfortunately, this is a story about which I didn’t capture all the details while Dad was around to give them to me. I know that the wholesalers went ballistic and demanded meetings with Doubleday management (presumably including Dad, who implemented policies like this from the relative safety of the “Research Department”, not from the front lines of the Sales Department.) The policy was reversed and the wholesale discount was restored.

But I can personally attest to the enduring bad feelings this initiative engendered. In 1974, around two decades after the failed experiment, I was working for Dad selling books for Two Continents. As the top sales guy, it was my role to introduce the company to Bookazine, a wholesaler that then occupied a warehouse on West 10th Street in Greenwich Village. Bill Epstein was the owner of Bookazine and, when he met me, all of the anger from that Doubleday discount change came to the surface, as if he’d been waiting 20 years to complain about it again.

The day has perhaps come again when publishers will want to consider offering the highest discount incentive for placing a book on a retail store shelf. (The idea exists in the world of commerce: it is called a “retail display allowance”, although the concept would need to be extended to favor all retail display, not just favored positioning.) This would be a devilishly difficult policy to design and implement to avoid alienating the wholesalers the way my Dad did. (There is no way a policy like this would be well-received by Amazon.) But after publishers hear Peter Hildick-Smith at Pub Launch BEA, it is bound to strike some, at least, as an idea well worth considering.

A lot of people in publishing would pay a lot of money to get a reliable answer to these two questions:

When will the growth in Amazon’s share of the consumer book business stop?

Who will be left standing when it does?

I won’t attempt to answer those two questions in this post. In fact, the purpose here is to begin to generate agreement that those are, indeed, the way the industry’s existential strategic questions should be framed going forward. In my consulting work, it is often my role to provide “synthesis and articulation.” This post will begin to document the synthesis that led to articulating the questions, which are actually implicit statements, above. The catalyst for these ruminations was the news last week about Amazon’s dust-up with Independent Publishers Group (IPG), a demonstration of its power and willingness to exercise it that recalls an incident almost exactly two years ago when they were unsuccessful at bullying Macmillan (or the other big publishers) into giving up their notion of implementing agency pricing.

Amazon was not the first online bookseller. But they appear to have had several distinctions from all others from the beginning. One is that they always saw bookselling as a springboard to a much larger business. That meant that bookselling was, perhaps primarily, a customer acquisition tool, not an end in itself. A second is that they saw, long before it was accepted general wisdom, that perfecting the “customer experience” online was the core requirement for success. And the combination of those two things, in concert with the ubiquitious availability of capital for promising Internet propositions that characterized the late 1990s, fueled growth powered by aggressive pricing that has had their trading partners and competitors agape for nearly two decades.

Any discussion of Amazon’s success must acknowledge that the other key component, aside from the strategic components of long-term vision, smart use of capitalization, and customer-centricity, has been the quality of their execution. This has been true from the beginning and it is still true today. Some of this is subjective, but it still looks to me like they offer a better print searching-and-buying experience than BN.com and a better overall ebook ecosystem than Nook or Kobo. I read on an iPhone and use all the ebook purchasing systems from time to time, but I use Kindle the most because it is the best. I am close to somebody who prefers to buy from BN.com because (she says; I don’t do this research…) they give money to Democrats and Amazon gives money to Republicans, but she still does her searching at Amazon because it works better before she hops over to BN.com to make her purchase.

[An update on that last point since the original posting of this piece. I was challenged on the "Amazon is red" statement by a couple of people whose opinions I trust, so I asked my favorite Democrat for citations and I got two. You'll see (if you care and if you look) that both of the analyses that delivered this characterization are squarely within the Bush presidency, so they could constitute a company hedging bets rather than expressing political conviction. On the other hand, B&N was blue throughout the Bush Administration. And the point about the search engines, which was the one germane to this piece, remains true.]

Some of these advantages have become structural; having more customers means more having more customer reviews, more consumer knowledge, more product to sell, and, of course, higher rankings for many searches. There isn’t much their competitors can do about that. But they also keep innovating, most recently announcing an X-Ray feature for Kindle books that does outlining and annotating that could add value for readers of immersive fiction and non-fiction that it will take a while for other ebooks to match.

That’s the good news: good for consumers and good for producers of books that want consumers to buy and appreciate them.

This post is not all about good news.

Amazon’s relentless customer focus doesn’t prevent them from keeping a close eye on threats to their business, whether they come from obvious competitors or whether they are more tacit challenges that spring from trading partners.

This goes back to 1997. Ingram, well aware that Amazon had started its business by simply using Ingram to supply most of the books its customers wanted (Bezos put his business in Seattle because Ingram’s Roseburg, OR warehouse was within a day’s trucking distance), decided they could put many retailers in business the same way. So they announced the formation of I2S2: Ingram Internet Support Services. I2S2 would provide the tools to allow any bookstore to start selling online. Prominent industry thinkers saw I2S2 as the way all booksellers could start to reap the opportunities of the Internet as a sales channel.

Had Amazon not quickly reacted to this threat, they could have gone away so fast that we’d have trouble remembering their name now. But they did. They promptly cut their sale prices so deeply on most of what they sold that the other retailers, focused as they were on their stores, saw no point to expanding into unprofitable web business. Almost as quickly as I2S2 was announced, it was dead.

I2S2 was the first instance of Amazon successfully using price as a weapon but it has been an important part of their arsenal ever since. It has been a powerful one. It works for them commercially because they aren’t just a bookseller; they use book pricing to acquire customers and nurture their loyalty. They lock in that loyalty with their Prime program, by which the customer pays a fixed price annually for benefits that include expedited shipping, thereby making an investment which pays off in direct proportion to how much they buy from Amazon. The more they buy from Amazon, the better deal Prime is for them.

But using price as a weapon has another benefit; it puts the customer on your side. Even when Amazon’s lower prices are subsidized by their being excused from sales tax responsibilities that fund state and local governments and disadvantage local retailers who could be their friends and neighbors, consumers want it and defend it.

Amazon opened its virtual doors in 1995. Soon after they fended off the I2S2 challenge, they discouraged their first really well-financed competitor. They competed with BN.com (in which Bertelsmann, owner of Random House, bought a half-interest in 1998 to become partners with B&N) by extending their anti-I2S2 strategy and discounting so deeply that the online book channel hardly made any margin for the retailer. From Amazon’s perspective, acquiring customers for a long haul that was going to include selling many other things besides books, this made sense. From Bertelsmann’s, a company that made money selling content, owned book clubs that made money, and with no interest in being a multi-product online retailer, it made none. They sold back their half to Barnes & Noble in 2003.

And B&N faced the complications of not wanting to cannibalize their own store business with cheaper prices online. They also didn’t want to invest in the site and the search engine for it the way Amazon did. By the middle of the last decade, it was pretty clear that Amazon would be the dominant online bookseller for the foreseeable future and that those sales efforts would be subsidized by margins earned on other products.

Until the Kindle debuted in November 2007, however, publishers didn’t need to see Amazon as anything but their principal online channel and, for trade publishers, that was still ancillary to their principal channels to the consumer. Barnes & Noble was still growing its store presence. Borders was not doing as well (and still recovering from the mistake of handing Amazon its online business earlier in the decade), but was still a robust brick-and-mortar bookseller. The online share of total sales was rising, but even the bookstore component of sales was still a growing business. And expectations that ebooks would change any of that were limited to True Believers (like me) who had been predicting a change from paper- to screen-reading that had not yet gained any traction.

I recall in the late 1990s the suggestion was made by some pundits (but definitely not this one) that publishers should combine to compete with Amazon. If they had, they almost certainly would have failed as ignominiously as I2S2 and the Bertelsmann-B&N combination did. Publishers wouldn’t have gone into online bookselling to lose money and it would have taken vision and guts to use books the way Bezos did, as a springboard to create a global online Walmart. The point I want to emphasize is that it was not a failure on the publishers’ part to have “allowed” Amazon to grow their online hegemony. It was not in their power to have changed it. And, in the meantime, Amazon was making all their books available and selling much more than they would have if they had been trying to produce more margin on book sales. (Of course, store sales would have atrophied more slowly if the publishers had managed to keep online prices higher, but it wasn’t the publishers’ or booksellers’ choice to make even if they had full cognizance of what was to come.)

Of course, since 2007, ebook sales have doubled or more every year, print sales are declining, print sales in stores are declining even more rapidly, Borders has gone away and closed hundreds of stores, independents and small chains keep disappearing, and even B&N is drastically reducing the shelf space it devotes to books. eBooks have enabled commercially viable self-publishing in ways never before anticipated, giving authors leverage in their negotiations with publishers they never had before. And agents now have to share the concern of the publishers and retailers that Amazon could disintermediate them as well by providing their publishing and distribution services to authors directly.

Aside from the pricing pressure and the arm-twisting of Macmillan and now IPG, Amazon has shown in other situations that they will use power when they have it. A few years ago, they tried to pressure publishers who wanted to sell print-on-demand titles to do that printing for Amazon with CreateSpace, not with Lightning. Recently they have instituted charging publishers for posting supporting material for books online that a few years ago they would have begged them to make available at all. There are now reports that they are pressuring for more margin and more coop (Amazon has apparently recently “invented” ebook coop).

This kind of pressure is not surprising. Retailers who account for a large percentage of a manufacturer’s business apply it routinely. What is new and unprecedented is that Amazon sales now constitute 30% or more of many large publishers’ business, between print and digital, and that number is rising.

This would all be difficult enough if there weren’t a huge cultural gap between Amazon and the rest of the publishing industry. But there is. More and more, people who have been in publishing for years see Amazon as “in” the book business, but not “of” the book business. That attitude is exacerbated because the answer to the second question above (“who is left standing?”) for many is “perhaps not me.”

In fact, what we know is that Amazon’s share of the trade book business has done nothing but grow since the company began in 1995. And however direct or indirect the connection, we’ve lost a lot of players in the business since then, and we continue to.

(Of course, if Amazon had failed in 1997 and I2S2 had succeeded, we would have had a different online and digital history, but there still would have been a digital change and brick-and-mortar would still have declined over time.)

The cultural gap will be covered in an upcoming post that analyzes the impact of Amazon’s growth in each segment of the publishing value chain. Then we’ll start trying to tackle the questions at the top. I expect to get a lot of help with that from the comment strings of this post and the next one on the big questions. From what I can tell, every player thinking about their own future in a world where Amazon just gets more and more important is looking for some help answering those questions as well.

A couple of major (Big Six) publishers have acknowledged that ebook revenues for them have passed 20% of their revenues. Of the 80% that remains print, I think it would be conservative to estimate that 20% of that is sold online. That’s an additional 16 percent of their business. Adding those together tells us that, for at least some very major companies, 36 percent of of their sales are being transacted online. That would leave, on average, about 64% of the sales for print sold through brick-and-mortar retail and other more minor channels. ”On average” should not be read as “typical” on a title-by-title basis. It isn’t. For immersive reading, or straight text like novels and biographies, the percentage sold in stores is already almost certainly substantially lower. My hunch, and nobody really keeps these figures (but I think I’ve found a way to get at them, which we’ll try to show at a future Publishers Launch conference) is that it may already be down to 50% print in stores for new titles.

(It adds both confirmation and confusion to note that Bowker’s PubTrack estimated that 30% of the dollars spent on books in 2010 were spent online. But they figured that only 2.2% of the dollars that year were ebooks. My own estimates are based on the picture of things we get from big publishers, who are perhaps more skewed to straight text than the industry as a whole. There are all sorts of explanations that would narrow the apparent differences between what Bowker describes and what I infer from what I know, but they’d require a different piece which, I think, would be less helpful in painting an overall understanding of where we’ve been and where we’re going than the one you’re about to read.)

Five years ago, early in 2007, it was a virtual certainty that 80%, and probably much more, of the sales of any trade book that sold a significant number of copies would take place in stores. There were almost no ebook sales. (The Kindle did not make its debut until November 2007; sometimes I feel like I was the only person reading ebooks before the Kindle arrived.)

Five years from now, by the start of 2017, I’d bet that 80% of the sales of any trade book that sells a significant number copies will be transacted online.

And that, even more than the ebook uptake that is a mere component of the store-to-online shift, is the story of our times that matters in trade publishing.

One thing I believe but won’t try to prove (which means “take it on faith”) is that more attention has been paid to the change from print reading to screen reading than to the change from store purchasing to screen purchasing. But the change in purchasing behavior is by far more significant in its affect on the industry than the change in consumption, at least in the medium term.

The shift in the way we consume what is now print may become more important as new presentation forms enabled by digital delivery — making use within the content itself of video, animiaton, links, social connections, and alternative content and navigation paths — are improved and gain commercial traction. (I’d argue that no enhanced or illustrated ebook solution has achieved that so far.)

But being halfway through the change in consumer buying habits in our decade of change has profound implications for all the big players in the publishing value chain. It would appear that publishers in both the US and UK are now accepting that the decline in numbers of bookstores and the shelf space they offer for merchandising is not temporary and not primarily recession-driven. (We heard that said more than once last year and the year before.) It is a fundamental societal shift that is inexorable and which shifts power away from publishers to their trading partners on both sides of them: the authors and the retailers.

In fact, even though the share of the overall business commanded by the brick-and-mortar retailers is declining, even they will, at least in the short term, gain clout with the publishers. The exposure they offer any book they carry will be increasingly appreciated as shelf space diminishes. And for illustrated books, print is really the only proven game in town because there is no digital presentation of such books that has demonstrated enduring viability in the marketplace.

The fact that we are halfway to a complete reversal of the online-offline sales ratio explains some conflicting behavior see in today’s marketplace. It is still true that brick-and-mortar placement is instrumental to building the reputation of a book or an author. And it is widely accepted that only a publisher employing a real infrastructure and customer network (its own or through effective use of a powerful distributor like Perseus or Ingram) can deliver that placement. At the same time, sales through online channels, particularly of ebooks, has reached a level of real commercial significance and those sales can be delivered with a fraction of the organizational capability that the declining model requires.

So we have authors like J.A. Konrath. He is perfectly content to eschew the bookstore exposure in favor of doing it himself. He keeps much fatter margins on the ebook sales, even though he probably has to charge lower prices for the same book than a publisher would. Konrath has argued for a long time that he is thinking of the future. He may be giving up some sales today, he acknowledges, but he believes he’ll be compensated for his foresight as the sales base moves away from bookstores and he has avoided forever paying 50% or 75% of his ebook royalties in an exchange for bookstore sales that will inexorably diminish.

Of course, he gives up advances against royalties too.

On the other hand, we have the author Amanda Hocking who built herself an online sales machine from scratch but yet happily sold her next four books to a publisher. She got significant advances, will now get bookstore exposure she never had before, and, from her perspective, also laid off many of the non-writing tasks of delivering a book to market. Those were tasks she found onerous; she’d rather write. I think she’s right that it is hard to do it oneself and I think it might get harder.

And then, taking a middle-ground position between these two, we have John Locke and Barry Eisler.

Locke was like Hocking. He started from scratch and built a big sales base online. He also was not getting the bookstore sales and exposure he’d get through a publisher. But Locke doesn’t mind the marketing work and he likes controlling his online presentation and pricing. So he made a “distribution deal” with Simon & Schuster for his print, getting the muscle of a real publishing sales and distribution organization working for him on a fee-for-services basis.

Eisler, who had done several books with major houses, turned down an advance from a publisher (ironically, the publisher was St. Martin’s, the same one who signed Hocking) and initially intended to self-publish. Instead, he took a deal with an Amazon imprint. This cuts the baby in half. He gets an advance. He gets the marketing attention of a big organization with unique capabilities. But he does not get bookstore exposure.

The reason all these different approaches actually make sense is that we are still in a period of transition. Konrath is banking on the fact that my analysis is right. From his perspective, he’s giving up bookstore revenue and marketing now because he doesn’t want to be paying forever for what he gets today. The same is true for Locke. Eisler and Hocking are pursuing more immediate benefits. Eisler is betting that Amazon’s direct marketing to consumers they know will propel him further and faster than going back to bookstores for sales yet again. And Hocking is banking on the fact that the bookstores and the publishers’ ability to place books in them will accelerate the growth of her fan base as well as laying off a lot of work she doesn’t want to do on somebody who is willing to fatten her bank account for the privilege.

The transition has another dynamic which is the growth of Amazon’s power in relation to every other player in the value chain. Going back to the stats at the top of the piece, the publisher who is seeing 36% of total sales and perhaps nearer 50% of immersive reading sales taking place online, is also seeing the percentage of their sales through Amazon grow as well. Amazon has about 60% of the ebook sales in the US and perhaps 90% of the online print sales. That would make Amazon (12% of the 20% sold as ebooks and 16% of the 80% print) about 28% of such a publisher’s volume now.

But using an overall number like that understates the reality of Amazon’s dominance. Their share of the sales of straight text books is almost certainly higher (because they sell most of the ebooks), so that share is almost certainly above 30% now. If things proceed as this piece contemplates for the next five years and nothing drastic has happened to change the shares retailers have of the ebook and online print channels, Amazon is likely to be something more than 50% of a big publisher’s business. All they won’t have is the 20% that is brick-and-mortar print, a sliver of online print, and the chunk of the ebook business that is sold by other vendors. And, as now, the percentage sold online will be higher on straight text.

Going from 80 to 90 percent of book sales being made in stores to that same percentage being made online in a decade’s time certainly justifies anybody’s pronouncement of profound and disruptive change. Having a single account that delivers half of publishers’ business — more on many titles — is unprecedented and perhaps unsustainable.

Although what we’ve seen in the past five years looks to me like it points very clearly to what we can expect in the next five years, it is hard to tell whether these realities are being taken on board by the players from whom power is shifting away. (Nobody is going to call me and say “Mike, our business is melting away!” even if that’s what they’re thinking.) I’m pretty sure it is all well understood, and expected, by the player who is seeing the power move in its direction. But they aren’t calling to tell me that either.

The death of the senior John Sargent last week – he was for a time my father’s boss at Doubleday in the 1950s — gave me reason to recall this piece I wrote in the blog’s very early days on Leonard Shatzkin breaking the color line at Doubleday in the 1950s. I didn’t have very many readers then compared to now. I thought it was worth calling my now-much-larger audience’s attention to it, even though it has nothing to do with today’s post. I think many of you will enjoy it.