Literary Guild

It is not news to publishers that they have to engage directly with their readers


Since the merger that has created Penguin Random House, there has been precious little speculation (except by me, as far as I can tell) about what this new behemoth in trade book publishing could do to exploit their scale in new and innovative ways.

Their scale advantage is huge. PRH has something in the neighborhood of half the commercial trade books published, bestsellers and below. (You see numbers as low as 25% for this and most of the time estimates put it around 40%.) For several decades, the big US book clubs — Book-of-the-Month Club and the Literary Guild — demonstrated that having about half the books was “enough” for very large numbers of people to feel comfortable that their choices of what to read from within that group of titles would be sufficient for most of their needs.

My initial hunches, still totally unrealized, were that PRH would launch a subscription service with just their own books and, through the use of vendor-managed inventory, create exclusive channels of store distribution that wouldn’t be available to any of their competitors. (One senior executive from a competitor to whom I described this scenario said candidly, “we’d make our best books available to them for their proprietary channel if it were the only way for us to get the distribution”.)

One PRH executive kindly explained to me the company’s inherent resistance to the subscription model, which would seem to appeal most to the heaviest readers looking for a bargain. As the largest player in the market, PRH isn’t looking to reduce the spending by the people who are the biggest sources of industry revenue, which a successful subscription offer would inevitably do. (That subscription model, or “Netflix for ebooks”, is complex in ways that are often ignored, but which Joe Esposito spells out very clearly.) Of course, that doesn’t mean the company wouldn’t consider it in an environment where subscription services were taking a big part of the audience (certainly not the case yet, but watch what happens if Scribd or Oyster or Entitle or the new Rooster succeed). It does seem to say that they won’t be pioneers in this field. And there is no sign yet that they’re taking up my idea to use VMI to create their own bookstores, either.

But PRH UK — echoing what was said to me by RH US CEO Markus Dohle some years ago — has now announced it is becoming a consumer-focused publisher. Hannah Telfer, who was made “group director, consumer and digital development” in January, says discoverability depends on “building a direct relationship with consumers”. And she claims “our scale” is a key enabler of doing this “properly”. This is refreshing, since most of the industry thinking about how they would use scale seems to be more about consolidating warehouses than getting smarter about talking to consumers.

One article in The Bookseller details staff changes and initiatives around this goal. (And another expresses some skepticism about whether their plans are adequate to the task. That second piece suggests they need to think about selling direct, a recommendation I have expressed some reservations about.) On the one hand, the first article suggests some really broad, company-wide objectives, including “the potential for Penguin Random House to be a cultural and entertainment powerhouse; a home for all audiences”. At their recent sales conference. CEO Tom Weldon described the opportunity for PRH “to create the blueprint for a publisher brand as a consumer brand and, in doing so, capture the attention of the world for the stories, ideas and writing that matters”. That sounds like one big brand.

At the same time, there was clear acknowledgment of the importance of what we call “verticality”, or “audience-centricity”. An “audience segmentation project” was announced. So was cross-imprint attention to specific subjects, with “cookery” and “crime” cited. One tool that it is clear Penguin Random House has and will use is called Bookmarks, described as “the Random House readers’ panel”. New plans call for it to “become a PRH resource, giving all parts of the business access to over 3,500 readers through surveys and focus groups”.

Of course, the more different ways the company wants to use that panel, the more difficult it will be to get meaningful data from it. In fact, it would seem that what is really called for is an ongoing “panelization” process, by which new people are being added all the time to a number of panels that can answer questions about different communities of interest. One panel can’t serve all purposes.

This brings two topics into bold relief that have not historically been part of a book publisher’s thinking or skill sets.

1. It calls for new and nuanced thinking about brands.

2. It calls for a multi-faceted plan for engagement with individual consumers.

Advice directing publishers to think about branding for consumers is plentiful these days. Since I first started thinking and writing about publishing and brands, something disruptive occurred which I wasn’t thinking about at the time: self-publishing. My original notion was that the challenge was establishing brands with clear vertical, audience-centric identities. Probably the best example of doing that successfully in the big US houses has been Macmillan’s establishing of Tor as a brand for science fiction and tor.com as a destination site for science fiction devotees. It is well over two years since I wrote about tor.com having hundreds of thousands of email addresses that they could address with promotions that got very high open rates.

Tor.com gives Macmillan’s science fiction list a clear label of not-self-publishing. But outside Tor, for their general list, Macmillan uses many imprint names. A novel might be published as St. Martin’s, Holt, Farrar Straus, or Thomas Dunne Books (among others), each of which probably has “meaning” to buyers at major accounts, big libraries, and major book reviewers, but which means precious little to the general public. Does the average person know those names better than they know, let’s say, Thomas & Mercer (the new imprint of Amazon) or Mike & Martha Books (a name I just made up)?

(Please note that Macmillan is being used here for illustrative purposes; every major house has the same issues with imprint brands that are really intended as B2B signals, not for the consumer.)

But ultimately, it is important for Macmillan, and for every publisher, to stamp “major publisher” on their books to let the public know “this is from a long-standing and established book publisher” on the assumption, which I would share, that people who don’t know the names would still trust an institution rather than a self-interested individual to “pick” their books.

(Obviously, most people choose their books because of the author, the subject matter, a recommendation from a friend, or even based on some combination of the cover, the description, and the price. How much of the audience would be influenced by knowing that a major publisher was behind the book? We don’t know that, and we don’t know whether that number will grow or shrink based on the always-increasing output of self-published material that has not gone through a publisher’s editing and formatting rigor. And, by the way, doing aggressive branding means the publishers need to pay even more attention to their editing and formatting. Each instance of an inferior branded product hitting the marketplace will weaken the value of the brand.)

So here’s the rule about branding. Each major house should pick one name that is an umbrella. It goes on every book to establish the company as a major source of quality literature, enjoyable reading, and book-packaged information.Trying to target more precisely than that should be the job of the “imprint” brand under the umbrella brand. And that brand should be vertical, identifying subject or audience. That’s Tor in the Macmillan example above. Note that right now Macmillan is not a brand being used by any of the US companies in the Macmillan family.

The plan for engagement with consumers is much more complicated and has many components. One is simply collecting email addresses and permissions to ping people and then utilizing them. Turning almost all the marketing efforts you can into components of an email-gathering machine is a big part of this. This is a game everybody should be playing: all the retailers, all the publishers, and all the authors. We know from recent assignments at our digital marketing business that the smartest literary agents are figuring out how to help their authors do this. We can’t be far from the day when an agent will routinely ask a publisher “how many relevant email names do you have to promote my author’s next book to?”

But email lists, as the PRH UK statements suggest, are just one aspect of consumer engagement. And the statements from PRH also implicitly claim that a much bigger company has advantages in pursuing it. Aside from their ability to analyze existing email addresses among their signups or that they find through other means (hitting their web sites, self-identified in social media) to understand and reach audiences better, large companies can create special interest verticals to pull traffic (driving email signups) and give themselves a range of promotional opportunities. We see Simon & Schuster doing a lot of that kind of work. I’ve become a daily fan of “250 Words”, an email from their new business book web vertical that summarizes the core proposition of a business book every day. Whether that, or other vertical efforts of this type the house is trying, can turn into a remunerative web community or even a good place to get a book launched, is still an open question. But it is the kind of experiment that could produce a launching pad that could really help S&S with business books.

We touched on the notion that creating dynamic panels of consumers to tell you things — things you can ask all the time — is also a real value. We are aware of a niche magazine which routinely uses Twitter to ask its readers for opinions about various things, like what angle to take on a story. They get very fast responses that way. We know that Osprey, the military history publisher, routinely asks its audience for opinions when they are choosing among subjects for development of a book. (And it is relevant to note that Random House UK has hired Osprey’s energetic and visionary CEO, Rebecca Smart, to run their Ebury imprint. That’s another way to employ scale: hire away the best smaller-company executive talent!)

A good approach for a big house that can harvest large numbers of email addresses would be to routinely ask consumers whether they would like to be polled about questions that will guide the house’s publishing and marketing strategies. Doing that would give them fresh names all the time. What Osprey does with their specialist audience could become routine practice to a house with a big enough email list. Consumers could be asked about whether a topic is a good one to sign up before the house makes a commitment. They could also be asked about packaging and pricing. And if that kind of interaction were built into the house’s practice, over time they’d learn when consumer opinions are a good guide to follow and when they’re not (because they won’t always be!)

We are in the earliest days of big publishers changing from near-total dependence on intermediaries to reach their markets to having direct relationships with consumers. For now, most houses are pretty quiet about what they’re doing, partly because they think they’re inventing something and partly because they don’t know how well any of this will work. But relative silence shouldn’t be interpreted as relative inaction or inattention. It isn’t news to the big publishers that they need to talk to audiences directly. Penguin Random House has advantages of size relative to the others in the Big Five, but the rest of them have advantages of size relative to everybody else.

Note to readers: because of glitches and fiddling not worth detailing, the last two posts didn’t go out through our normal email distribution (which makes some people refer to this blog as my “newsletter”!) If you didn’t receive posts entitled “Getting Mark Coker Right This Time…” and “Sometimes One More Calculation…” they are linked here for your convenience.

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Peering into the future and seeing more value in the Random Penguin merger


So now in addition to the Random House and Penguin merger that is being reviewed by governments far and wide, we have the news that HarperCollins is exploring a tie-up with Simon & Schuster in a deal that hasn’t been made yet. That leaves Hachette and Macmillan, among the so-called Big Six, still on the outside as the general trade publishing behemoths rearrange themselves for whatever is the next stage of book publishing’s existence.

I am not sure we really need an “explanation” for what is the resumption of a perfectly natural phenomenon. Big publishers have been merging with each other for several decades in a process that suddenly stopped after Bertelsmann acquired Random House (to add to its holding of Bantam Doubleday Dell) in 1998. We didn’t know it at the time, but that concluded a long string of mergers that had recently included Penguin’s acquisition of Putnam-Berkley, but which stretched back to the 1970s when pursuit of the paperback-hardover synergy had driven Viking and Penguin; Doubleday and Dell; and Random House-Ballantine and Fawcett into each other’s arms.

(Perhaps HarperCollins should get credit for the resumption of the era of consolidation. Their acquisition of Christian publisher Thomas Nelson, combined with their holding of Zondervan, created a powerful position in one of publishing’s biggest vertical markets shortly before Penguin and Random House announced their plans.)

But consequential events always get an explanation, whether they deserve one or not, and this merger appears to many to be driven by consolidation among the retail intermediaries and the rational concern — amply documented by recent experience — that the retailers would use their leverage to press for more and more margin. This is complicated by the fact that both of the dominant retailers — Amazon in the online world and Barnes & Noble in the brick-and-mortar space — have small publishing operations of their own that are always available to put additional pressure on publishers at the originating end of the value chain.

There is an important asymmetry to take note of here. The retailers publish and are always a threat to acquire manuscripts directly and cut the publishers out but the publishers, particularly the biggest ones, don’t do retail and there is no obvious path for them to enter retailing in any significant way. (That last sentence was written with full cognizance that we await the debut of Bookish, which is an attempt by three of the Big Six to enter retailing in a significant way. Maybe when concrete plans for it are announced there will be some reasons provided to amend that thought.)

In my opinion, the dominant position that Amazon holds in online retailing and that B&N owns in shops are impregnable on their own terms in ways that the positions of each of the big publishers are not.

The threat to Barnes & Noble is that bookstores will become unsustainable: that a retailer trying to exist at scale with books as its primary product offering will, because of ebooks and online purchasing of print, simply become unviable. The threat to Amazon is more nuanced and more distant. One can imagine a world developing where content retailing evolves into niches by subject or tastemaker. But that world is not around the corner (an environment toxic to bookstore chains appears to be much closer) and it would be far easier to imagine how Amazon could adapt to niche online retailing than to see B&N adapting to deliver retail book selections that are only viable at a fraction of their current size.

(I consulted to them a decade ago and suggested that to no interest. They were shutting down their mall stores at the time and the idea seemed totally counterintuitive.  I’ve also written about it.)

I saw recent data (sorry, can’t remember where…) suggesting that something like 38% of the book business is now done online, taking both ebooks and sales of print into account. This seems to be confirmed by a chart built on BookStats data by reporter Laura Owen of PaidContent, if you take “institutional sales” out of the equation and assume that wholesalers sold books to online and store retailers as well as libraries.

Whatever the percentage is, it is almost certainly higher for immersive reading than for illustrated or reference books because immersive works for ebooks and the others mostly don’t. So it would appear that something like 60% of the book business is still a bricks-and-mortar game, with the number being somewhat lower for straight text and higher for illustrated.

That, in a nutshell, explains why the big publishers are still extremely powerful. The 60% sold at retailers is what they’re uniquely skilled at getting and what Amazon is uniquely challenged to penetrate.

But the one thing we know for sure is that the shift to online purchasing — while it has slowed down — will continue to progress for a long time. The increased ubiquity of devices; the always-larger selection from an online merchant; the increase in availability of appealing and useful content that is either too short or too specialized for print; the steadily increasing cost and hassle of shopping by car rather than by computer; the natural results of birth, death, and demography; and the increase in online word-of-mouth and recommendation sources are among the many factors that assure that.

As the percentage of a publishers’ sales that are made through retail stores decreases, the cost of covering them increases. This has already become an issue as the big publishers view their overheads and come to the conclusion that they can’t afford to pay ebook royalties greater than 25% of receipts. Surely, some of the cost basis they see driving that necessity are really print-based (creation and distribution), which makes them calculate what’s affordable differently than a more new-fangled publisher that is planning primarily on digital and online distribution.

The publishers who are merging or thinking about merging are not doing so out of immediate desperation. The financial reports we see from trade publishers are not frightening. Top line sales are challenged — there is little or no growth — but margins have been maintained through the seismic marketplace shifts of the past few years and the pace of change is slowing. So it is probably preparing for a world a few years off that drives publishers to merge today. What will that world look like?

The world of publishing we’re going to see five or ten years from now will probably look quite different. Even if store sales only decline 10% a year against the industry total, what is a 60% share today will be about a third after five years have passed and below 20% in ten. Those are sales well worth having, of course, but they’ll be a lot more expensive to get. And if I were predicting rather than just speculating, I’d expect the erosion of retail sales to be a bit faster than that.

My expectation is that freestanding bookstores will be less and less common, and smaller book sections in other retailers (the way they’re in mass merchants today) will proliferate. We already see this in “specialty” retail: stores stock books that fit alongside their other product offerings. But as bookstores get scarcer, it will probably begin to make sense for general book selections — bestsellers, classics, and the cream of popular categories like cooking and current affairs — to be offered by other merchants. Part of the reason that doesn’t happen now is that it is too hard for the retailer not in the book business to do. A representative selection either requires dealing with many publishers or buying from a wholesaler. And the wholesalers are working on tight margins, not allowing them much room to offer expensive services (like inventory management) unless they really cut into the store’s margin.

But you don’t have to have every book — or even every bestseller — to deliver a compelling consumer offering. Book-of-the-Month Club and The Literary Guild proved that half a century ago when they competed for the general book club market. They demanded exclusives on the bestsellers, so they tended to split them. And they each had enough to pull a very large audience.

Well, the combination of Random House and Penguin has damn near half the bestsellers too. And Random House, at least, has already developed vendor-management capabilities that they can apply at the store level. So as the bookstores disappear from town after town, a Random Penguin combination (they really ought to call it that!) becomes able to offer any local retailer a selection of books that will look pretty good to the average consumer.

In addition, they’ll find that the combined lists give them a great head start on having enough titles to deliver retailers other vertical selections — cooking, crafts, home improvement — that their VMI skills will also help them serve.

Right now the challenge Amazon is having is that they’re trying to publish with a grip on no more than half the market. That’s great, as far as it goes, because that’s where they have a real margin advantage when they cut the publisher out of the chain. But because there is so much Amazon fear-and-loathing around the rest of the industry, they’re not able to build out beyond their proprietary position. (See the recent frustrations expressed by their author, Tim Ferriss, to appreciate how that’s working out in the market today.)

But if Amazon could reach 75% of the market — that is, if store purchasing declined below 25% of the total, which is in the cards for the next ten years — leverage would be reversed. (I’m eliding the format and proprietary reader device issues around ebooks here, but I’m guessing they’ll mostly go away in the next five or ten years.) Then Amazon wouldn’t want or need distribution to the stores or other online outlets. In fact, chances are they’d see it in their best interests to withhold those titles from other retailers and use them as tools to compel shopping with Amazon.

(This would not be a peculiar selfishness of Amazon if they did it. I remember well the battles my friends at Sterling had when they were first acquired by Barnes & Noble trying to convince their new owners that it was necessary to distribute the books as broadly as possible or they would start finding it impossible to sign new titles. B&N’s instinct was to want what they published available only from their stores, an instinct they acted on with SparkNotes.)

But if I’m right about where Random Penguin might go, they could play this same game. As the cost of running book departments increases as a percentage of sales, as they surely will as sales in stores decline, the mass merchants will diminish their presence. If Random Penguin has half the bestsellers, they will be able to use VMI to build secondary locations to keep their print books available. Those locations will be theirs and theirs alone. Maybe they’ll only be making 10% or 15% of the total sales this way, but those sales will be unavailable to other publishers (unless they go through RP at diminished margins.)

The proprietary distribution will give RP an advantaged position signing up the biggest books. In time, they might even have enough of the biggest books to pursue one of the current active fantasies of Amazon and a bunch of entrepreneurs: creating a value proposition for big authors that will enable a subscription library with headline titles. And that would be another proprietary distribution channel that this next generation of scale might make possible.

The resistance of the bookstores to doing anything that helps Amazon will make it difficult for Amazon the publisher to build a general trade list of bestsellers until a much bigger chunk of the market has moved online. Barnes & Noble, which had a chance to become the one dominant trade publisher if they’d played their Sterling card differently, seems not to be interested in that role. So it will be one or two of the incumbents that will be left standing ten years from now managing the most commercial titles in the marketplace. The odds are very good that one of them will be Random Penguin.

I (usually) resist the temptation to make political observations on the blog, because that’s not what people come here for. But I have to make an exception because I think one of the most important points to be made about the results of November 6 has not been made anywhere else. And it is, ultimately, a non-partisan point.

Among the many reasons that President Obama convincingly defeated Governor Romney was the superior execution of the Obama campaign around data and operations. They were simply better analysts and managers and they executed better than the Romney campaign.

So can we please put to rest the notion that “getting rich” or “running a business” is a proxy for “management skill”? The most frequently-offered argument from Romney was “I’m a successful businessman so therefore I can run things better than this guy who is community-organizer-turned-public-official.” Actually, Governor, you couldn’t. You didn’t.

The last presidents we had with business experience were (working backwards) George W. Bush, Jimmy Carter, Herbert Hoover, Calvin Coolidge, and Warren Harding. There is no historical evidence in there that shows that business success correlates with the ability to run the United States government. Or even, as we’ve just been shown, an effective national campaign.

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Subscription models seem to me to be for ebook niches, not a general offer


Another fledgling ebook retailing venture came through our office this month touting a subscription proposition. I told the entrepeneur “I’m skeptical of the subscription model for ebooks,” and he said, “I know”.

We had a great chat, but I’m still skeptical. When I say that, I mean I’m skeptical that a general offering subscription model can work.

There certainly is a logic to subscriptions, particularly for those who think the book business should learn from other content businesses. Cable TV really started with subscription and then only later moved to pay-per-view, which is more like the ebook sales model (but not exactly). We have Netflix for movies and TV, Audible for audiobooks, and a host of services for music, the most successful of which seems to be Spotify.

I have a Spotify subscription, even though I don’t use it much. Perhaps foolishly, I’m comfortable spending $119.88 a year (which is what $9.99 a month comes out to) to have access to just about any song I might ever want to hear instantly when the urge (or suggestion) to hear it arises. (Spotify very seldom disappoints me by not having the song.) And that’s even though most of my listening needs are satisfied with the 6,000 or so songs I have in my iTunes repository of which the best 1,000 are on my phone.

Spotify was cited by the entrepreneur I met as a motivation for him to start his ebook subscription business. As he correctly pointed out, “sharing a playlist” with a fellow Spotify subscriber enables them to immediately — with no additional cost or friction — “consume” that music. Sharing an iTunes playlist with somebody just leads them to having to make purchases which, quite aside from the money, put time and (a considerable) effort between receiving the playlist and enjoying it.

So, it is posited, this logic should apply to books. With a host of very explainable exceptions, I’m not sure it does, at least not anytime soon.

I’m fresh off a speech in Washington about what the DoJ doesn’t understand about publishing. The answer, if boiled down to a single word, would be “granularity”.

According to the MPAA, North American movie releases for 2007, 2008 and 2009, were 609, 633 and 558 respectively. There are foreign films and perhaps some below-the-radar indie films that must be added to that number to reckon what’s being made available, but it gives you an order of magnitude.

The Big Six publishers average more than 3,500 titles a year each. And there is far more production of titles beyond the Big Six in publishing than there is production of movies beyond the Hollywood studios. It would be very conservative to estimate that there are 100,000 new professionally-produced book titles a year intended for consumers. (Many more are published for professionals or as school or college texts and were you to add in self-published ebooks, which sometimes reach big audiences, they would multiply that number.)

Commercial releases of music would fall in between movies and books in number, but much closer to movies.

That’s the short answer as to why most people share music and movie experiences with far more friends and acquaintances than book experiences. It is also the short answer to why people outside the book business just can’t grasp it; each one of those books is a separate creative and commercial endeavor, down to having its own contract, its own development path and schedule, and its own marketing requirements.

(It also helps explain why many people who use libraries for some of their reading don’t use it for all. No library will have all the books a voracious patron would want to read.)

In the days before Amazon.com and digital books, there were two kinds of subscription services that worked for consumer books.

Book clubs offered price deals and curation (help with selection) but it was the price deals that really attracted members. Before ubiquitous bookstores (which arrived in the 1980s), Book-of-the-Month Club and The Literary Guild got the highest-profile books distributed to consumers who would have had a hard time getting to them (as well as those near bookstores who just wanted the convenience of mail delivery.) As bookstores spread, the Clubs found that “niche clubs” (around mysteries, science fiction, or subjects like gardening) were apparently more profitable than the big general interest clubs. (“Apparently” is a highly operative word, but the explanation of that will wait for another day.)

The other subscription concept that worked was the “continuity series”. The market leader there was Time-Life Books. These books were about a particular subject (World War II, say) and they were “packaged” specifically for the series and not available in stores. Continuity relied on the combination of intense subject interest and the “collection” mentality: somebody who started collecting the series didn’t want to have holes in their collection.

Both models were pretty much blown out of the water by online book purchasing which suddenly made every book available for home delivery to everybody everywhere.

In specific niches, subscription models can work very well. The granddaddy of them on the digital side is Safari Books Online, originally conceived and built by O’Reilly in partnership with Pearson. Safari serves a community of programmers and has a huge collection of instructional and reference books which they can use on the job. Most users of these books dip in and out of them, rather than reading them straight through. And they frequently like the idea of checking out what several books might say about a problem they’re tackling.

Safari pioneered the model of dividing the publishers’ share of the subscription fees by metering usage. The more your book is viewed, the more money you get from the pot. And since users of Safari will almost always find the answers they need within the service, leaving your book out means it won’t be found and used. Since at least some of the time Safari usage could lead to a sale of the book itself (even if not very often for most books), that discovery element is lost along with any Safari-generated revenue if the book isn’t included in the database. A publisher should feel pretty confident that they aren’t losing many sales being inside Safari.

(The model that looks like “all you want for a price” to the purchaser and like “pay per use” to the content owner in even purer form than Safari does it is the deal offered by Recorded Books for its digital downloading service for audiobooks to libraries. There are other subscription models in the library space; it is a distraction to the point of this post to get into them which is why they’re not covered here.)

O’Reilly saw at the beginning that their books alone wouldn’t be the strongest subscription offer so they were open to participation by others from the very beginning. Safari is exceptional in at least three ways: they are bigger than one publisher; they are built on a professional user base; and they deliver value primarily through chunks, not end-to-end reads.

But if a publisher is strong in a niche, a subscription service can work for them too: Baen Books (science fiction) and Harlequin (romance) are two niche publishers who have sold subscriptions successfully. (In fact, Harlequin recognizes sub-niches, further segmenting their audience for better subscription targeting.) The Osprey-owned sci-fi house, Angry Robot, offers subscriptions. eBooks by subscription are also part of the model for Dzanc, which does more literary books (fiction and non-fiction; they’re really less niche-y, except for “quality”) and it will be interesting if they can make the “quality” paradigm work the way “romance” and “science fiction” do.

Sourcebooks is a general trade publisher, but they have a robust romance list. They’re trying to establish a club and community called “Discover a New Love” which operates more like the old BOMC: subscribers can choose one of four featured titles each month in addition to getting other benefits from discounts on other books to early looks at some titles.

Subscriptions are offered in the children’s ebook area as well. Disney Digital Books has a monthly subscription service, as does Sesame Street eBooks. In both cases, the model is browser-based delivery rather than downloads.

F+W Media is a publisher that works across many verticals (niches). They had two big head starts. One is simply being vertical. They have audiences that are defined by their interest, which has been the key to making a subscription offer work in the book business. The other is that they were once publishers of magazines and operators of book clubs, so they have experience with direct customer contact and managing those relationships. They also had a lot of names. And F+W is managing subscription offerings for many things other than ebooks.

Most of F+W’s communities have been non-fiction (subject-specific) and they offer subscriptions for content in art, writing, and design. But they are also venturing into the romance market now and their Crimson Romance offer is an “all you can read” model. Baen introduces the wrinkle of releasing a novel in stages to subscribers, like a serial.

And we note in the recent reminder that the TED conferences started doing ebooks (sort of: only within an iOS app) that a subscription model is part of their thinking too. Once again: in a niche. The app that enables them to manage subscriptions is powered by The Atavist, which is another attempt to build a following for a publisher distinguishing itself by its content choices, like TED or Dzanc, rather than around already-established consumer clustering (romance, sci-fi, or a topic like writing or design.)

It is worth noting that there are “all you can eat” subscription offers and ones that are limited but which offer discounts on further purchases. That variation exists in other media too. Spotify is one price for everything; Audible and Netflix meter your use and you can pay more if you consume more.

There’s a pretty strong pattern here to the subscription offers we see.

They’re usually done by publishers. (Safari isn’t a publisher anymore, but it was started by publishers.) That means they’re working with the publishers’ margins (bigger than an aggregator’s margins). Controlling the product flow means they can make good use of intereaction with their audience, learning through data and conversation what they should be doing next. And, most important of all: from a product offer point-of-view, they’re focused.

They’re precisely the opposite of Spotify or Netflix or Audible who all want every single song, movie or TV show, or audiobook they can lay their hands on.

So, what about a more general model for ebooks?

It hasn’t happened yet and I don’t think it will anytime soon, despite the ambitions of my recent visitor. The challenges of putting together the title base for one are daunting and, as I hope this post makes clear, so is providing and demonstrating persuasive value.

I can see only one player that might be able to pull off a more general subscription offering in the near term. (You can guess who that is.) The “whys” of that will be the topic of a future post.

One thing that is pretty certain is that when there are many publishers offering subscriptions in their niches (and someday there will be), they’ll each be powered by a Cloud-based service of one kind or another. None will be asking the IT department to create the software to handle it.

I will admit that I haven’t programmed anything specific about “subscriptions” into the “Book Publishing in the Cloud” program we’re running on July 26, but if that’s what any attendee wants to find out, they’ll have a great opportunity at our “Conversations with an Expert” session to get the answers. Almost all of the speakers will be available during structured chat time, as well as representatives from the great companies that are sponsoring the event. 

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The old publishing value chain got twisted a bit last week


Although the value chain in trade publishing for the last century has, for the most part, kept retailers between publishers and consumers and kept publishers between retailers and authors, that has never been 100% true. Doubleday covered the whole value chain in the 1950s, when it not only owned the Doubleday Book Shops and the Literary Guild book clubs, it also owned printing plants. In the early 1960s, the Crowell-Collier Publishing Company bought (and eventually renamed itself) Macmillan (and that’s the old Macmillan that became part of Simon & Schuster in the 1980s, not the new Macmillan which was what the renamed Holtzbrinck group became a few years ago) and they also bought the Brentano’s bookstore chain.

I sold books to both Brentano’s and Doubleday in the 1970s and I don’t recall it ever being an issue that they had publisher ownership. Of course, that was before trade publishing consolidated into anything remotely resembling a Big Six.

After those two chains were sold in the 1980s (and I’m going to admit that I forget whether Walden which became Borders or Dalton which became Barnes & Noble bought each of them), in a period of two decades when publishers and book retailers grew enormously, the neatness of the division between the publisher’s role and the retailer’s was mostly respected. A number of retailers — notably B&N and Borders, but suppliers to the mass merchants as well — bought bargain books directly from packagers during that period, but joint ownership of significant publishing and retailing capabilities was, temporarily, suspended.

But Barnes & Noble was particularly aggressive at direct sourcing of book content and around the turn of the century announced the goal that 10% of their volume should come from directly-sourced product. To further that objective, in late 2002, B&N outbid several other companies (including at least one very large publisher) for the independent niche publisher, Sterling. Immediately, Borders stopped buying Sterling books and Barnes & Noble started stocking a lot more of them than they had in the past.

Meanwhile, the Internet was forcing everybody to rethink the paradigm. Even before the Kindle was launched in November, 2007, Amazon was encouraging authors to “publish” with them directly. All they could offer was the connection to the vast majority of online consumers — no print runs, no presence in any brick stores — but this could still be attractive and productive for some authors. My friend and client, David Houle, a futurist who blogs at Evolution Shift, published his “Shift Age” book with Amazon before Kindle and has sold thousands of copies, many of them at his own speeches. He’s very happy earning about $7 on every sale of a $17 book. No publisher was going to offer him as much as a third of that per copy.

As online sales grew, and then were further fueled by ebook sales starting in late 2007, it became increasingly obvious to many that publishers would have to start selling direct themselves. Some did. Harlequin has done so for years. F+W Media, one of the most aggressive publishers employing a vertical community strategy, announced a year ago that they would use Ingram to sell their books as well as those of their competitors to their direct audiences. Macmillan announced a similar plan for science fiction through Tor.com, although that idea has apparently never been implemented.

Part of what has discouraged the big publishers from selling direct is the threat of retaliation by Amazon and Barnes & Noble, both of which are much happier if the customer contact for big books is through them, thank you very much. Since both companies really exercise direct influence on many consumers, big publishers are inclined to respect their concerns.

To a certain extent.

And then we had the events of last week.

Amazon, which had previously established imprints for author-direct publishing and for translations of foreign works and had created a relationship with Houghton Harcourt to address their prior inability to get brick store distribution for books they owned, announced a new romance imprint called Montlake Romances. (Personally, I thought it was a bit strange that they announced it with just one book coming this Fall, rather than 10 books coming next week!) That put them squarely into the publishing business in a new way, and one could only imagine that the mystery shoe and thriller shoe and sci-fi shoe will be soon to drop.

In the same vein, Barnes & Noble has a program called Pub It! to enable authors to by-pass publishers and earn bigger royalties. They also still own Sterling, which gives them in-house the distribution capabilities that Amazon had to team with Houghton Harcourt to get. And with Sterling they also have the entire infrastructure in place to deal with authors and their care and feeding which could constitute competitive advantage when the gloves come off chasing brand-name authors.

So both of the giant retailers are looking more and more like publishers.

But it turns out the publishers were cooking something up too. On Friday, we learned about a new business called Bookish, which will be the “new digital destination for readers.” In its announcement release, Bookish promises to use content and software tools to promote discussion and discovery around books and to answer the reader’s question: “what book should I read next?”

What was most eye-catching about Bookish was its backing by three of the Big Six: Hachette, Penguin, and Simon & Schuster, who have apparently been planning this move for quite some time.

What was downplayed, but perhaps most significant, is that Bookish is trying to straddle the same fence that Google, and, to a lesser extent, Kobo are: being an ally of existing retailers while selling direct to consumers itself.

It really is impossible to speculate intelligently about Bookish’s potential for success. What they’re suggesting they’ll do is reminiscent of Copia and Goodreads and Library Thing, and none of them have yet replaced the marketing power of the brick store, a fact which is front and center in the minds of the trade publishers who depend on that merchandising.

But it will certainly accomplish one thing: giving the big publishers a direct path to the consumer. The hunch here is that if any one of these three big publishers had gone aggressively into direct sales, they would have risked serious retaliation from both of their two biggest customers: Amazon and Barnes & Noble. But it will be hard for them to retaliate against three publishers who, among them, deliver about half the biggest commercial books in the marketplace.

Let’s remember a year ago January when Amazon briefly sought to block agency terms for ebooks by removing buy buttons from Macmillan books when they briefly thought they could stop the plan from being implemented. As quickly as it became clear that the five publishers determined to implement agency would not be deterred from doing so, Amazon retreated. (In fact, they graciously joined Macmillan in compensating authors who might have lost sales during the brief period the buy buttons were inactive.)

And that brings up another important point about Bookish: what it says about the common interests among fierce adversaries, which the trade publishers certainly are. The times call for collaboration among competitors in trade publishing. It is a little bit nuts that several of them are building competing romance, mystery, and science-fiction “communities”, which only leaves the field wide open for a third party to be the biggest aggregator in each of the verticals and also allows much smaller competitors to look comparable on the web. But collaboration models have to withstand anti-trust concerns. Presumably three of the biggest publishers jointly investing in this web venture will.

Whether or not the Bookish team can invent the general book marketing future, or, through competition, spur Amazon and BN.com to be more creative about online merchandising, remains to be seen. But this past week certainly gave us further indications that the publishing value chain is being drastically reshaped and that the neat roles we’ve been used to for 100 years have less and less applicability to publishing’s future.

I chuckle when I think about a very smart person from a major house who was telling me just about a year ago, right after agency was implemented, “whew, now I think things can settle down for a while.” Actually, “things” are just getting moved over to the fast track so they can really change. Montlake and Bookish within a day of each other; Barry Eisler (who’s speaking at our “eBooks Go Global” show at BEA on May 25) and Amanda Hocking going in opposite directions within a week or so of each other a couple of months ago; these are significant events but they’re also signs of accelerating change.

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