Michael Cader

Headliners galore will address Digital Book World 2015


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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The support infrastructure for entities to publish is growing but the most important piece may not yet be provided


I remember a song lyric from the early 70s for which the opening line was: “we don’t need more sailors, we need a captain”. (I can’t find the reference in LyricFind and I don’t remember the name of the band.) That song could be about the new publishing that is arising from the phenomenon of “atomization”, books that could come from just about anybody anywhere (that’s the “we”). They are supported by “unbundling”, the availability of just about every service required (those are the “sailors”) in the complex task of publishing books.

This is what we should call “entity self-publishing”, as opposed to “author self-publishing”. The success of indie authors has gotten a lot of ink lately, partly fueled by the Amazon-Hachette dispute which has brought into bold relief that authors can make a living self-publishing — mostly by exploiting the capabilities of Amazon — without a big organization of their own. But entity self-publishing is ultimately far more threatening to the publishing establishment trying to make a profit because it could, in time, bring a lot more content into the marketplace with a lot more marketing muscle behind it than individual authors will. And sometimes the motivations of those content providers won’t include the need for profit.

(It also can be seen to offer opportunity to the establishment, to the extent that they find it productive to craft their own service-offering on-ramps to be flexible partners for entities.)

Companies abound that offer the core services that support publishing. Big organizations like Ingram and Perseus are mainstream providers and deliver the full suite of capabilities, including putting printed books onto store shelves. (In fact, if you’re big enough, you can get a Big Five publisher to do this for you.) Digital distributors like Vook, INscribe, and ePubDirect can turn a file into ebooks and put them into distribution around the world. Lulu and Blurb will also deliver printed books for you. The subscription services like Scribd and Oyster (not to mention Amazon, Ingram, Overdrive, and the other ebook retailers) will give you distribution. And, both as part of those larger offerings and as stand-alone services like BiblioCrunch, it is increasingly easy for an author (or self-publishing entity) to find editors, cover designers, marketers and web site creators, and just about any other specific skill set that is required to publish a book successfully. In fact, publishers themselves have relied for years on freelancers for many of those functions.

But entities have challenges that individual authors don’t.

An individual author knows what is to be published: what they write. And because most authors are most comfortable in a particular genre, they don’t have to worry much about consistency as they build an audience. They are inherently consistent. (Authors who want to span genres or write outside what they’re best known for have a tougher row to hoe to make themselves commercially successful as self-publishers.)

Of course, they have plenty of challenges outside their writing skill set: editing, cover design, even pricing and marketing. And those challenges are enough to make many authors prefer to have a publisher who will take care of them, even if they would otherwise be willing to give up the marketing and distribution clout of a professional publishing house. There are big per-copy-sold margin advantages to doing it yourself as well as being set free from the constraints and delays that come with working with a larger organization. There are still plenty of “how” questions, but there are very few “what” questions.

But when an entity commits to self-publishing, even one like a newspaper or a magazine that knows how to create the intellectual property, they suddenly need decision-making they’re not equipped to do, and it begins with “what” to publish.

They need a publisher. In the metaphor of the song lyric, they need a “captain”.

The position of “publisher” exists within the magazine and newspaper worlds as well, but it means something subtly different than it does in books. In either case, the publisher governs the whole enterprise, not just the editorial decisions. Because the revenue for magazines and newspapers comes primarily from advertisers, the publisher’s time, bandwidth, and focus are directed there. The publisher certainly has responsibility for things like marketing and distribution, but those tend not to require a great deal of issue-by-issue attention.

But the nature of book publishing is that each book is its own separate marketing challenge as well as an editorial one, and the two are interrelated. If the right book for a market should cost $15, you make a different book than if the right book would be $30, or $8. If the book is ready for publication in September but the right time to bring that book to the market is February, it’s a publisher who decides to hold it back.

And if there are 20 or 30 or 100 books an entity could do, it is a publisher who decides whether to do five a month or five a season, which ones to do first, and which ones should always come out in June.

In a post over a year ago, I cited the example of what publisher Bruce Harris did for Microsoft founder Nathan Myhrvold’s audacious (and successful) $625 cookbook. Myhrvold had the concept and the intellectual property and the business acumen to make key decisions. But it took Bruce, or somebody with his considerable experience and publishing sophistication, to orchestrate the inputs from marketers and publicity experts, coordinate it to the realities of the publishing calendar, and provide the direction to make best use of Ingram’s industrial-strength services.

This kind of expertise is even more important to structure lists within an ongoing publishing program.

Vook has certainly experienced some of that. Their new website announces them as “author-centric” (and they’ll move more and more in that direction), but they have totally cottoned to the idea that entities are a big part of the self-publishing future. They’ve provided critical infrastructure services to enable ebook publishing for The New York Times, Forbes, Thought Catalog, Fast Company, U.S. News & World Report, Frederator Studios, and The Associated Press.

Providing business intelligence has been a crucial part of Vook’s strategy for working with entities. Matt Cavnar of Vook told me:

“We’re tracking data on over 4 million books — print and digital — and we use that information to generate pricing recommendations to maximize revenue for the books our partners publish, to then adjust the books within the marketplaces, and to find specific categories where they will more be likely to rank on bestseller lists. We also coordinate the standard digital marketing and merchandising with the retailers. Thus, we’re acting as the infrastructure and data backend platform for these partners to be as successful as possible — allowing them to focus more on the creative and developmental side of their publishing program.”

But, of course, that data needs to be acted upon by a publisher at the other end. Vook’s client list is heavy with media organizations that can provide some version of that title-by-title, list-by-list decision-maker to make use of Vook’s tools. Because Vook  thinks hard about offering services to authors, Cavnar knows what it is like having focused direction and acknowledges the point.

“That’s right. That coordinated/creative decision maker on the partner side plays the role of the author in a sense.”

The news arrived over the weekend that Blurb, the publishing services company that grew out of an initial print-on-demand offering, had hired veteran publishers Molly Barton and Richard Nash to help them build a network of support services that they will, presumably, operate as a stand-alone business and as an on-ramp to their core business. Blurb has seen this coming for a while and the move made made sense: two publishers with vast experience know how to find and vet all the service offerings for every component of what it takes to publish a book successfully.

But I suspect that for most of the newbies who find editors and cover artists and book marketers in the network Barton and Nash will help Blurb deliver (and, one wonders, how much overlap and qualitative distinction there will be with what BiblioCrunch and a Google search would offer), it would be Barton and Nash themselves, and people like them and Bruce Harris and other veterans with experience with many books and many lists, who would be the most valuable service providers. The most ambitious of the new entrants to book publishing, coming to it to build on knowledge and a reputation established in some other ecosystem (even one that is “media”), would be wise to see that, like all the other tasks, the orchestration of a publishing program is best done by somebody with experience. And the person providing it doesn’t necessarily have to be on staff.

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And another, not unrelated thought.

In the world outside book publishing, a lot of content is being generated for “content marketing”. It has been part of my job in programming Digital Book World to understand how the world of content marketing and the world of book publishing connect.

The way a publisher instinctively wants to think about it is “if people are getting paid for content, can I sell some?” Of the three possible interactions with the world of content marketing, that’s likely to be the least productive one. The content marketing world is all about creating precisely the right content for a brand’s marketing needs. It’s not a particularly efficient approach to search the world of existing content for that, then have to license it and live with the licensing restrictions, and almost certainly have to modify it for marketing use. So, with some limited exceptions, scratch that.

Another potential interaction might be around distributing what is or starts out as marketing content as ebooks. I first made this suggestion to a law firm that had created a white paper on Trademark Law. Why not publish it as an ebook, I said? They said, why bother? I thought, don’t you want to show it to people who search Amazon for “trademark law”?

But when I talked to Joe Pulizzi, the head of the Content Marketing Institute, about ebooks, he said “well, sure, they might make sense in some cases, but there are so many other things that are more important to a marketer.” He’s talking about blogs and Pinterest and YouTube and the wide world of web and apps where content can be made to show up for the people who would be most interested in it exactly when they need it. In other words, “I see your point, but frankly, we usually have much bigger fish to fry.”

And that points to what publishers most have to gain from the business of content marketing. Publishers have tons of content, but they are far from having figured out every best way to use that content for marketing. That’s an adjacent science for us, not one in our experiential wheelhouse. That’s why we have Pulizzi speaking on precisely that subject — using content to build an audience and how to apply all those things that work better than ebooks — from the main stage at Digital Book World. We even gave him a breakout session to follow because there are going to be tons of questions from publishers (and their marketers) who will want to put these capabilities in their arsenal.

Many of the companies mentioned in this post are speaking at Digital Book World, Jan 14-15, 2015. Blurb and ePubDirect are sponsors who will also be on the program. Speakers from ForbesIngram, OverdriveOysterPenguin Random House, PerseusScribdUS News & World Report, and Vook are on panels. From the main stage, we will hear a presentation from James Robinson, who does web analytics in the newsroom at The New York Times, and Michael Cader and I will have a conversation with Russ Grandinetti of Amazon.

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Frankfurt is still vast, but it seems to be getting smaller


I’ve spent more than half-a-year of my life in Frankfurt, one week at a time. My first Fair was 1976 so this would have been my 39th if I attended them all. I think I missed two, so that’s 37. I love it and I get enormous commercial benefit from it. I can’t understand people who are in our business who don’t; it attracts the top executives from just about every publishing company in the world.

But, like just about everything in our business, it is affected by the digital revolution.

It stands to reason that gatherings of publishing people (or any other kind, really) that require travel time and expense should diminish in a world where email and Skype and Google Hangouts are a normal part of everyday life. But the venerable events just keep going on. It was more than five years ago that I wondered how long BEA could last. They have an extreme challenge because BEA’s DNA is that it is for publishers to show their wares to bookstores, and the number of bookstores has dropped precipitously for years. And London Book Fair, despite venue issues over the years which have them moving again next year, seemed from my visit last April still to be going strong.

The concerns I expressed five years ago that BEA might disappear have, so far, proven unfounded. Good show management that has brought in other players ranging from bloggers to meetings of BISG and IDPF, digital publishing’s trade association, have, at the very least, postponed what seemed to me to be inevitable. Of course, they have their own venue change to navigate and it will be a tougher one because they’re leaving NYC for Chicago in 2016. That is going to be extremely disruptive.

Frankfurt is an entirely different beast. It is really two mega-events that stretch over five exhibit days: Wednesday through Sunday. Set-up day is Tuesday, so it is really a week-long commitment. For the global book trade, and specifically for those of us in the English-speaking world that are the dominant players in worldwide publishing, it is a unique opportunity to trade rights face-to-face, on metaphorical steroids. Books published in English can have anywhere from zero to a dozen or more foreign language editions which, cumulatively, can bring in very significant revenues. What Frankfurt has done for us for years is provide an efficient venue for those deals to get made.

For German publishers, however, Frankfurt is also an opportunity to meet the public. For the non-German exhibitors and attendees, this is mostly a nuisance but a minor one because the English-language hall has been as far as is geographically possible in the Messegelende (which is about a dozen Javits- or McCormick Place-sized buildings on a vast campus connected by buses and moving walkways; 5-7 minute walks from one meeting to the next can be minimized by experienced fairgoers’ planning, but are unavoidable) from the hall which houses the Germans. (Art book, sci-tech, and other language publishers are a lot closer.)

Global companies use Frankfurt as an opportunity to hold global meetings. I could see on the meeting signboard at my hotel that Hachette and Quarto had meeting rooms booked for the day before the Fair opened from 9 to 5. These are senior management meetings that bring the heads of various regions into the same room; the rights directors and acquiring editors who will be working hard at the Fair aren’t necessarily part of those conversations. This is built into the travel rhythms of the big global companies. And the CEOs are often not fully occupied at the Fair itself. I don’t know if it is part of Frankfurt’s marketing plan to help facilitate these global meetings, but it should be. It cements the commitment of the biggest companies to that spot on the calendar.

(By the way, the global meetings combined with the long-in-advance planning publishers do for Frankfurt make it particularly challenging to run a successful conference ahead of the Fair. Michael Cader and I had a Publishers Launch event for three years — we didn’t do it this year — and both recruiting speakers and gathering an audience was harder than it has been for any other event we’ve done. People schedule their Frankfurt time tightly, and in advance, so you have to have powerful programming posted well before the event to compel people to plan to take a full day of Frankfurt time to attend.)

But it was really obvious this year that Frankfurt — at least that part of it which is about English-language publishers buying and selling with non-English markets — is shrinking.

I stay at the (now Meridien) ParkHotel, which has the Casablanca Bar off the lobby. It has, for years, been the main hangout for the Brits at Frankfurt and, in years past, you could hardly get through the lobby to your room on Tuesday night, Wednesday night, or Thursday night. This year, the crowd hardly spilled out of the bar at all.

But what was really stark was the empty Halle 8 (this year for the last time, the English-language hall) on Friday. Up until about ten years ago, Frankfurt ran through Monday morning and Sunday was the last “real” day of action. My pal Charlie Nurnberg of Sterling was always the last big US executive there working; he always made deals there on Sunday. The biggest big shots had all gone home, and Charlie made himself accessible to lots of smaller players, who were delighted to sell to (or buy from) Sterling. The important point is that there were people for him to meet that day to do business with. Powerful people went home early, but lots of business was still being done.

People hated staying through Monday so the Fair in one recent year relented and eliminated the Monday, and Sunday became the last day. Pretty rapidly, Sunday became a desolate day. This was so much the case that in the past couple of years I’ve managed to persuade Gwyn Headley of fotoLibra, my British pal with whom I share a stand and then — most years — drive back to London, that we could leave on Saturday afternoon and get back to London on Sunday evening, rather than doing it all 24 hours later.

Doing this requires some arranging. The story is that you get “fined” if you abandon your stand early. (I have seen lots of deserted stands over the years and I haven’t actually met anybody who admitted to having been fined. But I have friends who work for the Frankfurt Book Fair, I have partnered with them on conferences — I know them — and they all insist to me that it is true, so I take it seriously. I never yet left not wanting to have my stand again next year so I figure they can enforce the fine.) To avoid that problem, you hire a local young person to sit at your stand. They can’t do any business for you, of course, but they prevent you from being fined. This year doing that cost me 180 Euros. It’s worth it to get back to London a day earlier.

In the past few years since Monday was eliminated, Saturday became quieter but Friday continued to be kinetic and active. It was well known that the top execs, particularly the British ones, left after Thursday, but top editors and marketers were there in force through Friday. Not this year. Friday was the new Saturday. My Logical Marketing partner Pete McCarthy and I had a dozen meetings or more each day on Wednesday and Thursday. I had three on Friday. I had none on Saturday. We made a wisely efficient decision having Pete go home on Friday morning. (Frankly, his time is much more valuable than mine.)

You could have rolled a bowling ball down just about any aisle in Halle 8 on Friday and not broken any legs.

This is not really surprising. Global rights trading used to be an annual event, particularly for illustrated book packagers and publishers who had bulky samples and boards that needed to be seen for decisions to get made. Now it is a continuous effort with PDFs easily moved around the world in milliseconds. And that’s on top of the fact that there are fewer and fewer illustrated books and a consequent reduction in illustrated book packagers and publishers.

Next year the English-language publishers move from Halle 8 to Halle 6. On one hand, this takes us closer to the rest of the Fair and we do a lot of business with Europeans who will be more proximate as a result. It moves the English-language publishing world closer to the kids’ books publishing world (and they overlap, of course) and that’s good. But it also takes us from a hall where we’re all on one floor to one with a smaller footprint where we have to navigate three floors. Going up and down escalators only might pad time between meetings by three minutes or five, but when you’re scheduling a sit-down every 30 minutes (as many of us do, at least on Wednesday and Thursday), that can mean reducing the productive time by 15 percent or more.

And while it puts us considerably closer to the tram stop that can take us into the Fair, it also puts the German public which uses that same tram that much closer to us as well. This is going to be particularly disruptive to the b-to-b trade business on Saturday and Sunday.

The Frankfurt Book Fair will remain an indispensable stop for the global publishing community, but it might have a real battle on its hands trying to remain a five-day event. I don’t have 37 more Frankfurts to go, but I think I’ll see more changes in publisher behavior around it before I’m done than I’ve seen since I started attending.

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Print book retailing economics and ebook retailing economics have almost nothing in common


There has been a lot of conversation lately about the differences between wholesale pricing and agency pricing for ebooks and about what constitutes a “fair” division of revenue between publishers and retailers. Since the economics of bookstores have been generally misunderstood for years, it is not surprising that the understanding of what changes make sense as we switch to digital have also been misunderstood. A better grounding in the print book economic realities might enable a more informed discussion of what makes sense for digital.

Here are a couple of points about book economics that I learned at my Daddy’s knee.

1. The investment in inventory is the single biggest capital requirement for a bookstore.

2. Given that the ability to invest in inventory is limited, the speed at which inventory “turns” (a measurement of how long a retailer has to hold stock before it sells) is a much more powerful determinant of a store’s total gross margin, and therefore its profit, than the margin it earns on each sale (the difference between what it pays for the inventory and what it is sold for).

In simple shorthand, that means that a retail store selling books can improve its profit more easily by more closely matching what it buys to what it sells than it can by squeezing more margin out of its suppliers. It also means that a publisher can do more for a store’s profitability by shipping quickly and allowing smaller orders at workable discounts (which make it easier to match supply to demand) and offering delayed billing than it can by offering extra points of discount (which is what added margin is called in the book business). The additional benefit of employing this understanding is that margin division is a zero-sum game, but increased inventory efficiency is actually synergistic: both the publisher and the retailer benefit from it.

This reality about bookstore economics explains the value to the supply chain of wholesalers like Ingram and Baker & Taylor. By offering the ability to combine orders across publishers and giving rapid, often next-day, delivery, the wholesalers enable stores to gain much more inventory efficiency at a relatively trivial reduction in margin. (Where the publishers’ “deal” is sometimes better than the wholesalers’ in a meaningful way is that publishers will often allow a longer period before demanding payment. Inventory “investment” only really begins when the books the store received are paid for.)

So, in fact, there is very little similarity between the economics of retailing print and retailing ebooks. The tech infrastructure for selling is not a trivial investment, and DRM — including customer service — is a significant expense that ebook retailers deal with that bookstores do not. The print retailer has to build a customer-friendly location and invest in (presumably knowledgeable) clerks. How those costs of doing business compare is a complicated question that changes over time as the tech gets cheaper and the cost of physical locations — driven by ever-higher real estate values in the attractive neighborhoods where bookstores tend to thrive — goes up.

But the things that change aren’t nearly as important as the things that don’t.

The stock turn of an ebook retailer is infinity. There is zero inventory investment.

Publishers first had to deal with the question of what the bookstore’s margin should be on ebooks back in the late 1990s when Palm Digital and Microsoft created the first reflowable ebook platforms. Prior to that we had PDFs, which delivered — in the current jargon — “fixed page layout” ebooks which didn’t adjust the number of words per screen to the screen size. At that time, the ebook retailers were inclined to sell at publishers’ “list prices” and publishers tended to price ebooks at about the same level as print.

But nobody paid a lot of attention because the sales and revenue were de minimus. Since Palm had the most hand-held digital assistants (Palm Pilots) in circulation back at the turn of the century and because (as we have clearly learned since) portability is one of the big drivers of ereading, Palm’s ebooks were the best-selling format. But Palm decided not to enable widespread distribution of their ebook format; they sold the ebooks themselves through a controlled vendor (originally called Peanut Press and then Palm Digital).

In fact, the mobi format that Kindle uses today was developed at the time as a bridging format, able to be read on both Microsoft and Palm devices. This was before the creation of the epub format used by everybody except Kindle today. When Amazon bought Mobi, it was apparently to prevent any other retailer from building a real ebook business selling to what was then the “entire” ebook market. B&N’s one-time exit from ebooks was because they could sell only to Microsoft and not to Palm devices, which meant they had the smaller piece of what was a very small market. Amazon apparently figured then that they’d enter the market when they were ready, but they wanted to prevent B&N from building a foothold in it before then.

I’d argue that the biggest mistake B&N made in the history of ebook evolution was not buying Mobi before Amazon did.

So it became “established” that ebooks would be sold on a similar basis to print books with discounts of 40 percent or 50 percent off publisher-set retail. It should have been no surprise to anybody that once “real” retailers — not software companies like Microsoft and Palm — took the reins, they’d give away a lot of that margin to go after market share. That’s what real retailers do; it’s in their DNA.

In fact, the first wave of discounting of print in the 1980s by the Crown Bookstores chain followed very quickly behind increases in publishers’ discounts to stores from the low 40s to 46 percent and up. Most people never noticed that; others think there’s no connection. It always seemed to me that the increased publisher discounts and the discounting to consumers were linked.

In the early days of ebooks, the volumes were so low and the tech was still under development, so the significant margin the publishers offered — and the retailers employed — might have been necessary to have any ebook retailing at all. As time passes, the fixed retailing costs get lower and the customer service costs also tend to get lower.

Once a real retailer, Amazon, got into the ebook business, deep discounts off publisher prices had to follow, and they did. The move to agency pricing had purposes beyond the principal one, which was to remove pricing as a weapon from the retail competition arsenal. It also put publishers on a path to set realistic retail prices for consumers and to reduce the notional share given to the sales intermediary from around 50 percent to 30 percent.

There’s reason to believe that even 30 percent is too high, given the plunging cost structure for retail and the economic reality of infinite turn on inventory investment. A senior Random House executive told me during the period they were not in agency (the first year it existed) that part of the reason they stayed out is that the 30 percent figure Apple wanted and the other publishers agreed to seemed “too high”. As it turned out, Random House came in a year later and accepted the 30 percent. They said at the time it was because indie bookstores were attracted to ebook retailing by the assured 30 percent margin and fixed retail prices, and Random House always wants to support independent retailers.

It was always curious to me that the preference of all the other retailers except those who can use the book business as a loss leader — Amazon, for sure, and perhaps Google —  for publisher-set retail prices never made its way into the discussion of the publisher motivation at the time, nor to Judge Cote’s reasoning, nor to the arguments which have taken place about it since.

Ebook pricing today is very confused. Apparently, many of the retailers will accept wholesale terms at a lot less than 50 percent, although this is not widely known and, indeed, isn’t even really confirmable. Discounts of print to bookstores were published, standard terms. That’s not the case with ebooks (because they’re not really sales, they’re licenses, no matter what anybody says, and they are individually negotiated contracts, the terms of which are kept private). Nobody outside Amazon really knows what margin Amazon actually takes from ebook sales; it is certainly true that most of the ebooks are discounted from whatever prices publishers “suggest”. (And sometimes those publisher-set prices may be inflated, particularly if the publisher is selling at a bookstore-like 50 percent discount.) Perhaps they only really take the 30 percent that they get from agency publishers and that they take from individual authors in KDP and that they have said in their arguments with Hachette is the “right” share for a retailer.

We actually still don’t know what the “right” or “fair” margin is for retailers of ebooks. Random House had some idea of that in 2010 when they were holding out and they seemed to think “less than 30 percent”. Comparing ebook retailing economics to print book retailing economics only tells us that physical retailers of print need a lot more to have a viable business. Dad also taught me is that the reason publishers give stores a discount off the publishers’ retail price — which should be the price a publisher would sell the book at if a member of the public came directly to them — is to give stores the margin they need to operate. Because publishers want there to be stores. First purposes may have been forgotten in course of the digital transition.

There is programming relevant to this post at Digital Book World 2015 in addition to the main-stage appearance of Amazon’s Russ Grandinetti main-with Michael Cader and me. We have a great panel discussion on “price promotion” with Josh Schanker of BookBub, Rachel Chou of Open Road, and Matt Cavner of Vook. And “Blue Sky in the Ebook World” where a panel of visionaries will talk about what is over the horizon for ebook retailing, rethinking simple ebooks, making complex ebooks, and creating ebooks with soundtracks. Jonathan Nowell of Nielsen Book’s talk about how the profile of what sells in print has changed will enlighten around this topic as well.

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Export sales is one of the few areas of predictable growth for book publishers


For a client meeting last week, I was shown a chart that came from Bookstats of channel revenue for publishers. Bookstats is the recent (and now no longer) partnership between the AAP and BISG collecting book publisher shipment information. It has four years of data, which were arrayed in a neat bar chart.

Since the chart showed publisher shipments, it was an imprecise gauge of sales. The third largest channel was “jobbers/wholesalers”, and those books went somewhere else (if they got re-sold and not returned), but we don’t know where. Basically all the other channels got those books eventually.

But it is noteworthy that of the eight channels enumerated (one of which is “other”), only two showed increased sales from 2010 to 2013: online retail and export sales.

Indeed, export sales are one of the real growth opportunities for publishers, and particularly English-language publishers, in the future.

The reasons for this aren’t hard to understand. English is the most important second language in most countries that are not English-speaking. And, obviously, ebooks create no-inventory and little-friction distribution opportunities that make it easy for a publisher in New York or London (or Sydney or Toronto) to deliver to a customer separated by any distance or number of oceans.

In addition, the search engines are global so “discovery” can take place anywhere as well which can increase the demand for printed books as well as digital ones, even though the printed books present a more complex delivery challenge.

The opportunity brings along its challenges. One is that rights conventions need to change. Publishers often have their rights to distribute in some parts of the globe limited by contract. But even when rights aren’t an issue, marketing — including both customizing the metadata and the pricing to a very large number of local territories — can be.

This opportunity has grown rather recently at the same time that many publishers have been preoccupied with overcoming obstacles in their home markets. Both the US and UK markets have been roiled by the relatively sudden emergence of a strong ebook market and the concurrent (and related) weakening of the brick-and-mortar infrastructure for print. Publishers have been scurrying to change many of their practices: licensing differently, learning to do SEO well and employing other digital marketing techniques, shifting their internal structures and workflows, and grappling with the opportunities presented by social media. Many have expended effort on apps and enhanced ebooks which were time and money traps in markets that briefly looked promising but then didn’t pan out.

But in a more settled marketplace, which we have now (perhaps temporarily), the opportunities for growing revenue through export sales is going to get increasing attention from all publishers, who will be happy to know that entrepreneurial companies — some new but some quite established and familiar — have been building out the capabilities to help them.

There are three panels at Digital Book World that will really inform publishers that want to work harder to exploit this opportunity.

The mostly obviously relevant one is called “Global Publishing Tactics: understanding distribution, metadata, pricing, and marketing to maximize sales in different markets”. Two of the panelists are Marcus Woodburn of Ingram and Gareth Cuddy of ePub Direct — we have other conversations pending — and moderated by Len Vlahos, the executive director of Book Industry Study Group. Marcus and Gareth and the panelist(s) who will join them have experience selling around the world on behalf of many publishers. Their insight and advice will be gold for publishers looking to expand their export sales.

We also have a panel discussion “Global Market Spotlights: reports from markets around the world”. The four markets we’ll discuss are Germany, Italy, Brazil, and Russia. The panel will be moderated by Thomas Minkus of Frankfurt Book Fair. Our panelists — all of whom are local players — will talk about the switch to digital reading and online sales in those markets, but will also give specific insight into the market for English-language books.

Another discussion which is a bit more tangential, but will still be informative for publishers trying to grow ebook exports, is one on “How People Read”. What we’re trying to get at here is to use the knowledge that ebook platform providers have about the granular detail of reading consumption: about devices, how far people go in various kinds of books, whether they read more than one book at a time, and how they respond to pricing changes. All of our panelists — Micah Bowers of Bluefire, Michael Tamblyn of Kobo, David Burleigh of Overdrive, and Andrew Weinstein of Scribd — are superintending global platforms. Another aspect of what they’ll reveal is how these consumption patterns vary across markets, including how much English is read in various export markets. Chris Kenneally of Copyright Clearance Center, which also has an increasing international focus, will moderate.

We could well also learn more about global opportunities from the keynote talk we’ll hear from Brian Murray, the CEO of HarperCollins, and Michael Cader and I will certainly be asking Russ Grandinetti of Amazon about how publishers can maximize their export sales through them.

So if export sales is on your current agenda, a visit to DBW on Jan 14-15 also should be. And, in that case, sign up before the end of the day on Monday and save yourself some dough. Early bird pricing ends on Monday night.

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The motivation of the publisher-bashing commentariat is what I cannot figure out


Once again this morning we wake up to a piece by David Streitfeld in The New York Times about Authors United and their ongoing effort to discredit Amazon. The message coming loud and clear from the legacy publishing establishment is that Amazon doesn’t appreciate, and perhaps doesn’t understand, the value that agents, publishers, and chain and independent bookstores bring to authors and readers and, by extension, to society as a whole. The challenge they face in this ongoing discussion is that many of those values — multiple (agent, publisher, bookseller) levels of curation, investments in quality editing, giving worthy authors the financing to do the creative work that must take place well before the IP will generate any revenue — are pretty esoteric and hard for most people to relate to. And they apply to a small and possibly diminishing number of writers.

The critical services publishers provide are marketing and distribution and those functions, as we all know, are undergoing change and revision as part of the digital disruption. And because they are rapidly changing, there is even greater-than-usual variability to how well these things are done across publishers and, within publishers, across their imprints and lists. Indeed, many authors at legacy houses are not enamored of their publishing experience, but the ones who are defending the publishers are also defending something of their own.

What is equally loud and clear from Amazon’s own statements and those of their supporters (including many authors who would be less well known and less well off today if Amazon hadn’t built the tools and market share they have over the past several years), is that the legacy industry doesn’t appreciate, and perhaps doesn’t understand, that commercial publishing was built on an ecosystem which is rapidly being dismantled and will ultimately be irrelevant. And they point out that what is replacing what came before delivers much lower-priced ebooks (print is another matter) to consumers and a substantially larger portion of the revenue to the authors than published contract splits would give them. (The fact is that those splits are irrelevant more than 80 percent of the time for the most commercial books because big agents get big authors advances larger than what they “earn”, but that’s another story.) The authors that work in the new paradigm also gain unprecedented control of their professional lives: publishing when they want to, pricing and changing prices as they want to, and playing with marketing opportunities (bundling print-and-digital, entering subscription services) or not, as they and they alone decide.

The fact that both options are commercially viable today means we might actually now be living in a golden moment for authors. Publishers are certainly aware that a brand-name author has a truly workable self-publishing option (although, frankly, the biggest surprise to me so far is that basically no major author has taken it, which is objective evidence that the execs running the big houses are navigating at least some aspects of the digital transition very well). And Amazon started paying authors 70% when publishers switched to agency and extracted 70% for themselves, a connection that seems not to have been made by much of the publisher-bashing commentariat.

While there is a symmetry to the two sides’ dismay about what is appreciated or understood, there is a massive asymmetry here that is hardly, if ever, mentioned. And that asymmetry makes the motivation of the legacy defenders very clear — they’re fighting for their lives — but actually suggests that the “side” fighting them (to the extent that it consists of indie authors) is at least sometimes simultaneously fighting against their own interests.

Those who feel well served on the legacy establishment side have much to fear from Amazon’s continued growth and success. The clear self-interest of all the publishers, agents, and those authors fortunate enough to be continuously “employed” through book contracts — which includes many, and certainly the most recognizable, of the authors in the Authors United effort — who are fighting for Hachette to “win” (which means maintaining the publisher’s share of the sales that flow through Amazon) in the current dispute is obvious, if perhaps insufficiently emphasized or acknowledged.

Cynicism about whether it is really the greater societal “goods” that get so much emphasis in their appeals that are really motivating these authors or whether they’re just protecting their own gravy train is not unreasonable.

Assuming that the publisher-bashing commentariat, who could also be characterized as the “pro-Amazon” advocates, has a healthy number of authors whose revenue is as largely dependent on Amazon as James Patterson’s is on Hachette, one can see the emotional motivations to fight for the home team could be similar. But the practical side of it is precisely opposite. It is obvious that Amazon getting stronger weakens Hachette’s (or HarperCollins’s or Bloomsbury’s or Cambridge University Press’s) ability to pay advances and publish more books, which directly affects various stakeholders and particularly steadily-working authors. But if Hachette “wins” — or if Amazon’s margins on transactions with publishers are not improved — how does this injure the self-publishing authors who are working successfully that way now? Simple logic says that Amazon will treat them best when the possibilities offered by publishers are the best.

Do they really think that Amazon will offer them more if Hachette is weaker? History and logic would suggest the opposite.

In other words, publisher-published authors definitely lose if Amazon gains strength in relation to them. But Amazon-published or KDP authors (and the publisher-bashing seems to come from both flavors) lose nothing if legacy publishing remains strong. They are, allegedly, fighting for the “good” of those authors who are signing “exploitive” publishing contracts, but their own interests are not served.

This asymmetry plays out in another way in the Lee Child exchange on the Konrath blog. Child says, again and again, that he thinks it makes complete sense for authors to exploit the opportunities in KDP if it looks like the best commercial choice for them. Maybe I’ve missed it (and I admit that I am disinclined to read most of the publisher-bashing posts and I certainly don’t make a habit of reading the bloggers who specialize in them), but the message I keep getting from Konrath, Eisler, and Howey is not “choose the course that is best for you based on the choices you have in front of you” but is more like “never sign one of those exploitive publishing contracts!” (Howey tells me he blogs about that “all the time” and cites this post of his. You can decide for yourself what you think, but it seems to me that he is saying “only sign with a publisher after you’ve built yourself up by self-publishing first”.)

The motivation of the authors who spend a great deal of time and energy bashing big publishers has puzzled me before. Because “price-shoppers” are a core audience for indie ebooks, indies actually got a shot in the arm when the publishers and Apple put in agency pricing, which in its original form prohibited even the retailer from taking a loss to bring branded ebook prices down.

There’s no way for an outsider to compile the data to prove this, but the chances are very good that indie author breakthroughs were easier to achieve during the years when the price gap between the majors and the indies was greatest. But most of the voices now demonizing Hachette (and the rest of what is being called the Big Five “cartel”) also bashed agency pricing. I see the benefit to Amazon in that position, but I don’t see how crippling agency pricing helped indie authors.

It is not only Judge Cote’s decision which has changed things since, but also the growing awareness of publishers about the value of temporary price drops, or “daily deals” and services — most prominently BookBub — to amplify the effect of promotional pricing in the marketplace. But how did ending agency pricing benefit independent authors?

Hugh Howey maintains that he is better off if his books and those from the big branded authors are priced the same. Hugh’s a smart guy so maybe I’m just not bright enough to get it, but that makes no sense to me. Except in the luxury goods market, there is virtually no situation where you gain advantage with a higher price than the alternative pitted against you. The bigger the saving you can offer, the more you’ll sell. In fact, Hugh makes that argument himself when he claims that lower ebook prices will raise industry revenue because it makes the ebooks more affordable. It’s fine to argue that the big publishers are dumb not to lower prices and sell more, but, even if it is true and especially if it is true and they pay attention and obey, how does that do him any good? (The answer from Hugh, by the way, is that we’re all better off if all prices are lower.)

I have been persuaded in Howey’s case that he personally rises above self-interest in his industry commentary. Hugh’s a nice guy, a smart guy, and a socially-conscious guy. He and I have had many candid and mutually respectful exchanges. And I read “Wool” and recruited him to speak at Digital Book World long before he was such a celebrity on the anti-publisher side. I believe him when he says “I’ve made more money than I ever imagined I would; I’m grateful; and one benefit of that is I don’t need to be motivated by money in my decisions.”

Howey is a true believer and a crusader who is sincerely convinced that the standard publisher terms for authors are unfair and need to change. He has occasionally expressed skepticism and concern about some of Amazon’s decisions and behavior, particularly around the complex compensation schemes for Kindle authors with their KOLL (lending library) and Kindle Unlimited (subscription) initiatives which buys him a certain amount of credibility. But I still can’t understand why he’s in KU but not Oyster and Scribd and 24Symbols, a set of decisions that strike me as being in Amazon’s commercial interest but not his own. (One possible explanation is that going into additional distributions creates more “work”, but I don’t take that too seriously. Hugh can afford to hire people to do the work, and he does all kinds of other things, like his AuthorEarnings blog, purely to add to industry knowledge. It would add a lot of useful insight if he were in the subscription services and reported on it.)

Perhaps the problem has to do with Amazon’s KDP rules, which apparently require “exclusivity” to be in KU. That is almost certainly not a requirement visited on publishers. If that’s what is stopping Howey, it would be nice if he would say so. Could Amazon be preventing its authors from pursuing revenue opportunities? If that’s true, wouldn’t that belong in any discussion of an author’s choices?

Another persistent Amazon advocate is author Barry Eisler, whom I first encountered during a brief moment when he was going to eschew taking advances and being published by somebody in favor of doing it on his own. (In the end, he became an Amazon-signed author.) When I posed the quandary that is the subject of this piece to Eisler, he referred me to this post of his which I don’t believe addresses the question. You can check out the link and decide for yourself.

Trying really hard to understand this and think imaginatively about it, I can only really come up with two “selfish motivations” that make sense. One — and I think this is the one that is claimed — is that the publisher-bashing is designed to improve life for the victimized authors who choose those deals. Indeed, the content of the anti-publisher rants often includes specific suggestions, or demands: raise the digital royalty, make shorter contracts, pay royalties more often, etc. that are, no doubt, author-friendly. But it does seem a bit weird for people committed to demonizing, weakening, and ridiculing the big publishers to be the ones to tell them what they could do to stay competitive. If publishers accepted the suggestions, of course, perhaps Amazon would be pushed to improve author terms too, but that seems a pretty indirect and distant reward to explain all the time and energy some people expend on this. (Or are they promising to sign with the big publishers if they follow these suggestions? I don’t think so!)

Another conceivable legitimate motivation, of course, is ego. These publisher-bashers have managed to “do it” without them, and continuing a high-profile running criticism of the establishment they outdid and outmaneuvered, particularly when you can get a lot of applause, might be alluring. But even that feels weak to me. If self-aggrandizement were what motivated these people, it would be even more impressive if their frame were “this is hard, but I managed to do it” whereas the message feels much more like “anybody can do this and you’re a bit of a dolt if you don’t.”

None of this constitutes enough of an explanation to satisfy me. I am either missing something in plain sight or I’m not in possession of all the facts. Perhaps the “explanation” that the published authors defending Hachette pursue their selfish interests but that the indie authors who bash Hachette and the others do it out of public-spiritedness, even if their own revenue suffers, does it for you even though it doesn’t for me.

Amazon has a strong case to make for itself. They really made online book retailing work through strategic brilliance and excellence of execution, without being first and against industry entities that should have had competitive advantage. They made ebooks into a thriving business for everybody pretty much singlehandedly, also without being first. They’re entitled to feel that the powerful position they’re in is because of the virtue of their model and execution, and they’re entitled to feel that a different publishing industry than the one they came into is the future they have to work towards, whether or not they want to spell out that vision in full and whether or not the incumbents “get it”.

If every argument being made by the publisher bashing commentariat were coming from Amazon, I’d understand the motivation and factor it in, as I do with Authors United or Hachette when they speak.

But I need to understand a rational motivation to put anybody’s advocacy in context. And it seems to me the very best thing for indie authors is for all the existing publishers to retain their capability to hire authors on that model as much as they can for as long as they can. That’s not the best thing for Amazon, but I really think it is the best thing for authors, and as true for those who do-it-themselves as for those who are published.

A senior Amazon executive, in a meeting we had two or three years ago, complimented me on the fact that I “understand entities acting in their own self-interest.” My response then was, and my feeling now is, “I’m mistrustful when they don’t.”

After I wrote this, I found that blogger Chuck Wendig had asked a similar question, with far less editorial speculation than appears here, in what appears to be an undated, but recent, post. He framed it differently than I do and I’m not sure what I read at his attempt at irony (“why are self-publishers trying to save the Big Five?”) was seen that way by his many respondents. My focus is narrower: this fight is being carried by a handful of very persistent and energetic critics, spending time and energy that one would think takes more motivation than is required simply to  “have an opinion” on this subject one way or the other. “What fuels all this energy and vitriol?” is a different question than “which side are you on in the dispute?” 

Early Bird pricing for Digital Book World 2015 is only open until next Monday. There will be lots of programming that will provide context and insight around all things Amazon. Michael Cader and I will have a half-hour wide-ranging discussion with Amazon’s Russ Grandinetti. Judith Curr, the CEO of Simon & Schuster’s Atria imprint, will present her view of  the “publisher-or-self-publishing” choice authors face. An expert on the school and college market, Matthew Greenfield of Rethink Education, will include an assessment of Amazon’s role in his review of what publishers need to know to compete for those sales as things change. Jonathan Nowell, the CEO of Nielsen Book, will use his company’s historical data to look at how the mix of what sells in print has changed since ebooks took off. Media veterans and authors Walter Isaacson and Ken Auletta will let us see the book business alongside other media undergoing technological change, which is necessary for any valid understanding of Amazon. We have a panel of publishers talking about selling direct. Oh, and of course, Founder/President Josh Schanker of BookBub will be on a panel on price promotion! There’s a lot more that is relevant, which you’ll find if you scan the entire program.

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Are Amazon exclusives the next big challenge for everybody else in publishing?


Somebody smarter (or more patient about wading through data) than I am could probably figure out how far along this bifurcation is already, but Amazon is doing its very best to build a body of content that is desirable and available from nobody else but them.

This is something you can do when you’re in the neighborhood of 70 percent of ebook sales and already more than half the total sales for many works of fiction, which is where the self-publishing world is strongest. It is not an opportunity that is really available to any other retailer. Apple has given it a try for more complex ebooks for which they provide ebook-building tools and, presumably, offer the most productive distribution environment for complex content. But they’re playing on much less fertile ground and they don’t have anything like the audience share necessary to drive this strategy very far.

It is hard, if not impossible, to imagine that any other ebook ecosystem could offer benefits that would make it worth skipping Amazon.

Two recent developments call attention to this situation.

David Streitfeld in the New York Times reports that Amazon has held a private by-invitation-only conclave for writers the past four years. I knew about this before because I’m a subscriber to Publishers Lunch and they reported on it about three years ago. (I like to say about my conference business partner Michael Cader, proprietor of Publishers Lunch, that you go to him for the facts and you can come to me for opinions.)

It is a smart and sensible thing for Amazon to do. Amazon has been demonstratively aware of the ability of writers to promote their own books to their audiences but also to promote Kindle Direct Publishing among their peers. Bringing authors in for a private chat to exchange ideas is not only flattering to those invited (a benefit to Amazon in and of itself), it almost certainly also informs them about how to be more successful courting authors in the future. This shouldn’t be viewed pejoratively, although Streitfeld’s piece and a companion blog post seem to position it that way.

The other is Hugh Howey’s very public rumination about whether to go exclusive with Amazon or not, in which Howey wonders out loud whether he should stay exclusive with Amazon beyond a 90-day trial period based on his calculation that his audience (perhaps counterintuitively) goes up while his revenue takes a small hit. I’ve had an off-line exchange with Hugh in which he emphasizes what his post says: he really can’t decide which way to go on this.

(It is worth noting, as Hugh does, that when he makes these decisions, they are only commitments for 90 days at a time. Of course, each time he switches he creates work for himself, either putting up the titles in other venues or taking them down. But he can get the benefits of Amazon exclusivity in 90-day chunks with no commitments beyond the 90 days and go in and out as many times as he likes. Hugh makes what I think is an unhelpful and invalid comparison to the life-of-copyright deals publishers ask for in return for advances against royalties and inventory investments that Amazon and other retailers do not make for self-published authors, but he’s right that it is much easier to make a decision when you only have to live with it for three months.)

His open thought process became the subject of a post by Chris Meadows on Teleread. One thing on Hugh’s mind was whether he needed to help keep alternatives to Amazon viable by contributing his content to their mix. Meadows says “that’s not your problem” and I agree with that. Each writer should be making the publishing decisions that are best for their personal brand and career. The first decision — if a publisher offers them a choice — is whether to take an advance and a deal or whether to self-publish. If they self-publish, they have to decide whether to be exclusively Amazon or go for the widest possible distribution.

The reflexive, intuitive choice is to get the most distribution possible. There are certainly readers who shop exclusively in non-Amazon retail environments. There could even be a growing number of those in light of the recent publicity around the Hachette dispute and the negativity directed at Amazon by Authors United. There are certainly people who make a point to avoid shopping at Amazon or buy from them as little as possible. (I’m even related to some of those people.)

But with Amazon’s enormous market share, their ability to promote both through normal commerce and special exposure like their subscription service Kindle Unlimited, and their willingness to put a thumb on the financial scales (KDP Select authors get higher royalties; they pay bonuses to top sellers and top titles being seen in KU), they can make up for whatever might be lost by eschewing other channels of distribution.

The idea that having content that is not available elsewhere can strengthen a retail offering is not the exclusive province of Amazon. It was a core component of the strategy originally announced by upstart retailer Zola Books.

Amazon has not yet ever suggested that “content only available here” was any important part of their customer-marketing strategy. (Update: I’ve been corrected on this. In fact, they do promote the exclusive content, both in press releases and in their Kindle Unlimited promotion online. They tout “over 500,000 digital titles you won’t find anywhere else”.) The exclusive-or-not conversation has been mostly (should be: largely) confined to their dialogue with authors. In fact, the rest of the publishing world has nudged them in that direction by being resistant to stocking books from Amazon Publishing. If at one time the author recruitment team at Amazon might have hoped to deliver ubiquitous distribution for their books, the path to bookstores was effectively blocked by their brick-and-mortar competitors’ lack of willingness to support their program.

The self-publishing revolution, despite the enthusiasm of its strongest advocates (which definitely include Hugh Howey), has only made small inroads among authors who have the option of a substantial advance from a traditional publisher. For that reason, the pool of authors exclusive to Amazon contains very few that could change a book consumer’s shop-of-choice (except perhaps one time for a particular book they wanted to get).

But if a big earner like Hugh Howey thinks he might be better off accepting Amazon’s standard terms for exclusivity, that’s a dangerous sign for everybody else in the book ecosystem. A traditional publisher still offers brick-and-mortar visibility and revenue that Amazon and any self-publishing effort will not. The transfer of market share from stores to online and from print to digital hasn’t ended. Every point of market share that shifts strengthens Amazon’s proposition for exclusivity and increases the likelihood that a high-visibility author will make the self-publishing leap. The combination of the two — highly branded authors and Amazon exclusivity — is among the most unwelcome inevitabilities the rest of the industry will probably face in the years, if not months, to come.

What is already the case is that Amazon is piling up a repository of content that nobody else has. When that hits a tipping point that starts influencing substantial numbers of consumers is another shoe waiting to drop.

Programming at Digital Book World that is highly relevant to this post will be a presentation by Judith Curr, president of the Atria division of S&S, on the math of the author’s decision whether to go with a publisher or publish on their own. Curr’s division works hard to recruit new authors and, in fact, Peter K. Borland, who heads up Atria’s Keywords Press partnership with UTA to publish books from highly successful “digital influencers” (people with big YouTube audiences, for example), is a participant on a panel of “new publishers” who are making their mark. The other participants on that panel — Entangled and Georgia McBride Media — don’t have Big Five roots.

As we were about to post, a rumor hit the Net of a new Amazon program to recruit more self-published authors. The idea is that submissions of manuscript and cover are given a crowd-sourced review; then the highest-ranked are “considered” for a new kind of Amazon publishing contract. This doesn’t seem to have been “officially” announced, but a conversation with an Amazon person is reported and the source, The Digital Reader, is normally reliable. This initiative would be further evidence that Amazon is using its platform to control the distribution of more and more of what authors generate.

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Big publisher bashing again with fictional facts


The estimable Clay Shirky has written a lengthy piece called “Amazon, Publishers, and Readers” on medium.com saying, essentially, that an Amazon-dominated world would be an improvement over the Big Five “cartel”-dominated world of publishing we have today. This is an apples to oranges comparison. The Big Five are not nearly as broad a cartel as Amazon — which reaches way beyond the consumer books they publish — is a monopsony. Amazon touches much more of the book business than the Big Five publishers do. To make his case, Shirky recounts some very questionable history and employs some selective interpretation to get from his own impression of the current Hachette-Amazon dispute (about which he says “Amazon’s tactics are awful, the worst possible in fact”) to a completely different conclusion.

My complaint with the facts and logic start at the top: with the two paragraphs Shirky uses to set up his argument and establishes the “holier-than” context for his position. He says:

Back in 2007, when publishers began selling large numbers of books in digital format, they used digital rights management (DRM) to lock their books to a particular piece of hardware, Amazon’s new Kindle. DRM is designed to transfer pricing power from content owners to hardware vendors. The publishers clearly assumed they could hand Amazon consolidated control without ever having to conspire with one another, and that Amazon would reward them by passing cost-savings back as inflated profits. When Amazon instead decided to side with the customer, passing the savings on as reduced price, they panicked, and started looking around for an alternative conspirator.

Starting in 2009, five of the six biggest publishers colluded with Apple to re-inflate ebook prices. The model they worked out netted them less revenue per digital sale, because of Apple’s cut, but ebooks were not their immediate worry. They wanted (and want) to protect first editions; as long as ebook prices remained high, hardback sales could be protected. No one had any trouble seeing the big record companies as unscrupulous rentiers when they tried to keep prices for digital downloads as high as they had been for CDs; the book industry went further, violating anti-trust law as they attempted to protect their more profitable product.

Almost every sentence of this is subtly or blatantly wrong.

1. Publishers did not begin selling large numbers of books in digital format in 2007. Amazon started Kindle in late November 2007. Significant sales of ebooks didn’t start to occur until after Christmas and continued to grow rapidly thereafter.

2. Although an uninformed person would be led to infer from reading this that DRM was somehow created for Amazon, in fact DRM was routinely used for ebooks for their entire existence before Kindle. DRM on Kindle continued current practice; DRM was not created for Kindle or at Kindle’s behest.

3. DRM maintains pricing power for content owners as well as hardware vendors. In fact, I’d say it is more for the content owner than for the hardware owner. What it does for the hardware owner, particularly Amazon because they eschew the industry standard Adobe, is lock customers into their ecosystem. Of course, it is that lock-in that Shirky is telling publishers they can overcome by going DRM-free. (This precise antidote to Amazon was offered up by Matteo Berlucchi, then the CEO of Anobii, at a talk we put him on stage to give at Digital Book World in 2012.) In fact, it is not transparent that eliminating DRM would curb Amazon; it might fuel them. How well would the other retailers stand up to Amazon having easy access to their customers? Because that would happen at the same time.

4. Publishers did not believe — let alone “clearly assumed” — they were handing Amazon any sort of consolidated control. Perhaps that was a failure of vision, but it was a justifiable expectation since nobody had succeeded at selling ebooks before Kindle.

5. Amazon’s discounting was entirely at their own expense and was a tactic designed, at least originally, to sell devices and create captive customers. The publishers’ “inflated profits” (if that’s what they were) were not at issue in 2007 or 2008. So Amazon “sided with the customer”, but they also “sided with their own interests”. Some might say that’s not relevant; I think it is. Either way, it should be acknowledged, not elided or ignored.

6. Amazon was partly enabled to give the big discounts to consumers because publishers gave discounts too big to them, foolishly aping the print book business model even though a retailer’s costs drop much more than a publisher’s do with the change to digital. Stock turn is the key profitability metric for retailers. Stock turn on digital books is “infinity”. (I’d note that these are small points in this piece but are really really big points that go ignored in most of the discussions about ebook economics, which are almost always “fails” at understanding the core economics of publishers or retailers.)

7. The reduction in publisher revenue per book sold which resulted from Agency pricing (pejoratively characterized by Shirky as “colluded with Apple” rather than the at-least-equally accurate “using Apple’s established app store business model”) was not due to “Apple’s cut”. “Apple’s cut” was less than “Amazon’s cut” had been under the wholesale model. And, if you doubt that, you should take note that Amazon prefers not to switch to “Apple’s cut” so they don’t allow any but the biggest publishers to sell on the agency model with its lower margin. (Publishers can get 70% of net direct through KDP, but they have to stick to the $2.99-$9.99 price band and are at the mercy of KDP’s terms.)

8. It is misleading to attribute the publishers’ desire to keep “hardbacks” (really, all print) alive as a desire to protect “first editions”. It was primarily a desire to protect the brick-and-mortar bookstores. It should be said that way for accuracy but also to make the motivations of the sides clear. Publishers want to strengthen or maintain bookstores because their ability to reach them is a core competence that keeps them in business. Amazon wants to weaken or eliminate bookstores because it is clearly established that many customers of each bookstore that closes come to them. Another motivation for the publishers was to maintain a diverse ebook ecosystem, which at that time had just added Nook to its ranks and was about to add Apple. It is likely that Amazon’s discounting — thanks to the DoJ’s and court’s actions weakening agency — did as much to weaken Nook as any mistakes made by Barnes & Noble. And let’s not forget that Kobo has also abandoned active marketing in the US ebook market since then as well.

The other piece of Shirky’s screed that is misleading and inaccurate is his history of paperbacks.

Whether you date the beginning of paperbacks in the US to Pocket Books’s founding and Penguin’s establishing itself in the US in 1939 or to the period right after World War II when paperback publishing writ large discovered the magazine distribution system and really took off, there were decades between their arrival on the scene and their consolidation into the larger book business under joint ownership with hardcover houses. So it shouldn’t surprise anybody that, to the degree that the ebook disruption is analogous to the paperback disruption, the reaction would be even more extreme on the part of the incumbent establishment dealing with the lightning-quick change that has transpired since ebooks took off in 2008.

And that is quite aside from the fact that the paperback revolution was not 60-to-70 percent controlled by a single account that also controlled a substantial and growing chunk of the rest of the book sales as well. Be that as it may, Shirky is simply factually wrong to say that what happened was that the hardcover houses just bought up the paperback houses and consolidated them into the existing business. The acquisitions took place in both directions. In at least three cases, the paperback house bought the hardcover house (Avon bought Morrow, Penguin bought Viking, and Bantam bought Doubleday) in order to assure themselves a steady supply of good books.

And before the consolidation even began, real troubles had started to develop with the distribution through the magazine ecosystem. Returns were climbing (that is why prices of paperbacks went up) and paperback publishers were finding they needed to sell directly to many accounts, which made them more like the hardcover publishers. And over the couple of decades between the end of World War II and the beginnings of consolidation, almost every “hardcover” house had started doing its own “trade” paperbacks: not rack-sized and sold through the same network that sold hardcover books.

In other words, the analogy is not analogous in many important ways.

It is true that Amazon, at least in the current competitive environment, has everything to gain by pushing prices down and everybody else in the publishing world does not. And it is also true that the lower the prices of books are, the more accessible they are to more people. And accessibility is definitely a “good”.

Even so, I really resist the Manichaean view that it is “the Amazon way” or “the publishing cartel way”. It seemed like Shirky himself tried to dismiss that idea near the opening of his piece, when he attacks Steve Coll for writing “about book-making and selling as if there are only two possible modes”, which Shirky describes as maintaining the current “elites” or seeing Amazon become a “soul-crushing monopoly”. But that is precisely where he ends up. To look at things this way rejects not only what the publishers keep trying to tout as their “added values” (curation and editing, yes, but also marketing, distribution, and rights management) but it also ignores the interests of academic and professional publishing, textbook publishing, bookstores, and a diverse book retailing — and therefore book recommending — ecosystem.

There will be many Hachettes fighting their version of this battle over the next few years. But there will only be one Amazon.

Russ Grandinetti of Amazon.com is joining us for an interview by Michael Cader of Publishers Lunch and me at Digital Book World 2015, coming up next January 14-15. 

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Getting Mark Coker right this time and agreeing with him up to a point


On Tuesday, for the first time in the five years I have been writing this blog, I did a post I would like to take back. (But in the interest of the public record, and because there were several comments of value, I’m leaving it up.) This is the post that I should have written the first time.

Mark Coker, the founder of Smashwords, wrote a Huffington Post piece in which he asserted that indies are now responsible for 15% of the ebook market in dollars and on their way to 50% by 2020. The initial post of mine misread Mark, and assumed that the 15 percent and 50 percent claim were about units, not dollars. Mark set me straight, but, unfortunately, that other post focused on trying to translate what I thought were unit shares into dollar shares. Sorry…

At first I had thought I agreed with Coker’s overall numbers, because I thought an estimate that indie ebooks were 15 percent of the total units was reasonable, rising to 50 percent in six years. But dollars are another story. (Note: Michael Cader’s independent examination of the numbers determined that indie/self-published ebooks were, at most, 11 percent of the ebook dollars and probably less. Cader’s generous calculations put the unit share percentage at about double that, in the low 20s. I believe his logic and numbers would also support my view that it is something less than that, which would put me near to Coker’s dollar estimate for my units estimate: about 15%.)

If indie ebooks were 15 percent in dollars today, then they would be 30 or 40 percent of units because they are priced so much lower than publishers’ ebooks. Is that possible? I suppose it is. I thought in the middle of last year that in the aggregate indies sold the number of units equivalent to one Big Six publisher, but not anything like 30+% of unit sales (even though Howey’s examination of 50,000 Kindle titles led him to assign 27% of the units sold to indies.)

If they are 30 or 40 percent of units, and nobody I know has read any, does that suggest a cohort of people who really prefer indie ebooks and read them in big numbers? And if indie readers form a “separate” market, is it growing or is it static? In other words, do indie ebooks draw on a particular pool of readers, so that we have two separate competitions going on for eyeballs and ebook sales?

We note a piece this morning at Good EReader that calls for the segregation of the self-published titles at ebook stores, because their sheer number interfere with discoverability for publishers’ books. That’s bound to be an unpopular idea in many quarters, but it is something that could happen if any one retailer offers it as a choice to consumers (which is the way to do it: as a filtering choice, not a hard-wired default). If consumers liked it in one place, the practice could spread.

Regardless of whether there is one competition for readers for all books or separate ones for indies and publishers, wouldn’t we expect the flood of titles to make it harder for everybody to make sales? (This is a point that Peter Turner brought up in the comment string to the prior post.) Chances are, yes. And that could mean even more authors will be forced to go indie because publishers are likely to respond to a shrinking market and more challenging discovery by reducing their outputs.

But it is also true that more challenging discovery means more skill doing it and more tools to reach customers have value. So the ability of established publishers to have “better odds”, to get their books to rise above the “noise” of a large title output, should improve (relatively) over time.

Coker did a great service to all of us putting the ebook sales indies achieve into a larger perspective. And, in doing that, he might even have understated the current case for their importance.

What Coker did was point out that the 15% ebook dollar share for indies was within the estimated 30% of the market that is ebooks, 70% still being print. Doing math with his share number, he concludes that self-published ebooks are taking 4.5% of the dollars in the overall market. I’d put them at somewhere between half and two-thirds of that.

But, in fact, the 70% of the market that remains print contains a lot of titles that have very little, even no, ebook sales at all. These are illustrated books or reference books or even kids’ books that have not worked commercially in a digital version. We don’t know how much of the 70% of books that are print are “readerly” books that are equivalent to the 30% that sell in ebooks, but it isn’t nearly all of them. I think it would be conservative to assume that non-readerly books constitute 25% or more of the 70% of the market that is print, which would divide that portion of the market to be 52.5% books that have commercially viable ebooks (the 30%) and 17.5% books that don’t.

So the 30% ebooks overall is really more than 35% for the books that are real ebook candidates (and probably nearer 100% for most of the indie ebooks which would have limited or no print sales). In other words, the ebook share for the books that can work as ebooks is already a bit bigger than an overall summary would suggest. But, despite that, indie ebooks are somewhere in the low single digits as a percentage of industry revenue.

I think that’s very important to keep in mind. Indie ebooks are not yet commercially important if we think about consumer dollars. (But, of course, as Hugh Howey and Coker point out, the author keeps a lot more of those dollars.)

There are two big questions going forward.

1. How fast will the indie self-publishing ebook market continue to grow at the expense of publishers who do it for profit? (All of the calculations from Coker and Howey about the benefits to indie authors assume they do it themselves, not through some new-fangled indie-first publisher or aggregator. If they do it through anybody else, new or old, the author share will decline. Every participant takes a cut.)

2. For any individual author, how does the decision of whether to do it themselves or sign with a publisher look?

On the first, I think one key question is whether we now have a bifurcated market: one group of people reading the bulk of indie books and another group reading the bulk of published books. There is certainly reason to believe that we do, although this is something that only the retailers really can know for sure.

I believe we do have two markets. Part of that is genre-driven. Many readers who habitually consume romance, thrillers, and sci-fi have found less expensive digital-first and author-published alternatives perfectly satisfying. They read lots of units. So it is likely that a concentrated cohort of readers is responsible for a big chunk of the indie books.

(There is probably a third market because we know there are also bargain shoppers. Though traditionally-published titles are discounted, there are still price bands where the indies largely own the marketplace.)

If that is the case, then indies compete with indies more than they do with publishers. And since we believe that a big part of indie sales growth will be driven by indie title growth, it could be that the sales will have trouble keeping up with the titles. That would mean the path to success for each individual indie author would get harder.

Note that this would not affect a self-published author who had built a name and a brand by being published first, except to the degree that self-publishing gets handled differently by retailers or that discovery metadata is not as professionally produced. In general, the distinction between authors who had publisher help building their brand before going indie and those who created success from a standing start has not been underscored as much as it should be in these discussions.

And that leads us to the second point. As Coker has pointed out in his piece and in the comment section of my previous post, some authors like to have “control” of their process. As print books become less and less important, those authors have more and more inherent reason to be attracted to a self-publishing model.

I believe that those authors who like “control” are already more ubiquitous in the self-publishing world than in the overall population of commercially-capable writers. It stands to reason that they would be early adopters of the digital self-publishing opportunity. My hunch is that most authors want to write, and to let publishers handle their business. They don’t want to do the administration and marketing work necessary to self-publish. And that’s even before they get to the difference between getting paid in advance for a book and having to spend money to put a book out.

But it is also true that the deals we see today are not necessarily forever. Publishers have held the line on 25% of their revenue as the author ebook share (apparently with some limited exceptions and, of course, situations for big authors where unearned advances effectively deliver higher royalty rates on everything). If they have to raise royalty rates to keep authors, they probably will. E-only publishers and digital-first imprints at traditional houses are already establishing new standards. Amazon just reduced the author take through their Audible subsidiary. Will the day come when they decide to take a bigger share of indie author ebook sales? Why not?

Authors will have a shifting set of commercial propositions to consider, along with their personal preferences for “control” or “help”. And that’s before we get to other things not reflected in any comparison of what they earn from a self-published ebook versus a publisher’s ebook: print revenue, unearned advances, and having somebody else doing a lot of work on your behalf.

So while I largely agree with Coker’s 10 trends that will lead to enormous growth in the number of indie-published ebooks we will see, I think a grain of salt is needed about how economically significant they will be either for the industry at large or for the vast majority of individual authors following that path even though they are bound to grow quickly. It turns out that the previous post started out with a misunderstanding that led me (and therefore my readers) on a wild goose chase but, in the end, the headline message was right. Even over the next few years, the changes we’ll see around how authors get their work to their readers are more about evolution than revolution.

As it happens, The Great Debate at the London Book Fair is about whether big publishers or small publishers will “win” over time. Ken Brooks of McGraw Hill Education and I have the “big” side; Stephen Page of Faber and Scott Waxman, who is both a literary agent and owner of an ebook publishing house called Diversion, tout the “small”. Michael Healy of CCC moderates. If you’ll be at LBF, check this out.

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Looking at predictions from here going back a few years


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

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

I said that:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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