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I am recently awakened to the importance of “platforms” in our dynamic digital publishing world. Some could say I’m slow on this one (and they’d be right). Perhaps it is the “to the man with a hammer everything looks like a nail” syndrome in action, but my belated awareness reminds me once again that the most important single concept publishers need to take on board to succeed in the digital future is “vertical”.

Here’s what woke me up.

We’re working on the Publishers Launch Kids conference on January 15, our second annual exploration of the world of children’s book publishing. We rapidly discovered three (there are more) propositions which create the environment within which kids  might well be encouraged by parents and teachers to read digitally.

Storia comes from Scholastic. They worked with 200 pilot teachers to build personalized reading experiences for each child: age-specific and with a personal bookshelf. The business model is individual title purchases; kids make “wish lists” and parents approve and enable the purchases. And there are tools to allow parents and teachers to track the kids’ reading.

RRKidz grew out of the successful TV series, Reading Rainbow, which was purchased by actor LeVar Burton and Hollywood producer Mark Wolfe. They robustly augment with video, use gamification to entice the kids to read more (badges for completion, for example), and provide a dashboard for parents to track the kids’ activity. Reading Rainbow works on a subscription model rather than individual purchase. They start you out with one free book but then go to an all-access model for $9.99 a month, or you can buy six months for $29.99.

And Magic Town is an international platform that also creates a controlled environment for kids reading. They push English language books all over the world, and offer a combination of a subscription and individual purchase model. They have different levels of engagement: “watch” (which is “read to me”), “play” (hot spots in the books with interactivity), “explore” (quizzes to test comprehension), and “read together” (stripping out the narrator so parent-child or early readers can do it themselves).

The light bulb that went on for me when we talked to these companies was that they were providing good and valid reasons for the gatekeepers for children’s reading to steer the kids over whom they have sway to one of them. To do all they can do, the platforms require some customization of the content. Storia would seem to have a head start in this platform competition because of the power of Scholastic’s reach and the enormous amount of content they already own, but all of these players have unique features.

And there are others building variations on this theme, including Ruckus and Capstone, the latter with more of an educational focus.

This provides a lot for publishers to be thinking about. Intuitively, one assumes the job of the publisher is to make the investments necessary to get their content onto all the platforms where it might sell, particularly if the customers there wouldn’t find or acquire it any other way. But it also means that the platform owner would control the audience and could, conceivably, not allow all competing content access. Or they could, over time as they gain a stronger hold on a larger audience, reduce the payments to outside content owners.

This raises a business challenge much like what we see as the problem (for publishers and authors) of subscription services. Subscription services might not have other characteristics of platforms (like providing metrics or context), but they “encourage” their subscribers to restrict their choice of content to what is provided within the service.

Both platforms and subscription services constitute a land grab, or, more precisely, a customer-control grab. Is it wise for publishers to allow their content to be used to strengthen the grip a gatekeeper has on an audience, whether or not they start out as a competitor? Whether or not it is wise, do publishers have any choice?

While I was pondering this, Kindle and NOOK both announced modifications of their own platforms to accomplish some of what Storia, RRKidz, and Magic Town are trying to do: get parents to see them as the preferred environment for their kids’ book consumption.

Kindle’s offer, called FreeTime, enables parents to manage the media access their kids have on the new Kindle Fire line. So they can specify 30 minutes of video, 30 minutes of games, and unlimited reading time (for example). That’s pretty powerful, and one can readily see parents choosing the Kindle platform just to get that capability. Kindle does this by allowing multiple accounts on one device and giving the parents that level of control on their kids’ accounts.

Barnes & Noble also now offers multiple accounts on the NOOK so a parent can have a naughty romance ebook and be sure that their kids won’t stumble across it while reading the material in their account.

Now sensitized to the power of the platform, I’m seeing more of it everywhere. B&N and Kobo have created tools for consumers to save treasured content and to enhance discovery. B&N calls their saving capability “scrapbooking”. Their new discovery capability, which they call “channels” uses humans (what a concept!) to create lists of “what to consider next” from various triggers (books, authors, subjects).

Kobo has tied the saving and discovery together in a very alluring way that, I must admit, makes me think about buying their new ARC device when it becomes available. What B&N calls “scrapbooking”, Kobo calls “tapestries”. You can “pin” (very much like the new web sensation Pinterest) digital items of interest — books, songs, web pages, whatever — together so they are visually nested for viewing. But what is really captivating is that ARC then runs a crawl along the bottom of the page with suggestions for other content that might interest you, based on what is in your tapestry. I am pondering a book idea; it seems to me that Kobo has just created a tool that could really help with the research.

That could provide me with a reason to buy their device and to use them regularly for content purchases. And that’s the point of a platform. Note that the capability only makes sense if it is applied to a vertical. The unique tool Kobo has built delivering automated search essentially looks for the people, places, and things suggested by the content in your tapestry. In other words, each reader creates his or her own verticals.

But it isn’t necessary to be a global retailer with devices, or even a children’s book specialist with an understanding of how kids learn and read, to apply the principal of vertical platforms. If a publisher thinks vertically — about niches — they can do it themselves. Dominique Raccah of Sourcebooks demonstrated that with the two new initiatives she just announced and which she explained at our Publishers Launch Conference at Frankfurt on October 8.

One of Raccah’s ideas is also a children’s book initiative. Called “Put Me in the Story”, it is a way to really enhance one of the most common parent-child experiences: reading a book together at bedtime. The capability Sourcebook announced takes a kids’ name and picture and inserts them inside a well-known children’s book presented digitally. Raccah wants to restrict the “Put Me in the Story” title base to well-known children’s books. Fortunately for her, Sourcebooks has had a number of big sellers in that genre recently so she can start with her own books.

But what really impressed me, and should make all publishers think, is Sourcebooks’ new “Shakesperience” line.

I did some acting in Shakespeare as a teenager. I always read the Washington Square Press Folger Library editions because they had the play’s text on the right-hand page and definition of terms and other notes on the left. I didn’t care if what was available from Penguin or Dell Laurel was cheaper or had a clearer typeface or was reputed to have a better introduction. I wanted the version that made the language of Shakespeare most accessible, and the Folger Library did that.

Sourcebooks has taken the idea of making reading Shakespeare easier and raised it to a new level using digital capabilities. They’ve added some audio and video, so you can hear and see how the pros do it. But what is most helpful is that they’ve taken the glossary idea and both extended and embedded it. They define individual words and phrases in context, and they put the definitions in so that you just mouse over what you want cleared up and get the definition in a little box. I spent some time with the Romeo and Juliet app — a play I know well — and found it really helpful.

Sourcebooks is starting with three plays (R&J, Hamlet, and Othello, which are apparently the three “most taught”) so this isn’t a platform yet, just the basis of one. But as they build out to the entire canon, it is conceivable that they will build a way to read Shakespeare that can establish itself as the one best way to do so. With a variety of community and informational features built around it (where every play is being performed, how different English teachers approach each play), there is a real possibility they can build a strong hold on franchise content that is in the public domain. That would really demonstrate the power of platform.

At the same Publishers Launch Conference in Frankfurt last week where Dominique Raccah talked about these two initiatives, we also heard from CEO Rebecca Smart of Osprey, a vertical publisher whose original niche was in military history. They have a dedicated audience of buffs with whom they communicate all the time. Smart, in an insight she credited to Seth Godin, said “I don’t look for audiences for my books. I look for books for my audience.” It is easy to imagine Osprey building a platform for readers of military history, with text and visual glossaries and other bells and whistles that make reading that content much more productive than reading it anywhere else.

This is an optimistic view of the future from a publisher’s perspective. What’s scary is the potential for one gatekeeper for all books. Many gatekeepers that are somehow vertical-specific — with overlaps, of course — is a much more cheerful prospect.

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

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

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

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

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

On the other hand…

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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