Politics & Prose

Two new initiatives to ponder as we end the year


Two announcements made in the last two weeks caught our attention.

One was Simon & Schuster’s deal with Author Solutions, creating a new Archway Editions publishing imprint. This was the third such major deal with a publisher for ASI, following similar arrangements forged with romance publisher Harlequin and Christian publisher Thomas Nelson (now owned by HarperCollins).

The other was Publishers Lunch’s deal with Random House, creating the new online bookstore-lite, Bookateria. This was the second such major deal with a heavily-trafficked website for Random House, following a similar arrangement forged with the political site, Politico.

Of the two, the S&S-ASI connection offers less obvious benefits. ASI has apparently built a remarkably efficient engine to get a book delivered from a manuscript. And every publisher has many times more authors knocking at their door than they could possibly consider publishing. And many of them will never find a publisher so would be good candidates for self-publishing services.

But there are both ethical and practical commercial challenges to converting author aspirants who come looking for a deal to customers willing to buy self-publishing services. ASI seems to have persuaded publishers that the conversion works enough of the time to make the connection between publishers and ASI worth making. Let’s remember that the Harlequin and Nelson deals preceded both the acquisition of ASI by Pearson and the deal announced last week with S&S. Presumably, S&S and Pearson knew something about the results from those prior deals and were proceeding with some evidence that using a known publisher as a front door for self-publishers was an idea that works.

On the other hand, neither Nelson nor Harlequin has trumpeted the results of their ASI deal and authors may notice that the legions of successful self-publishers (John Locke, Amanda Hocking, Hugh Howey, Bella Andre, and more than a few others) seems bereft of ASI clients.

There are more questions than answers generated by these deals so far. It appears that the publishers really have nothing to do with their new customers aside from bringing them into the tent. (S&S says in the press release that they’ll be watching the sales of Archway books to see what authors it might want to sign for the house. But isn’t that what every big publisher should be doing across the self-publishing landscape right now?) Will the association with self-publishing damage the core publishing brands? Will the publishers feel some ownership of the self-publishers from whom they profit? Will real synergies develop between the publishers and their ASI connections, or will this remain largely a branding trick?

While all of that remains to be seen, if the ASI-publisher connections deliver revenue to publishers with little or no effort on their part, other publishers will be open to doing the same thing. The question is whether they do.

It is not difficult to discern the value delivered by the collaboration between Publishers Lunch and Random House to deliver Bookateria, a search-and-shopping experience with a Publishers Lunch perspective. It gives Lunch an easy way to deliver real convenience and value to its audience and modestly monetize it at the same time. And it further tests and proves the concept Random House first demonstrated with Politico. By delivering the tech around a pretty complete catalog of available books able to be monetized through affiliate relationships, Random House has created a “product” that any web site with substantial traffic can benefit from in the way Lunch now will.

Publishers Lunch, because it is constantly reporting book news, has more opportunities than the average site to link to purchase pages for a book it is mentioning. It regularly refers to various and sundry lists of award winners and top sellers and it makes nothing but great sense for them to make purchase of these books easy (and make a little money at the same time.)

It may be (and I’m not on the inside of any of these deals; aside from our partnership in Publishers Launch Conferences, Michael Cader of Publishers Lunch runs his businesses and I run mine) that Publishers Lunch is taking a more active role in merchandising books than Politico is. That would make sense. Books are PL’s business, and they have to both be thoughtful and appear thoughtful about how they present them. And since this capability is probably at least as much about providing utility to site visitors as it is about increasing revenue, the merchandising would want to reflect the site’s knowledge and point of view.

I have long believed that book and ebook distribution would ultimately follow the web’s innate tendency to verticalize audiences. Why wouldn’t you buy your political books or sports books or knitting books where you learn about them and be guided more by recommendations of “domain experts” than “book experts”?

I had visualized this verticalization working out from a publisher, which would use its content to attract audiences which it would then monetize many ways, including by selling them books and ebooks of its own and from other publishers. To varying degrees, this is what I saw unfolding with Hay House, F+W Media, Osprey, and Harlequin with the most highly-developed Big House example being Tor Books inside of Macmillan.

Some new propositions — notable among them being the still-promised book retailer Zola and the distributed sales “apps” from Impelsys and Ganxy — were built around the understanding that book curation was most effectively done by the experts and communities functioning in any domain and it made sense to deliver a way for them to enable their own ecommerce for the content they suggested or reported on to their audiences.

But it is in a trade publisher’s DNA to work with aggregators and intermediaries (which is what bookstores, mass merchants, libraries, wholesalers, and special sales outlets are). Random House applied the same vision of distributed and vertical curation but decided that they didn’t need to offer the entire ecommerce solution to execute on it.

So Politico and Publishers Lunch — and, one presumes, more to follow — use Random House to provide their catalog and metadata and some level of curation and they all rely on the existing retail network to complete the transactions and do the fulfillment. Random House and their partners (presumably) share affiliate revenues from the retailers, not the “full margin” on the content sales.

This could be viewed as a bit klunky from the customer’s perspective and it definitely will be for some. You wouldn’t be “shopping” and then “checking out” as two discrete and serial experiences. Each “buy” decision would take you to a retailer choice and then deep-link you to the purchase page for that book at the retailer you choose. Anybody who wants to purchase multiple titles would definitely find this less convenient than just shopping on a retailer’s site.

But if the retailer were delivering the curation and information that Politico or Publishers Lunch is offering in the area of vertical interest, then the customer would probably do their multiple-title shopping at the retailer anyway. The Random House-powered strategy is more opportunistic than that. It’s more about facilitating impulse purchasing than attracting a shopper.

And when you stop and think about it for just a minute, you realize that conversion is likely to be much higher by offering customers a choice of their favorite retailers than it would be if you were signing them up to a new account with a retailer (web site) they hadn’t purchased from before. This is true even in the case of Publishers Lunch, which has credit card numbers for a large number of its most regular visitors because they’re members of Publishers Marketplace. It would be even more of a barrier to making a purchase at Politico and other non-membership sites.

One veteran publishing marketer told me that conversion on clickthroughs to Amazon were very high in his experience, ranging from 8% to 17%. He really doubted whether any fledgling retailer could achieve anything like that rate of conversion.

That constitutes evidence that the revenue achievable as an affiliate could well be higher than what could be gained executing the sales and keeping “full margin”, which brings along with it full responsibility for maintaining an infrastructure and providing customer service. None of that is necessary working as an affiliate.

There is a superficial similarity to these two initiatives. Both involve a company offering tech at scale to help another company monetize its existing network in ways that it doesn’t now. How effective that monetization really will be is still an open question. But it would appear that the ASI service to publishers entirely depends on that: aside from whatever revenue it can yield, there’s no other real benefit to the publisher and, in fact, it could confuse or cheapen the perception of their core business.

The Random House offer to websites, on the other hand, has all sorts of “soft” value. The partnering web site unambiguously offers a service to its site visitors by enabling rapid purchase of relevant content encountered while pursuing their vertical interest. Selling content and earning revenue is only one way to win; they also benefit from more traffic and more stickiness, the inevitable by-products of improving the value being offered any site’s visitors.

What is also interesting to contemplate about the Random House-powered distributed curation is what its potential impact will be on the retail network. Enabling the content purchaser to choose her retailer would, one assumes, distribute the sales from their site in pretty much the same proportions as the market had already.

On the other hand, it might also make it easier for consumers to switch. It could dilute the advantage Amazon has built through their usually superior (compared to other retailers) curation and presentation. It would make it much easier for a supporter of independent bookstores to make the choice to buy from them. (The choices presented are obviously flexible. Politico offers “Politics and Prose” bookstore, an indie based in Washington that specializes in political books. Bookateria instead offers Indiebound, the ABA’s way of sending you to an independent retailer.)

One more observation. There have been two retailers expected to make their appearance anytime now for the last six months: the big publisher-created Bookish and the previously-mentioned Zola Books. The rumors about both of them say that they are having a really hard time making the metadata we have in our industry work well enough to execute on ecommerce. Obviously, Random House had to overcome that same problem to deliver their proposition (although perhaps the bar was a bit lower since they execute sales as an affiliate rather than transacting themselves). An informational page for Bookateria makes it clear that metadata improvement will be an ongoing work-in-progress.

As the other big publishers look at what Random House is doing and wonder if they should be doing the same, they might want to rethink the digital aphorism that anything, once done, can be replicated in half the time and for half the cost. Even if that’s true, starting now to replicate the Random House capability could take a year or more; this is not something that Random House dreamed up last week. In a year, Random House could pick off a number of very desirable large sites and improve their metadata organization even further. I don’t think any competitor who takes this concept seriously will be able to afford to wait for proven success or failure to start developing if they want to be in this game.

NPR did a great job of choosing four minutes of me to sound wise on All Things Considered as part of a publishing roundup. Or you can read a summary of my bit instead of listening to it. We start with the Random House and Penguin merger and meander a bit from there.

This is the last post for the fourth calendar year of The Shatzkin Files. Our annual rhythm is that our quietest week of the year (this one) is followed rapidly by our most intense: the 7-1/2 days of conference programming in four days on the calendar that comprise Digital Book World  2014 and the two Publishers Launch events that bookend it. 

Happy New Year to all my readers, and especially the many of you who take the time to add to the conversation here in the comment string. Double-especially to those of you who dispense your wisdom in concise doses.

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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