Publishers Weekly

Stats are often hard to interpret in our business


Stats are often hard to interpret in our business. The reported data comes, of course, after the fact (you can’t report things before they happen) and is often aggregated in ways that don’t tell us what we really need to know. So I tried an exercise last week of asking a few agents for their impressions of the evolving ebook marketplace. I wanted to get a handle on two things: where we are now in terms of books sold in stores versus books sold other ways and whether the transition from print to digital consumption is slowing down.

The picture I got from nine smart and well-informed agents seems to confirm that:

* sales of ebooks for fiction more often than not top 50% of the total sales, in both the hardcover life and the paperback;

* sales of ebooks for immersive non-fiction are at something like half the percentage of fiction;

* illustrated books do a lot less in their digital editions, which usually struggle to reach 10% of the sale;

* while the marketplace data seems unambiguous, the agents have not formed a consensus that the print-to-ebook switchover is slowing down.

Perhaps we can attribute that to the fact that the data presentation which most shapes the agents’ impressions is provided in royalty reports. This past year, and especially this past season, have not yet been delivered in the data they study most intensively. But it was still useful to check with them, if only to confirm that fiction ebook penetration is double non-fiction and that illustrated books lag far behind.

If 50% of fiction is selling now as ebooks, it is likely that only about 35% of it is selling as print in stores (because 25-30 percent of the print sale is online). Considering that number was more like 90% ten years ago and 80% five years ago, that’s all the explanation anybody needs to understand the reduction of shelf space we’ve seen. Every year when stores are interviewed about traffic and sales, they cite the presence (or absence) of “big books” as a key driver. The “big books” are most often big fiction. This year, the Fifty Shades family of titles may have provided that lift, which may be why stores (other than B&N) are anecdotally reporting a strong Christmas.

But what the industry should be most interested in, which will be reflected in the next round of royalty statements agents see, is that ebook sales growth appears to have damn near stopped. As Michael Cader pointed out on Lunch, Random House UK indicated a 13% increase this year over last, which mirrors Barnes & Noble’s reported rise of 13% in ebook sales in December.

Thirteen percent is a big increase in a stable marketplace.

But if you consider the heavy activity in the device field — the new iPad mini, Kobo devices being sold by independent stores, and B&N turning progressively their stores into NOOK showrooms (and not to mention the always-growing ebook title base, still adding backlist and formerly out-of-print books and small press and self-published books) — the rise in ebook sales seems like no rise at all. So perhaps we really have hit the point of resistance from print readers and a new stability in division of sales across channels.

The consequences of only about a third of fiction being bought in stores — and not all in bookstores — are still to play out. If it is true that independents did better than B&N this past Christmas, could part of the reason (as I speculated in a prior piece) be B&N’s prior success selling their customers NOOKs? Is the indie store customer somewhat less likely to have bought a Kindle or NOOK previously and therefore disproportionately in the marketplace for printed books?

It is quite possible that the disappointing B&N results could be a more accurate indication of the world we’re now living in than the reported success of the indies.

Under the heading of data being ambiguous, note that the reported big rise in sales by independents in 2012 appears to have taken place in the first part of the year so that sales at Christmastime might not have been as much better than B&N’s as first impressions on the data could lead us to believe. (Once again, thanks to Cader for doing some in-depth analysis of the raw data to lead us to see that possibility.)

And at the same time that we’re seeing an increase in ebook sales of about 13%, PW reports that BookScan US numbers show print unit sales having declined by 9%. What is interesting there, though, is that deeper PW reporting about BookScan says that non-fiction declined by 13% while fiction fell only by 11% in unit sales. Since we think we know that ebook penetration for fiction is much greater than for non-fiction, perhaps the reported decline in non-fiction units reflects lower sales of illustrated books, not because they’re being cannibalized by ebooks, but because of the store traffic decline B&N reported.And that’s exactly what I’d be worrying about if I were an illustrated book publisher. Their business isn’t transitioning to digital as fast as novels, but it is possible their sales were more interdependent on novels and their power to bring traffic into the bookstores that sell the illustrated books than they might ever have thought.

The data reported by PW also says that mass-market paperbacks have suffered by far the biggest decline among the book formats. The ebook sales by independents (self-published) are apparently underreported. Could the very cheapest ebooks, which are largely the indies, be cutting into the sales of the cheapest print books. It would stand to reason, wouldn’t it?

Both our sold-out (really and truly, we will have to turn people away if they show up trying to buy a ticket at the door) Children’s Books Go Digital conference on this Tuesday (Jan 15) and Digital Book World on Wednesday and Thursday (Jan 16 and 17) feature as much worthy original data presentation and analysis as we could find.

On Tuesday, we have Carl Kulo and Kristin McLean presenting data from Bowker’s survey of the kids book market, Peter Hildick-Smith of Codex with fresh information about children’s book discovery, and both our case study of middle-grade marketing from Simon & Schuster and a presentation from Random House about driving word of mouth with a YA audience will undoubtedly deliver some objective information that will help other publishers make sound marketing decisions.

We have always featured original data presentations at Digital Book World. This year is no exception. We will kick off the event with Forrester’s snapshot based on interviewing executives; we’ll feature academic research from Carnegie-Mellon on the true impact of piracy; and Dan Lubart and Jeremy Greenfield will deliver a report based on close study of ebook bestseller data. That’s just on the first morning. We also will have insights from a survey F+W Media did to which more than five thousand authors responded; data about discovery in the general trade marketplace from Hildick-Smith; and a report from Bowker about book buyers and BISG about ebook buyers, based on regular surveying that has taken place over the past couple of years. Children’s Books Go Digital is sold out, but there are still tickets available for Digital Book World. 

I’m really proud of what we’ve put together for both events and I hope to see you there. If you can’t make it because of geographical separation, though, DBW is making live streaming available this year for the plenary sessions and some of the breakouts. If the plane won’t get you to New York on time, you should check that out.

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No predictions this year; just questions


This is the time of year for predictions. I’ve done mine in the spirit of the holiday season in years past, going back to the late 1980s when I did a “My Say” for Publishers Weekly. (I wasn’t able to find it — some sharp reader will — but I recall that one of my predictions was that publishers would strive to put out the audio of a title at the same time they released the printed book.)

In recent years, I’ve done the predictions for PW and I’ve done them right here. This year I contributed some thoughts to a nice roundup done by Jeremy Greenfield, the new editorial brain over at the Digital Book World site.

This year, I thought I’d try something different. Rather than predict the future for the industry’s biggest players, I am posing what I think are the biggest questions faced by each category of them. Some of the questions are within their power or responsibility to answer; some depend on outside circumstances; and some may never be answered at all. But any honest futurist (and I try to be one) has to admit that questions outnumber answers. (Note: there is a great Johnny Nash song called “There Are More Questions Than Answers” that’s about 50 years old and is just as correct today as it was then.) So this post focuses on the important questions we’ll be facing throughout the industry in 2012 and beyond.

The biggest publishers:

Can their use of tech at scale — SEO and pricing seem like top candidates — add demonstrable value, cost-effective for them and persuasive to authors?

How fast do sales of print in stores decline? And how efficiently can publishers de-scale to keep overheads under control?

Can they reorganize to take advantage of the opportunities offered to the quick and nimble in a digital world?

Can they extend the “protection” of agency pricing to distribution clients and, if so, can they charge a premium for that capability? (Could this be an unintended benefit to the Big Six of Amazon’s refusal, so far, to allow agency to any except the Big Six?)

What skills and capabilities does a publisher need now that they didn’t need a few years ago, and what’s the best way (acquiring a company, outsourcing, hiring in talent) to bring those talents into the fold?

Publishers bigger than small, but not Big Six:

Can these publishers fight their way out of the box that Amazon and Apple have them in, with Amazon insisting that ebooks be transacted on the wholesale model and Apple insisting on the agency model?

Can Amazon continue to be relied upon to discount from high publisher suggested retail prices (the basis of high wholesale prices for the retailer), or will Amazon sell more frequently at the publisher’s declared price to “encourage” publishers to cut their suggested retail priceas and therefore bring Amazon’s costs, and publishers margins, down?

Smaller publishers:

Can they keep up with the technological and contractual demands of digital publishing change?

Can they find niches that present opportunities they can seize to sell something other than “the book” (whether in print or digital)?

Can they create opportunities by being nimble, opportunistic, and vertical that make them more attractive than larger competitors as partners for knowledgeable agents, authors, and brands?

Amazon:

Can they marshall their considerable resources to sell individual titles so effectively within their network that they make up for what they miss outside their network?

Can they build any noticeable or sustainable advantage in having a repository of desireable content that is not available except through them?

Can they maintain their device and platform dominance as the competition moves far beyond the early adopter online book-reading audience?

Barnes & Noble:

Do books as gifts and objects deliver enough traffic to keep a bookstore chain successful as the sales of novels and biographies go away?

Can they create a profitable international strategy? They haven’t had one yet.

Like the publishers, can they manage down their physical plant and overhead base as the revenue it was built to serve diminishes? (We presume they can’t do it with Nook sales and services alone.)

Independent bookstores:

Will the lift they get from Borders closing and B&N cutting back on shelf space for books buy them time as print book sales in stores shift to ebooks and online purchasing?

Can they make something work with Google ebooks? Or will another solution arise that works to get indies into ebook commerce in a profitable way?

Will emphasizing the books-as-objects market (gifts and otherwise) work as the customers for narrative text find it less and less necessary to visit physical locations?

Authors:

How do they know that their agent understands the new range of publishing options and directs their business activity accordingly? (It’s as hard to be effective as your own agent as it is to be your own lawyer.)

How do they build their own online platform? (And every author who plans to make a living through writing and hasn’t yet built a platform has to think about having one.)

Will any author turn down a significant advance to self-publish in 2012? (So far, that behavior has been extraordinarily rare, with Tim Ferriss being the only one really close. Barry Eisler intended to, but he took an advance from Amazon instead.)

Will the number of successfully self-published mid-list authors continue to grow? Under what terms and royalty rates do these authors return to traditional publishers?

Agents:

How do they make sure the full range of knowledge about the digital publishing alternatives is within their grasp? (if not in their head…)

Do they know what they need to know to make a “profit-sharing” deal with a publisher?

Can they direct an author’s own online marketing efforts? And, if they do, is some adjustment to the standard practice of a 15% share of the author royalties going to be necessary, or possible?

Illustrated book publishers:

Is “fixed page layout” the answer? Or, more likely, is it the answer for some books and not for others? Which ones?

How do illustrated publishers cope with the plethora of native formats, file requirements, and screen sizes?

Do “illustrated books” delivered on good portable screens achieve the same consumer acceptance that straight text did making the same transition?

Are there new retail channels available to sell illustrated books as bookstores diminish?

Are new models, perhaps built on social or community but also possibly built on non-book commerce, possible to support and extend illustrated book publishing?

The industry:

As the global ebook infrastructure develops, does it show signs of staying diverse or does it tend to consolidate as Kindle?

Does the industry show signs it will trifurcate, with narrative text, adult illustrated, and children’s books becoming three largely different businesses?

With Amazon, B&N, Apple, and Kobo established as significant global ebook outlets, will any of the other players or fledglings — Google, Sony, Blio, Copia, Bookish, Anobii — start selling enough units to be an important contributor to ebook sales?

Will either white-label B2B or publisher-to-consumer sales grow markedly in significance as the time-honored sales, distribution, and monetization models atrophy?

This could well be the last Shatzkin Files post for 2011. It’s been a great year around here. We launched a new business, Publishers Launch Conferences, with our friend Michael Cader. We started the year with a great Digital Book World last January and are concluding this one putting the finishing touches on an even bigger and better one coming next month. An ebook and a print book edition of The Shatzkin Files, Volume One (the first two years, through last February) were published. We have some great new consulting clients about whom we think you’ll hear a lot in 2012. And, despite the reality that you can’t claim 50 years in the business (which I do) and remain a young person (which I’m not), good health and good cheer remain in abundance around here. Our view of publishing’s digital future seems to have been more confirmed than contradicted by the year’s events. So we’ll take a 2012 that largely resembles 2011 very happily if we can get it.

Best of the holiday season to all our readers. And may 2012 be as kind to you as 2011 was to us.

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Lots going on; no single topic today


I find myself with a lot of pages open on my web browser. Even before Amazon’s announcement yesterday about ebooks passing hardcovers in sales this past quarter, there has been a lot going on.

There had been some suggestions, which I never bought into, that ebook sales were slowing in 2009. (Is this a meme that started with somebody anti-Agency? More on that later…) I look at the IDPF chart as it stands today and it is headlined 2010 Sales  ”OFF THE CHART” vs. Previous Quarters and that’s how it looks to me. A major publisher told me yesterday that AAP figures suggest ebook sales are up 210% this year and that house’s numbers are up 225%, so they feel they’re rising with the tide. That’s about what PW said the AAP said with the additional information that hardcover sales were up and paperback sales, trade and mass market, were down.

In fact, Amazon, in the face of the apparently-stiff competition from the Nook and the iPad, says Kindle book sales have tripled in the first half of the year!

Nonetheless, Madeline McIntosh at Random House doesn’t see ebooks causing problems for paperback sales. She’s quoted in the Wall Street Journal saying, “Our conclusion is that there’s no data to prove any connection—good or bad—between growth in e-books and the growth or decline, in trade paperback sales. … If anything, we may be seeing a positive effect in which the steady pace of e-book sales helps to keep a book in front-of-mind for a growing number of consumers after hardcover momentum slows.”

Kat Meyer, blogging for O’Reilly, got an indie ebookseller to talk on the record about the difficulties they’re having with the transition to Agency. This would seem to undercut the idea (which I agree with) that Agency is good for smaller sellers, because the little guys will get squashed in a price war with big guys. A seminal figure in the online book retailing world who has worked with smaller stores on these challenges for years told me in a phone conversation this week that he completely agrees with me. But the problems Kat lays out for the smaller guys during the transition are real. Let’s hope we don’t lose too many of them while this all gets figured out.

Meanwhile, Knopf made some news with the announcement that they are converting more of their backlist to ebooks. We were wondering what titles they could have missed so far. Random House has never been a laggard at ebook conversion and we’re scratching our heads wondering about a conversion initiative that would be imprint-specific. But this shows that the ebook sales records being broken are occurring without the gun being fully loaded; they’re still making ebullets out of old books.

Joe Wikert wrote a blog about the emerging ebook landscape in which he imagines that the various indies selling Google Editions will, all together, constitute a big Amazon. I don’t think so. I don’t think Google can save indies with what they’re doing. But it is good that they’re trying.

Joe also thinks that Amazon will abandon the Kindle device in favor of the Kindle as a platform. I don’t agree with that either. The device is reportedly still selling like hotcakes with sales rising quickly since a recent price cut, even while the Nook has established itself and iPad has been “competing.” I think there’s room for tablet computers and ereaders, which might be a minority position at the moment. (Being in the minority is perfectly comfortable for me.)

You know we’re all about vertical here at The Shatzkin Files. It looks like some authors from big houses are taking this vertical thing into their own hands. A bunch of gardening authors have created their own garden experts speakers bureau.  It won’t surprise anybody if I predict that this effort will be more successful than the “horizontal” speakers bureaus launched by some of the major houses over the past few years. I checked with the folks at Cool Springs Press, the gardening publisher I featured here a couple of weeks ago, and, of course, they’re involved.

I had written a blogpost recently saying that I thought ebook selling nodes would explode and be all over the web. It looks like Oprah is fueling that idea in a way that I hadn’t entertained: with an app. Why not? Who has a better brand than Oprah for “curation”? Maybe Barnes & Noble. But maybe not.

It also seems that self-publishing is growing in ubiquity and respectability. PW announced the plans of an author who told his agent not to bother selling his rights. If this isn’t the major trade houses’ worse nightmare, it should be! Joe Konrath, who may go down in history as the trailblazer who proved that some authors, at least, can make money without publishers, is reporting his rising Amazon revenues on books the New York houses have turned down, and they’re eye-catching.

And the last thing I note in this pot-pourri is the news from Farrar Straus & Giroux that they’re launching an online literary magazine. On the one hand, this is the kind of niche marketing we’ve been advocating that larger houses pursue. On the other hand, the story suggests this is all about promoting FS&G books, not about building a community of like-minded readers, few of whom would know or care which publisher put out the last book they liked.

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Digital change: what’s an independent bookseller to do?


The question of how to plug the independent bookseller into the digital revolution is a knotty one. Nobody has really “solved” it. 

Two of the smartest guys in the UK, Francis Bennett and Michael Holdsworth, tried to tackle this question in a report for the Booksellers Association in a report published in 2007. While they touched on a whole host of issues, including that publishers are likely to sell digital downloads direct, they really didn’t manage to come up with an action plan for the individual bookseller. Rather, they focused on the need for booksellers and publishers to join collaboratively to solve the problem: start with a public conference, create standards, form a joint trade working party. This is, at best, a path to an answer.

From this I conclude there is no ebook-centric answer. If there were one, these guys would have found it.

Then, three weeks ago, PW did a story headlined “Indie Booksellers Debate the E-book Conundrum”. This article introduced a product/technology called Symtio, which stores (among them Tattered Cover) use to back into ebook revenues. Symtio is a plastic card, sold at a retailer, which entitles the bearer (gift recipient) to download an ebook, an audiobook, or both from Symtio’s web site. If this strikes you as something less than the perfect ebook solution for retailers, you’re seeing it the way I do.

The ABA plans to work ebooks into Indiebound. Len Vlahos calls it a “focus for the immediate future” in a white paper presented to the ABA Board. Ingram Digital offers access to 150,000 ebook titles to independent stores. And stores such as Vroman’s are quoted as enthused about the potential for them with ebooks.

Dick Harte, however, who runs BookSite, which provides Web hosting for booksellers and librarians, doesn’t agree. Not only were ebook sales low on the BookSite platform, often they were erroneous purchases (people thought they were buying a printed book!) which then required a customer service intervention. One particularly far-sighted bookseller quoted in the article is David Didriksen who sees ebooks as very low-margin transactions not worth the effort.

I agree. What distinguishes what independent booksellers offer: local taste and judgment, personalized service, intimate customer knowledge — these things just don’t provide much competitive advantage in the ebook space. And the competition isn’t just Amazon and B&N either.

So independent booksellers need to look elsewhere to participate in the digital revolution. I tried to sketch out a strategy in a previous piece:

1. Set yourself up (probably with Ingram) in the simplest way you can to be able to sell as many titles in as many formats as you can. That is, get the maximum choice you can for your customers with the minimum hassle and investment for you.

2. Don’t expect to make money selling ebooks: consider it an accommodation to your customers to keep them buying physical books from you. Restrain yourself from investing large amounts of labor improving your ebook presentation past the point of acceptable. If the margin from your sales starts to amount to something, you can do it then.

3. Spend all of energy that you might have wasted perfecting the sale of ebooks on social networking, trying to be in direct contact with your customers through Facebook, Twitter, and through postings on popular and well-read blogs in subject matters your store specializes in. Particularly focus on the opportunities to promote to specific groups, such as through hashtags (#s) on Twitter, which identify groups of people interested in a particular thing.

I neglected to add a fourth, very important element of an indie bookseller’s digital strategy, although it is hinted at in the marketing suggestion above. This one is the same as it is for general trade publishers: get vertical!

The bad news about digital change is that it brings the biggest companies in the world — Amazon, B&N, Apple, and every phone company — into the indie bookseller’s back yard. But the good news is that it also brings every customer in the world into that back yard. So a bookseller with a vertical specialty can build a global market. This was the pre-Internet strategy of CEO-Read (originally 800-CEO-Read; if Bezos had invented Amazon ten years earlier he would have chosen a 7-letter name…) They’re business book specialists and their customer base is truly international.

Independent booksellers need to build a reputation within vertical niches. That’s a matter of having the stock, having the knowledge of the vertical subject, and then getting involved in the vertical communities — blogging, commenting, tweeting, reaching out. The bookseller’s web site, if it has good content properly tagged, can rapidly be discovered for relevant searches. Tattered Cover may not be able to beat Amazon at everything, but they should beat them on searches for Pike’s Peak. A northeastern store that specialized properly could come up ahead of Amazon in a search for “autumn leaves colors” or “historical sites Boston”. (By the way, I just checked, an no bookstores come up in the first ten pages of “historical sites Boston”!) 

In just the same way that general trade publishers need to use the time they have left when “general trade” still works to build vertical presences that will last beyond that time, so do general trade bookstores. It will work for Barnes & Noble to be “general” for far longer than it will work for any local store. The trick is to be World Class at something, most likely something that has a local root will make the most sense.

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Publishers need to be clearer about their rights


Some of the recent conversation about ebook fair use sparked by the Kindle-and-audio incident made me recall that Joe Esposito and I had written about this problem in Publishers Weekly more than two years ago.

We had a different catalyst for our thinking; at the time, we were wondering what the rules should be for libraries (or anybody else) to make, possess, or use a digital copy of a work they had acquired in print. The subject of concern then was the Google Library program: the partnership between some major research institutions and Google that delivered content (some of it in copyright) to Google to scan in return for digital copies for the libraries to keep. 

At the time, Joe and I observed that Google and the libraries had no direction from the copyright owners about what digital rights came conveyed when they bought a physical copy because no publisher was making any clear statement of what they believed they sold in the transaction.

Since then, the ACAP project actually tried to develop a standard for communicating rights like this electronically, mostly on behalf of the newspaper industry, not book publishers. The standard for communication is, of course, a separate problem from determining what rights can legitimately or sensibly be asserted. And the newspaper problem is perhaps more complex. With newspapers, much of the value being purveyed is closely linked to timeliness. Forty years ago, The Rolling Stones sang “who wants yesterday’s papers? Nobody in the world”. They wouldn’t have said that about “yesterday’s books.”

What concerned publishers was the possibility that a Google scan could end up on a library server and be shared with a whole campus, network of campuses, a state, or even the entire public. Even imagination-challenged publishers could envision a day when one sold copy could satisfy a large network of demand now purchasing hundreds or even thousands of copies. What concerned Esposito and me was that publishers weren’t taking charge of their destiny. They were being made uncomfortable by what they saw as erosion of their rights, but they weren’t making any explicit statement about what they believed their rights to be.

I hope Yogi will consider it fair use to say that the Kindle-and-audio flap is deja vu all over again. The Authors Guild, with no audible objections (pun appropriate if not intended) from publishers, complain that the application of TTS technology to a legitimately sold electronic text constitutes a rights violation. If that particular limitation on the license granted with an ebook ever occurred to an author or publisher before, I’m not aware of it.

In the digerati community, there is frustration with the GBS settlement because it short-circuited a legal test and definition of “fair use.” Of course, Google and the publishers and the authors are each operating in their own interests, not society’s (by their definition of society’s or the digerati’s, neither of which might be ours), and the settlement apparently satisfies their interests. But at least before the settlement, Google made its position of what constituted “fair use” clear, with policies about when they would use snippets versus when they’d show larger blocks of text. Publishers were never so transparent. If they want to be credible as they fight for their rights in the future, now is the time to think these questions through and stake out ground that makes sense to defend.

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