Ruckus

What to watch for in 2013


Although “digital change in publishing” has a year that lags the calendar year and this year won’t “end” until we have a read on how post-Christmas ebook sales were affected by the new devices consumers got for Christmas, the dropping of the ball in Times Square is the signal most of us respond to when timing our look ahead.

The signals about what to expect when the “digital year” ends are mixed, but not wildly encouraging. There are anecdotal reports of strong sales by US indies selling Kobo devices and Amazon has bragged about their Kindle Fire sales. On the other hand, B&N does not seem to be meeting its targets on the digital side and we’re learning that we don’t get the ebook sales surge from replacement devices that we get when a consumer first switches over from print. Most of the devices being sold now are replacements. And we’re also seeing tablet sales surging past ereaders. Prior analysis has told us that people spend more time reading books on ereaders than they do on tablets.

But quite aside from precisely where Digital Year 2012 ended up, there are five trends I think will be increasingly noticeable and important in trade publishing that are worth keeping an eye on in 2013.

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

We have already seen this clearly in data that has been reported throughout 2012. After ebook share growth that was in triple digit percentages for four years (2008-2011), this year we saw that switchover slow down considerably to substantially less than a 50% increase over last year.

Although the slowdown was pretty sudden, it shouldn’t really have been that surprising. Since the ebook era began in earnest with the arrival of Kindle in November, 2007 (5 years and a few weeks ago), it has been clear that heavy readers were early adopters. Both price and convenience were drivers that made the reader of a book a week much more interested in the new way of purchasing and consuming than the reader of a few books a year.

There appear to be those out there who believe this is a temporary lull and that the ebook switchover will shortly accelerate again. I really don’t think so. Although I don’t think the various surveys of reading habits have captured this, my hunch is that there are relatively few heavy readers left to make the change and those are, demonstrably, extremely resistant.

It is entirely possible that the death of Borders and changes at B&N reduced the amount of shelf space for books by as much as 50% in the two years that ended with 2011, a year ago. (That emphatically does not mean that print sales declined by that amount, or even that print sold in stores did.) That adjustment of shelf space to the reality of the purchasing shift consumers had made was a sudden over-correction, with the result that the remaining booksellers got a bit of wind at their backs. The data is hard to interpret, but it is possible that the indies benefited from that more than B&N did, perhaps as a result of B&N’s more intense focus on its NOOK business compared to the indies, who (despite the lift they got from selling Kobo devices this past Fall) are more focused on print.

This does not mean the digital switchover has ended. My gut (I don’t think there’s a great empirical substitute available here) tells me that store sales for books will continue to lose ground to online (print and digital) at a rate of 5-to-10 percent a year for some years to come. But that’s a much more manageable situation than the one bookstore owners had been dealing with for the several years leading up to 2012.

This is good news for big publishers. Their model is still built around putting print on shelves and managing a marketplace that works around a publication date focus and the synchronized consumer behavior that store merchandising really stimulates. It is good news for B&N too, if they can take advantage of it.

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

The commercial realities of ebooks and print are very different for immersive reading than they are for reference books, illustrated books, and picture books for kids. This difference is unfavorable for other-than-immersive books both in their creation and their sales appeal.

For immersive reading — books that are all text where you basically start on the first page and read through to the last — the “adjustment” to ebooks is both technically simple and uncomplicated for the consumer. Make it “reflowable” and it works. And the additional “labor” to make the two different versions (print and digital) is minimal.

But for books that aren’t consumed that way (reference) or which have important content that isn’t mere words, a single digital version might not work effectively (think of the difference in screen sizes and what that could do to a picture and caption or a chart). And compromises we make for a printed book — using six still pictures instead of a video or a flat chart instead of an animated one — can be downright disappointing in a digital context.

There are ongoing efforts to make creating good complex ebooks cheaper and easier, the most recent one coming from Inkling. Apple offers tools to do this, but then you can only sell the output through Apple. Vook was on this trail, although their most recent pivot seems to be away from reliance on illustrated books. The ebook pioneers at Open Road Digital Media have been making deals with illustrated book publishers — Abrams and Black Dog & Leventhal among them — and appear committed to solving this problem

But it seems to me that it might not be readily solvable. The inherent issue is that precisely the same intellectual output in both formats, which works fine for immersive reading, almost never does for complex books. So the core realities that have cushioned the digital transition for publishers of novels and biographies — that the cost of delivering to the digital customer is really very low and the appeal of the content is undiminished in digital form compared to print — don’t apply for illustrated books for adults or kids.

Will the how-to or art book in digital form ultimately be as close to its print version as has been the case for novels? Or will the how-to or art digital products in the future come from book publishers at all? Will there be any real synergy there? I don’t think we know that yet. As pressure grows in the retail marketplace, it gets increasingly urgent for illustrated book publishers to find out.

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

I have been a bit surprised about how little imagination has been evident from the kommentariat about the pending merger of Penguin and Random House. It seems like it is being viewed primarily for its cost-cutting potential (and that will be real), but I think it could actually be transformative.

I see two very big immediate wins for the combined company. They’ll be able to launch a credible general subscription, book-club-type offer using their own books exclusively (print and digital, although the big opportunity is digital). And they’ll be able to serve no-book-buyer retail accounts with a commercially-appealing selection of books working with a publisher’s full margin, not the thinner revenue available to a third party aggregator.

This is the two biggest of the Big Six joining forces. The other combination that is believed to be under discussion, putting together HarperCollins and Simon & Schuster, would be something like half the size of Penguin Random House and it wouldn’t have an equivalent reservoir and flow of highly commercial titles.

While Macmillan, according to the year-end letter from its CEO, John Sargent, remains determinedly independent, it is hard to see Hachette staying outside the merger tent as a stand-alone if Harper and S&S were to execute on the current rumor. The three of them together would present a competitive challenge to PRH and would have similar opportunities to open up new and proprietary distribution channels.

The merger activity will not be confined to the big general players. Both F+W Media (our partners in Digital Book World) and Osprey are building out the “vertical” model: providing centralized services to enable development of “audience-centric” publishing efforts for many and diverse communities. F+W has more than 20 vertical communities, most recently having acquired Interweave. Osprey, starting from a base in military history, has added science fiction (Angry Robot) and mind-body-spirit (Duncan Baird) to their list by acquisition.

The key in both cases is being able to add revenue channels to an acquisition as well as the time-honored objective of cutting costs through a combination. In different ways, all of the mergers we’re talking about here accomplish that.

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

Publishers discovered the power of platforms when Kindle showed them that they, not the publishers, controlled the customers and they, not the publishers, controlled the pricing. It took less than a year for Kindle to “own” enough customers that it would have been very difficult for any publisher to live without their sales, even without the leverage Amazon had as a significant customer for print.

Now we suddenly have a plethora of platforms that want to convince parents and teachers that they are where kids should be doing their reading. This is coming from the retailers: Amazon has a subscription offering for kids’ content and both Kindle and NOOK have parental control features. It is coming from the people who have been in this market all along: Storia from Scholastic and Reading Rainbow’s RRKidz. It is coming from outside enterpreneurs: Story Town and Ruckus.

And, before long, I think we’ll see branded digital subscription offers from the biggest publishers. (Why not?)

This suggests that a lot of shopping and purchasing decisions for young reading are going to take place outside of any environment that one could say now exists. And that’s going to be true pretty soon.

There are a lot of moving parts here. Sometimes the content has to be adjusted in some way for he platform, or can be enhanced for it. Sometimes the platform can facilitate a sale of stuff that is pretty much as it already was. Some of the platforms work on subscription models and others on discrete product sales models. But publishers (and agents) are going to be thinking about what those deals ought to look like. For now, platform owners are eager to engage the content so they have something to capture an audience with. When the audience is captured, the power shifts to the platform owner for anything but the most highly visible and branded content.

This will be an interesting arena. (And one that will be discussed at length at our conference, “Children’s Publishing Goes Digital” on January 15.)

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

I spent a post recently trying to describe an “audience-driven” rather than “title-driven” or, worse, “title-on-pub-date-driven” approach to marketing. When you get down to actually trying to use the biggest new tools publishers have in the digital world — the top two coming to my mind are using email permissions and social media for dirt-cheap communication and lots of data sources with more and more tools for analyzing big data — you very rapidly realize that it is very limiting to think about using them on a per-title basis.

Rick Joyce of Perseus presented some ground-breaking thinking at our Frankfurt event about using social listening data tools for publishing marketing; he learned that the tools were most effectively applied across categories rather than for titles. (Part of the reasoning here was that using the tools is time-consuming and therefore expensive; part of it is that you just get more actionable information categorically than you do title-by-title because you’re crunching more data.)

So when publishers start to conform their publishing and marketing to what the new tools can do best (we’re still in the stage where we’re mostly trying to make the tools do what we did before), it will mean an explosion in the number of marketing decisions that have to be made (because the age of the book will not be a central factor in the decision to include it in a marketing opportunity.) This is accompanied by the big increase in decisions required to respond to the near-instantaneous feedback marketing digital initiatives deliver.

All of this will continue to be very challenging to the structure and workflow practices in large companies.

I think the clearest indication that marketing is reaching its proper 21st century position in publishing will be its increasing importance in driving title selection. As publishers become more audience-centric, it is the people who are communicating with the audience (the marketers, but also the editors, and the line between them will get fuzzier, not that it hasn’t sometimes previously been blurred) who will see what’s needed that isn’t in the market yet. In a way, that’s always happened. But in another year or three, it will be a formal expectation in some structures, and will have a defined workflow.

One obvious trend I’m not discussing here is “globalization”. In fact, one analyst sees exploiting global opportunities as one of the big wins of the Penguin Random House merger. With all the retailers publishers know well (Amazon, B&N, Kobo, Google) expanding into new countries every month, there will be no shortage of reminders that publishers should clear rights and price books in all territories for which they possibly can. But the problem starts further upstream than that, with the licensing practices of agents, who still often maximize advances-against-royalties by selling books market by market. There is a long gestation time on deals, so even if the dealmaking changes, it will take a while for that to be reflected in more ebooks on sale in more places. That’s why I am not expecting globalization to have a major commercial impact in 2013 and it is also why I see it as a more distant opportunity for the new PRH business than the ones I suggested in this piece.

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“Platforms” are not exclusively the purview of Kindle, NOOK, and other retailers


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.

There are a lot of platforms and nods to platforms not included in this piece, which is trying to make a fairly narrow point. There are educational platforms like Blackboard, Moodle, and WebCT that are trying to control access to students in schools. (Ingram’s “Vital Source” digital textbook capability has joined forces with Blackboard to increase its power and relevance.)

At our Frankfurt conference, Pottermore CEO Charlie Redmayne made it clear that the platform capabilities they have built will be made available to other big brands.

There are applications that go in this direction in genre publishing. The AllRomanceEbooks web site isn’t a romance platform, but it could be the start of one. When HarperCollins announced (yesterday) that they were launching DRM-free and social reading capability for their romance line, they teamed up with AllRomance to do it. That’s platform-“like”.

The point is that it’s not just about the content itself; it’s also about the ancillary value the platform can add; it’s about the format/wrapper/technology that supports the objectives of the audience for that content.

Nobody has created a total genre “platform” per se yet. AllRomance adds value to the shopping/retail experience. Tor creates a place to talk and learn about new books. Baen has a subscription service. But none (that I know of) are adding sufficient context to the reading/consumption experience itself to qualify in the same way as the other examples. They’re not creating a virtual place/space where it’s more useful or enjoyable to consume the same content than it would be elsewhere. But I’m sure it’s coming.

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