Seth Godin

Capturing and distributing video might be getting cheaper than capturing and distributing words

There has always been a hierarchy of media built around how easy or cheap it was to deliver one versus another. The most simplistic expression of this has always been that words are cheap and moving images are expensive. A writer could create the intellectual core of a book on her own with paper and a writing implement. Making a movie required a number of creative skills and people and coordination.

Two decades ago, before online distribution and consumption, the hierarchy of ease and cost extended to the commercialization. Book publishers had much lower capital barriers to jump to put a product into the market than movie producers. TV producers required access to infrastructure which was controlled by a very limited number of gatekeepers (even after cable TV expanded the number of channels).

Music occupied an in-between position. A singer with a guitar could make an acceptable recording by oneself pretty readily. Recording a band well was more complicated. Recording an orchestra — even getting an orchestra to play — was expensive.

As the Internet evolved, bandwidth limitations confirmed the hierarchy. Text and music required little bandwidth; video required a lot.

The evolution of devices confirmed it as well. Until recently, texting was all phones could really do besides delivering sound. The Kindle, delivering pretty-much text-only with some weak gray-scale illustrations, preceeded the iPhone and iPad. And, in fact, straight text was demonstrably easier to digitally deliver than more complex layouts like charts with columns or recipes with complex graphic design requirement.

So for the first decade-plus of the digital delivery revolution (if you date it from the early or mid-1990s), straight text had built-in advantages. One person could create it. The bandwidth required to download it was ubiquitously available long before broadband was widespread. The devices could display it in a way that was comparable to the legacy print-on-paper.

When devices and bandwidth improved so that delivering video to masses became commercially viable, publishers smelled that consumers would want video and started to “enhance” ebooks, particularly with video. Studios to enable this were built in some big publishing houses. But (as the tech geeks say) “the dogs didn’t eat the dog food” and we’re already in a period of retreat from video as an important component of publisher’s product creation. (Although, clearly, publishers still see value in videos for marketing and promotion.)

But it may be that video’s disruption of print is just beginning. What used to be the hardest and most expensive media form to create and distribute may have become the easiest and cheapest. This is important when you consider that so many aspects of illustrated books are a “compromise”. You show a knitting stitch or a technique for making a piece of jewelry as six still pictures with captions in a printed book because video wasn’t possible. When the IP that serves the same purpose is “born digital”, you’d almost certainly reinvent the definition of a “book”.

Think about it this way. A 4-year old with an iPhone could conceivably shoot a video that could be a big hit on YouTube. (Maybe one already has.) There’s no way a 4-year old could write a story that masses would want to read. With bandwidth and suitable device ubiquity no longer any sort of constraint at all, the great commercial advantage of words on a flat surface is melting away. This is bound to be disruptive to both the book and movie-TV industries in ways that are not evident to us yet.

(Although some of the disruption is already evident.  Online video consumption is eating into TV viewership. An Accenture study suggests that traditional broadcasters are having some success fighting back the trend.

The disruption from YouTube (not to mention the Hulu/Netflix) of movies and TV is pretty evident, and the meme of “fighting for eyeballs/screen time” is ubiquitous, e.g. media companies are increasingly viewing other types of media as competition — books vs games vs online video vs TV vs film. The shift is already raising questions both of how to keep people coming back to books (rather than going off to other media) and of how to use the new technology itself to sell more books.

I saw one example of how the ease of making video could change things profoundly earlier today when serial entrepreneur Susan Danziger showed us her latest invention, a service called Ziggeo. It’s pretty simple but extremely useful. Ziggeo is an environment where webcam videos that can be shot from just about any computer or smartphone can be requested and curated. The “problem being solved” was for people screening job candidates, potential roommates, or potential dates to have a much more articulated impression of the person they were “meeting” than words and a still picture can provide. That’s a real problem that affects a lot of people.

But we readily saw applications for event organizers like us (being able to see an aspiring speaker “in action”, getting our speakers to blurb for promotion) and for book publishing promotion (author pitches, publisher pitches to individual stores). The simple intuitive interface would also put video-making power in authors’ hands. Imagine a non-fiction book with video interviews embedded. You might not actually have to imagine this very much longer. Using Ziggeo, it would be a piece of cake for an author to go back to an interview subject by email with a series of questions and get the person to give them appropriate video to slot into the books. With or without Ziggeo, I think the chances are you’ll be seeing that happen pretty soon. Ziggeo would make it a lot easier.

I’m not the first book business guy to discover this nifty new application. Seth Godin has already blogged about it, focusing on the “interviewing” problem Susan set out to solve in the first place. But Ziggeo is the most current demonstration that the structural advantage that “just words” had among all media is a thing of the past. The cultural implications are profound, as is the potential impact on the book business.


“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.


Selling direct will become an essential capability for publishers to have

One question on which I have had a long-standing difference of opinion with most of my friends in the biggest publishing houses — or at least with their publicly-stated views — is whether it is sensible for them to sell direct to end consumers.

That conversation was joined last week among three very smart people with very different perspectives. Madeline McIntosh of Random House, who added the title COO to her business card last week, expressed the opinion at the IDPF event at BEA that Random House would not “add value” by selling direct. This was in the context of whether it made sense to remove DRM, which, it has been suggested would help make it possible for publishers to transact ebook sales with consumers. (Some of the strongest advocacy for removing DRM certainly comes from publishers like O’Reilly and Baen who have built up robust retail businesses. F+W has a direct business across their two dozen or so verticals, and they sell DRM free.)

At the same event, Sourcebook founder and CEO Dominique Raccah enumerated useful things her company is able to do because they have direct customer contact, including testing out ideas for covers with live potential customers.

And following that, Andrew Rhomberg, a founder of the fledgling ebook bargain and conversation site, Jellybooks, took up Dominique’s side of this not-quite-engaged discussion in a post on the Digital Book World blog to make the point that the data publishers can gather through experimentation makes it worth having the direct customer relationship.

I agree with Andrew that publishers should sell direct, but the experimentation and data-gathering arguments he made — which actually resonate with the Jellybooks mission to improve discovery through both a different merchandising approach and by creating Groupon-like “deals” to entice purchasers — don’t strike me as the most persuasive arguments to make the case.

Partly that is because some of what Soucebooks accomplishes, like getting consumer reaction to covers, could be achieved without selling direct. Macmillan has told us that they have millions of email names (and the right to send them missives: what Seth Godin dubbed “permissions”) and has demonstrated that they can get a lot of response if they ask for an action. All that has been happening without them selling direct. (Macmillan will be starting to do that. Their VP, Fritz Foy, announced last week at our Pub Launch BEA conference that they’ll shortly be opening an ebook store, DRM-free. Hosting that event was the reason I didn’t hear Madeline and Dominique speaking around the corner.)

Our friends at Vogue Knitting Magazine use their Twitter followers to get opinions about how they should handle certain editorial choices they face for their magazine, just by asking.

Madeline was not saying that Random House shouldn’t have conversations directly with the readers of the books they publish. And they are certainly familiar with the point about data made by Dominique and emphasized by Andrew. They are, after all, the publishers of “The Lean Startup” by Eric Ries, which emphasizes the use of feedback loops to shape business strategies, including for the launching of the book! And everybody who knows Random House knows they are an analytical, systematic, and data-responsive organization.

What I took away from what I read Madeline saying was “we don’t have to execute the transaction in order to have direct customer contact and knowledge.” And what I also took away is, “whether it is because we don’t want to hurt our intermediary retailers or because we don’t want them to hurt us, we’d rather avoid competing with them. And if we sell our books direct, we are competing with them.”

That’s a powerful concern and it is built into the DNA of the biggest trade publishers. Selling direct works against the magic of trade publishing, which is the leverage provided by so many intermediaries helping reach the end consumer. I remember five years ago, when I was running most weekends with a Big Six C-level executive, telling him that I had just come around to the point of view that publishers should sell direct. He hadn’t then; he may not have yet.

I once had the (on more reflection) crazy idea that if all the publishers sold all the books of all the other publishers. there would be such a vast array of deal choices in the ecosystem that it would undercut the attempts of retailers to win share by selectively cutting prices.

But agency pricing changes that game because the price of an agency-model ebook is the same in all sales venues. In that case, does it reinforce the old logic of pushing sales through the intermediaries (as my running partner then and Madeline now apparently believe) or does it point to the path Raccah and Sourcebooks have taken, that Macmillan seems headed for, and which Rhomberg supports?

I think the latter. Here’s why.

We’re at the point now where all publishers understand that direct customer contact is essential. They may not all be fully aware that they are in a race with authors to gather the lengthiest list of useful customer contacts, but they are. The conversations between agents and publishers will very shortly start addressing how many names and permissions the author has with the number of names and permissions that apply to the author’s book the publisher can provide.

If a publisher works with the agency model — and Random House is a uniquely privileged publisher at this moment because they alone sell on the agency model without any pressure from the DoJ to change their practice — they can sell direct at their established price with the confidence that no retailer will embarrass them to their audience by undercutting them. That means there are three highly compelling reasons to sell direct:

1. If you have engaged in a dialogue that has “made” the sale, you don’t want to take the chance it will get “unmade” by sending the customer to a retailer with a vast array of choices, often suggesting other publishers’ books right on the same page which houses your book. There is wisdom that says every required click costs sales. Sending the purchaser to a retailer to execute a sale you have made not only lengthens the click stream, it introduces distraction and competition.

2. When an agency publisher makes a sale through an intermediary, it pays the intermediary 30% of the customer revenue for execution. Making the sale directly, adding that 30% to the 70% which would otherwise have been the publisher’s and author’s revenue, adds nearly 43% more revenue. Nobody is expecting publisher-direct sales to become a big share quickly, but a 43% increment is large. In some genres and niches, publishers might get to 20% direct sales in the next few years. In that case, selling direct would add more than 8% to their income, and to the income of any of their authors working on a percentage of the publisher’s net ebook revenue (which is almost every one that has earned back their advance).

3. It is much easier to execute further engagement with direct customers than through intermediaries. And further engagement is soon going to be desireable and before long will become essential. For example, an author could write a new ending or epilogue to a book (think non-fiction, not just fiction; this is already a big deal at tech publisher O’Reilly) that the author and publisher would want every  prior purchaser to have for free. Easily done if the customers are yours; a huge pain if they aren’t. Or a publisher next year might be happy to provide non-DRMd ebooks for customers who previously bought protected versions. Or a publisher and author might want to try an experiment of sending a sample of half the author’s next book for free to the readers of the last one. It will be far easier to get retailers to play along on things like this if they have to do it to remain “competitive” (more reminders that competition won’t just be about price!) with what the publisher provides its direct customers.

No retailer jumps for joy about publishers selling direct. Those publishers that do now, including Sourcebooks, the enthusiast publisher F+W Media (our partners putting on Digital Book World), and others, are usually publishing titles that are outside the circle of highly price-promoted big books. They’re managing to do it even without agency pricing. (I can’t resist noting that the DoJ doesn’t seem to care that Amazon won’t let these publishers use agency pricing, even though they might work that way with other retailers and, in my opinion at least, putting them at a disadvantage against their larger competitors).

But one clear lesson we should have all learned by now about digital change is that the bright lines that divided the author function from the publisher function from the retailer function are progressively being erased. It is possible for any of these players to perform any of these functions. (Indeed, a key idea behind Joe Regal’s new Zola Books business is that authors can do their own curation and become retailers, an idea everybody will have to wrap their head around just when we’re getting used to the idea that authors can become publishers!) Amazon isn’t shy about publishing; publishers need to overcome their reticence about retailing.

The guess here is that the ability to sell direct effectively will be seen as a necessary survival skill for publishers by two years from now, if not sooner.


If the government makes agency go away

The Wall Street Journal reports that the Justice Department has notified the Agency Five (Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster) and Apple that it plans to sue them for colluding to raise the price of electronic books. I have no standing to comment on the law here. But if this does mean the end of the agency model, it would seem to be a cause for celebrating at Amazon and a catalyst for some deep contemplation by all the other big players in the book business.

Agency pricing, for those who have not been following the most important development in the growth of the book market, enabled the publishers to enforce a uniform price for each ebook title across all retail outlets. This was Apple’s desired way to do business, and it addressed deep concerns the big publishers had about the effect of Amazon’s loss-leader discounting.

Although the WSJ article and Michael Cader’s follow up in Publishers Lunch make no “agency is dead” declaration and there are quotes from publishers and others indicating that there are a range of possible outcomes, including a version of agency that is modified to allow some discounting, everybody in the industry now has to contemplate what it would mean if the agency model is legally upended.

To Amazon, it would mean they would be free to set prices on all books again, including the most high-profile and attractive ones that come from the big trade houses. That is an opportunity they are likely to seize with loss-leader discounting of the biggest marquee titles.

To Barnes & Noble, it would mean they have to devote cash resources to ebook discounting that they might have preferred to dedicate to further development of the Nook platform, maintaining the most robust possible brick-and-mortar presence, and improving the user experience at Unconfirmed stories abound that B&N is about to announce an international expansion. Whether that will produce cash flow immediately or require it for a while is not yet known. For B&N’s sake, it would always better if it were the former, but if they’re about to fight discounting wars, it might be critical.

To Kobo, it would mean that they also will need to devote cash resources to subsidizing price cuts to match Amazon. With their new ownership by Rakuten, they should have the capital they need to fight this battle. They must be glad that deal got done before agency was upended.

To Google, it would mean that the bookstore service piece of their ebook business will suddenly be highly challenged. Many independent stores might be pushed out of the ebook game completely; it certainly would be extremely difficult for them to support competition with Amazon’s prices. To Google itself, with their new Google Play configuration, it means they will have to both spend more margin and more management energy to be a serious competitor in the retail marketplace. There’s no clear evidence that they have the interest at the top to do that, although they certainly would have the resources.

To Apple, it would mean that their entire iBookstore model is in question. They apparently didn’t want to take on all the normal responsibilities of a merchant, which would include setting prices. Now they may have to.

To all the big publishers, including Random House (the one of the Big Six not being sued, because they stayed out of agency for the first year and therefore were not considered part of the “collusion”) it would mean that they will have to painfully reverse the re-pricing and systems adjustments they went through to implement agency in the first place.

Smaller publishers and distributors might be beneficiaries if agency is eliminated, but they might not. The agency model is a great advantage for those publishers who are able to fully implement it. But that is only six publishers — the Big Six — because Amazon has simply refused to let anybody else sell to them that way. That creates problems for the smaller publishers but an even more threatening one for distributors. All but the Big Six, if they want to sell to both Amazon and Apple, must operate a “hybrid” model, selling Apple on agency terms and Amazon on wholesale terms. The two are inherently in conflict. What is ultimately a threat to the distributors is that distributees that desire agency terms, and many would. might seek distribution deals from one of the Big Six. (It might be coincidental, but it is worth noting that IPG, the company having a fight with Amazon at the moment over terms, is a distributor.)

Of course, we don’t know how the Big Publishers will respond if they’re forced off agency. It’s long been my opinion that the 50% discount for ebooks is unworkable. It leads to ridiculous and unrealistic retail prices. (Publishers operating on the hybrid model have to have two retail prices: one on which to base the wholesale discount and another at Apple operating agency-style. It’s crazy.) Would the big publishers, if they couldn’t do agency, keep the 30% discount and their current prices? Would they go back to the 50% discount and jack the suggested retail prices back up? If they did the former and nothing else changed, the smaller publishers could be at a much greater disadvantage than they are now.

Over time, the biggest losers here will be the authors. The independent authors will feel the pain first. Agency pricing creates a zone of pricing they can occupy without much competition from branded merchandise. When the known authors are only available at $9.99 and up, the fledgling at $0.99-$2.99 looks very attractive and worth a try. Ending agency will have the “desired” effect of bringing all ebook prices down. As the big book prices are reduced, the ability of the unknowns to use price as a discovery tool will diminish as well. In the short run, it will be the independent authors who will pay the biggest price of all.

But, in the long run, all authors will just get less. They will join the legion of suppliers beholden to a retailer whose mission is to deliver the lowest possible price to the consumer.

Seth Godin has recently made the argument that this is simply inevitable. Perhaps it is. The laws of supply and demand would support that contention. But from my personal perspective, I don’t like seeing the government hasten the process along.

But what about the reader? The reader gets lower prices, cheaper reading. What the reader won’t see is that s/he’s not getting what s/he won’t pay for. Some of the best books won’t get written and the biggest casualties will be in the area of highly-researched non-fiction, like major biographies, in my opinion. Twenty years ago they used to say that a conservative was a liberal who’s been mugged. I’m not about to become a conservative, but I sure see how easy it is for the government not to understand how their decisions might affect the dynamics of a business. Or, in this case, a culture.


Learning what every publisher needs to know these days about direct response

Until his knee gave out a couple of years ago, I used to run regularly with a Big Six C-level executive. In about 2007 I told him I thought all the big publishers needed, but lacked, a complete and thought-through email list compilation and marketing strategy and policy. I suggested we could help his company by looking into that and designing one. (Consultants dream up ideas like this that require both outside expertise and extra hands and feet because that’s how we get work.)

My pitch got me nowhere.

In the intervening years I have become increasingly convinced that collecting names and using them right is now mission-critical for all publishers and most critical, and most difficult, for general trade publishers. And from what I can see, it isn’t getting the attention it should from anybody. (I’ll be delighted to get comments telling me I’m wrong, but I’ll bet they come only from very small publishers or thoroughly vertical ones.)

This is not my field. I know a lot about the traditional book supply chain, with first-hand experience dealing with every part of it. But my knowledge of direct response principles, starting with list-building and maintenance, is mid-level amateur. So I did what I would have done if my running buddy had responded positively to my suggestion that we help: I engaged a very smart person I know is a real expert on direct response to help me learn and think through what publishers need to learn and do. This post and at least one more will share that knowledge.

The smart person is Neal Goff, owner of Egremont Associates, most recently the CEO of My Weekly Reader Publishing. Neal has been applying direct marketing expertise in executive positions at Book-of-the-Month Club, Time-Life Books, Prentice Hall Direct, and Scholastic Library (formerly Grolier) Publishing for large chunks of the past three decades.

I started out with Neal declaring my assumption that publishers can make use of names they gather in at least three ways:

1. They can sell books to them.

2. They can use them for marketing, to spread the word about a book.

3. They can enlist them to be part of a community, interacting with you and others you gather, for the collective value (informational, monetary, curative, content-generating) the community can provide.

For openers, I asked Neal: if we want to help a publisher, where would we start?

Before he would tackle that question, Neal wanted me to understand a couple of very basic things about what is needed in a marketing database.

Obviously, we want to build a database that has all the consumers (millions, so the database has to be able to handle lots of them) we’ll be tracking and all the information about them by which we will ultimately want to “select” their names in the future. Neal emphasized that the most valuable information about them will be derived from their “actions” (when they click or buy or request information), much more than from our own (when we mail or post or offer.) And what we most want to know about those actions is summarized as “RFM” — recency, frequency, and monetary value — plus affinity, which is the similarity between what we’re selling and what they’ve bought before.

Recency refers to “the last time they did something.”

Frequency refers to “how often they’ve done something” (particularly when they do something positive, like buy a book from us).

Monetary value refers to “how much they’ve spent with us.”

Tracking affinity may require some work. Our fulfillment system knows exactly what they’ve bought from us title by title, but this information won’t be terribly useful if, every time we do a promotion, we have to go into our database and select the names of our book-buyers, one title at a time. That information has great value, though, if we aggregate our customers into meaningful groups, like those who bought a photography book or a military history title or a romance novel.

This means that transactiondata is critical. Neal explained that most publishers, particularly trade publishers, don’t necessarily have easy ways to capture individual customer transaction data in a marketing database. That may require a bridge of some sort to be built between your fulfillment systems, which capture the data necessary to complete transactions, and your marketing database, in which you want to aggregate fulfillment data in order to make it more useful selecting names for future outreach. That includes the affinity grouping described above and also such information as how much a customer has spent with you in the last six months.

Knowing that, one is equipped to start thinking about gathering names.The first step is to round up all the names you already have and put them together in one database, capturing the data you have about them in a consistent way. The next step is to establish procedures for collecting more names. All of this should be done with future selection criteria in mind which requires you to start thinking immediately about what the meaningful segments within your customer base are likely to be.

Every publisher already has a lot of names. People who have purchased from the publisher previously will have provided contact information, for confirmation purposes at least. People will have contacted the publisher for customer service, inquiries, or to sign up for newsletters or alerts.

But, often, the publisher will not have requested the necessary “permission” from the consumer to use their name for email marketing contact. (Seth Godin has been making this point for a very long time. He invented the term “permission marketing.”) The task of collecting and collating the names that are already in the house’s possession will provide a painful lesson in how much good customer information has been wasted because permission to contact was not secured when the name was collected. That lesson needs to be applied to the publisher’s future efforts.

Neal explained that you want to set yourself up to get permission from people as early as possible. On all purchase and customer service forms, when you collect email addresses, you have to include the option for people to choose to stay connected to you. You invite your contacts to check a box saying “keep me informed of other books you publish ‘on this subject’ or ‘by this author’ or ‘which will be of interest to me.'” You want to word your permission statement so that it doesn’t scare your customers into thinking you’ll be spamming them all the time, while at the same time keeping the wording broad enough that you don’t unwittingly cut yourself off from future marketing opportunities.

He also pointed out a paradox. The higher you set the permission hurdle, the fewer people you’ll get to give you permission but the higher the quality of that group will be. So if you make people “uncheck” a box to prevent permission, you’ll get more permissions. But if you make people “check” a box to grant permission, you’ll probably be more successful engaging the ones who grant it.

This took me back to a belief I held even before Neal started explaining the basics. Most publishers’ efforts to harvest email addresses have been weak and underthought (which isn’t surprising if there is no active plan to use the names). Can publishers create better reasons for the book’s consumer to engage the publisher? Can the publisher offer free additional content, for example, or notifications of updates (most likely to apply to non-fiction, of course), or a web site that offers additional value at which registration might be captured? Capturing the name and email address of somebody inquiring about a book or even one purchasing a book is all well and good, but wouldn’t those who signed up after already owning the book be that much more likely to be candidates for future engagement?

So where a publisher has to begin is to gather the names they already have, which are buried in nooks and silos around the company, tag them for where they came from and by the kind of “permission” to use them that exists, and work out how to add the additional contacts made with those people, especially including all transaction data, to the database.

In the next post based on Neal Goff’s direct response knowledge, we’ll talk about using the names, including how to act on Neal’s point that many things are “testable”, and that every customer outreach presents a valuable opportunity to test something. And we’ll explain why even though sending email is “free”, mailing to your free list too often or with bad execution can actually cost you money.

Here’s an unrelated postscript. We’re putting together a database of enhanced ebooks because we think the world needs one (at least temporarily.) Our newest teammate, Chesalon Piccione, has been doing the work on this and has posted on the E2BU blog about her efforts and what she’s learning by looking at the aggregation. It will take us a little while to wrestle the database itself into something postable, but we’re working on it. In the meantime, if you’ve got an enhanced ebook project, send Chess an email ([email protected]) and let her know so she can include it. A list of the data points we need is in the linked post.


There’s only one Seth Godin, but there are other authors who might emulate him

What shoved other news aside this morning was the word from Seth Godin that he won’t be publishing books with publishers anymore. This is another early indication that it is going to get harder and harder for trade publishers to sign up books.

It is not the first one. Thriller writer J.A. Konrath discovered the virtues of publishing through Kindle about 16 months ago. With the help of audience-building through his own blog, plus completed manuscripts that the New York publishers didn’t buy, he was pushed into learning how to monetize his own work without a publisher.

Last December, the news was that S&S author Stephen Covey had taken his backlist to ebook publisher Rosetta which had, in turn, made a temporary exclusive deal with Amazon. The motivations, apparently, were a bigger share of the ebook pie and the unique marketing capability Amazon has to really push something direct to appropriate consumers. That deal seemed to be with the original publisher’s explicit consent. (Agent Andrew Wylie recently formed an imprint to do the same thing with a batch of his clients’ backlist apparently without prearranging consent, although no lawsuits have been filed to date.)

At the last BookExpo, one of the leading agents in New York told me he is working hard to learn about self-publishing options because his authors are asking him about it.

Last week, one of the leading publishing consultants to “brands” told me that the 25% standard ebook royalty was pushing her company’s clients to think harder about self-publishing.

And it happens that right now I’m reading a book about my favorite subject (baseball history) called “A Year in Mudville” (about the Mets inaugural season) that was self-published through Smashwords but which, in editorial quality, exceeds many titles I’ve read from established houses. I don’t know whether author David Bagdade didn’t want to bother with the bureaucracy of pitching trade publishers, was rejected by them, or just chose the control and better margins of Smashwords, but Smashwords rather than one of the established players is dividing with the author 70% of the nine bucks I gave iBooks for the purchase

This way lies destruction.

Many years ago, my friend and sometimes colleague Mark Bide and I were talking about threats to the scholarly journal paradigm. For those not familiar with how journals work, it might be an eyebrow-lifter. Universities pay professors’ salaries and encourage them to write peer-reviewed articles. The journals get the articles for free, operate the peer-review and publication process, and then sell the collection of articles back to the university’s library. So the university both pays for the content’s creation and purchases it in its published form. Since the beginning of the web awareness, it has been predicted that disintermediation of journal publishers would occur.

What Mark told me was “watch the level of submissions.” That is, he believes the first sign that journal publishing is in trouble will be if the professors stop sending in their articles. So far, that hasn’t happened (that I’m aware of.)

But it’s going to be happening in trade.

On an email list I read, you can detect the annoyance of publishers who point out that neither Konrath nor Godin would be where they are today if publishers hadn’t invested in them and built their fame. There’s some resentment that neither Konrath nor Godin emphasize this point and, by not doing so, seem to suggest “anybody can do this.” I’m not sure that they’re saying “anybody can”, but it isn’t necessary to push that idea to do real damage to publishers’ futures, because the authors who can do this are among the the ones publishers need the most.

Starting in the 1990s, publishers started to ask “what’s the author’s platform” when they signed up books. In those days, they were asking whether the author had a radio show, a newspaper column, a speaking circuit, or extensive media contacts that could give them a leg up to promote the author’s book. But with the turn of the century and the development of inexpensive websites and blogs, authors were able to build their own platforms. And, lo and behold, they were able to build them faster and better if they had legitimately published books in the marketplace.

Publishers should have remembered the axiom that you should be careful what you wish for. This was, perhaps, the beginning of the unbundling of the publisher’s suite of services to the author. It used to be that the publication of a book was the platform and the publishers’ publicity and marketing efforts worked to capitalize on it. This was all part and parcel of the package: paying an advance; editing and shaping the book; putting it into a distributable (printed and bound) form; getting it known; and, of course, getting it into a store where a customer could buy it.

Publishers still pay advances although they’re doing their best to scale them back. Many don’t provide the same level of editing services that they used to; they often expect more books to be delivered by each of their editors and they also lean to agents they can trust to do a lot of the work of putting a book in shape. Putting it into distributable form isn’t nearly as hard as it used to be and doesn’t require inventory investment if the form is digital. Getting it known is something that Godin very articulately and accurately suggests he can do better himself. He is not alone and authors who can do this are explicitly what publishers are seeking. And getting the content into the customer’s hands is a drastically different proposition in a digital context than it was in the pure print world of 20 years ago, and digital distribution can be done with far less investment and far less organizational muscle.

So there’s less for a publisher to do for an author than there once was. And the publishers sent that signal when they started to focus on the author’s own ability to promote and then, over time, turned that ability into a frequent requirement for publication. If the publisher is going to do less, the author wants to pay less for it. Joe Konrath is very clear about the advantages he sees in getting the lion’s share of the revenue his books generate, rather than a mere author’s royalty.

But, somewhat more ominously, making more money through disintermediation does not appear to be the primary driver for Seth Godin. What Seth seems to be saying is “I want flexibility. I want to use what I write in whatever is the best way to build my overall career, revenues, and audience. I don’t want to be locked into publishers’ schedules and bureaucracy.”

That’s a massive challenge for big trade houses but it will be of increasing importance to big authors, particularly big non-fiction authors. It is much easier for a publisher to provide real value if they’re vertical. On the same mailing list I mentioned above, we got a comment from a biggish independent publisher who claims that the house is finding more and better ways to work with authors and really investing in them. But, we are told, they are all in verticals.

Godin may be a unique case. There are unique aspects to Covey and Konrath too. But it is not comforting for trade publishers to see that authors have alternatives, that as ebook sales rise the viability of the alternatives grows, and that the authors most likely to strike out on their own or look for new partners are those with the strongest existing connections to audiences.