Simon & Schuster

Ebooks change the game for both backlist and export

There are two aspects of the business that ebooks should really change.

One is that ebooks can really enable increases in sales of the backlist.

The other is that ebooks will really enable sales outside the publisher’s home territory.

The second piece of this hardly even requires much effort. At a conference called Camp Coresource hosted by Ingram two weeks ago, Mary Cummings of Diversion Books, which last year launched a romance-only eBookstore app, EverAfter Romance, reported just short of half of EverAfter’s app users are coming from outside the “home” (US) market. Of that 49 percent, only about 6 percent come from the UK and Canada. Of course, Diversion owns world rights on many titles. And the rest of the world has far more than half the people, even far more than half the English speakers, in the world. So the US is still responsible for far more users per capita, but that’s really of secondary importance. Getting half one’s customers from markets that would have been very hard to reach ten years ago — without any extraordinary efforts — is a very new thing.

This global reality comes up in another frequent current discussion. The big publishers are suggesting that ebook sales have plateaued, perhaps even declined. Amazon says “not true”, that ebook sales are still rising. Some analysis, such as what is done by Data Guy for Author Earnings, says that the publishers’ big books are losing ebook share to the indies, primarily relying on data scraped from Amazon to make the case. The most commonly-offered explanations are that publishers’ success forcing higher ebook prices for their titles, combined with a decline in new converts to ebooks (who are inclined to “load up” their devices when they first start reading digitally) account for the apparent trend.

But the comparison can also be skewed. All Amazon sales from outside the US that are not made through a local Amazon store are credited to the US store. And when Amazon distributes indie ebooks, they always (or at least almost always) have global rights. So it could well be the case, and often is, that the publisher-ebooks that are being compared to the indie-ebooks are working on a smaller territorial base for sales. There is an apples-to-oranges problem that makes it difficult to compare Amazon sales of indie ebooks to those from publishers.

The point to capture is that just having ebooks for sale around the globe can bring markets to a customer’s door, wherever the book originated. Any rights management policy that prevents an ebook from being on sale anywhere is likely to be costing some sales.

The backlist challenge is trickier and the results might not be as obvious. Two of the biggest drivers of ebook sales are discovery in response to search and the amplified effect of existing sales momentum in bestseller lists and retailer recommendations. (“People who bought this, bought that.”) A power law distribution seems inherent in ebook sales. Those that sell develop sales momentum; those that don’t remain hidden and buried.

But a lot of that has to do with metadata. Publishers have been getting better and better at writing the descriptive copy that determines whether search engines identity them as an “answer” to the right queries. That means that as you go back in time, the copy is less and less likely to be useful for the purpose.

And there are some realities about budgets and effort allocation in big companies to take into account. The lion’s share, and that means more than 90 percent, of budgets and internal effort allocations for marketing go to the current frontlist. The backlist has many times the number of titles as the frontlist, so a much smaller amount of money and assignable labor is spread over a far larger number of titles. On a per-title basis, there have hardly been any resources available for backlist. And since backlist sales of ebooks have not generally been robust, predicting the ROI necessary to increase those budget allocations requires courage. Or foolhardiness.

Then there are corporate political realities. New books have advocates. There are the editors in the house who signed them and whose careers will be affected by how well they do. There is a publisher for each imprint watching the imprint’s P&L, firm in the belief that very few backlist books can move the needle but that every new title can. And the publishers and editors are also the ones who know the books and tell the marketers what they’re about and (too often) who the audiences are for them.

And, on top of that, publishers often count on backlist sales to be the most profitable precisely because they don’t have to allocate marketing spending or staff time to those books. There sometimes seems to be a fear operating at publishing houses that starting to expend marketing effort on backlist is opening a Pandora’s Box which would compromise the most profitable aspect of their business.

But there are hopeful signs that this is changing.

Carolyn Reidy, the CEO of Simon & Schuster, keynoted the recent annual meeting of the Book Industry Study Group by underscoring how S&S has changed its approach to capture backlist opportunities. Reidy made the point that between print bought online and ebooks, more than 60 percent of the company’s sales came from Internet channels. She said that at S&S’s weekly marketing meeting, which I’m sure was almost exclusively frontlist-oriented until very recently, they are now looking at their books “through a lens of daily opportunities”. That could include noting it if a book is listed for a prize or mentioned on a TV show or in a tweet by a celebrity. The chances that a book will be discovered by somebody searching for the book that way are multiplied if the book’s descriptive copy points the search engines in the right direction.

This is an approach we first saw for ourselves at Open Road Digital Media a few years ago. Their “marketing calendar” focused on holidays and predictable events like graduations, not the publication dates of forthcoming books. Of course, Open Road didn’t have any frontlist at that time. All the books they acquired in the early days of the company were backlist for which digital rights were somehow available. They made a virtue of a deficiency. But marketing the backlist in the light of the most current “daily opportunities” is precisely the right thing to do.

It is worth noting that when Reidy spoke at Digital Book World in January 2014, she pointed to the opportunities in global. In the prior year, she noted, S&S had sold ebooks in more than 200 countries.

Recognition of an opportunity is a necessary first step and assigning human and capital resources to pursue it is the second. But the biggest publishers are also going to need digital tools to fully exploit what is now open to them. When we looked at what Open Road was doing, they had about 1000 titles in their shop, all of which had just been acquired by the team in place. They could keep them in their heads. The biggest publishers have tens of thousands of titles in their backlists, many (if not most) of which were acquired and launched by editors and publishers who are no longer in their employ. Many of them have old and out-of-date descriptive copy which is not readily updated because nobody working there now knows the book.

It will soon be seen as necessary to employ technology to monitor the news and social graph and to “bounce” the results of each “daily opportunity” off the possiblities in the backlist. It will for quite a while longer still require humans to do some targeted research into what today’s relevant search terms are and to write the descriptive copy that will respond to them, but technological assistance will multiply the effectiveness of the human efforts.

We should expect the backlists to start increasing their share of every publisher’s annual sales. And we should expect offshore ebook sales to do the same.

There are recent reports from the US and UK that print unit sales are up while ebook unit sales are down. This is being celebrated by some as an indication that book consumers are turning away from digital reading to go back to print. Perhaps because I intuitively find this so unlikely, I can think of caveats.

The presumed reductions and growth are very small and the measurement techniques are pretty crude, so there is an accuracy question. But we also know — as was referred to in the main body of the post above — that new ebook converts tend to “load up” their digital device when they start reading that way. I believe the purchases at first are somewhat “aspirational”, but then settle into a rhythm more like replacement. So ebook purchases are inflated in relation to ebook consumption early in one’s ebook-reading “career”. Fewer new ebook readers each month (which we certainly have) mean fewer people loading up.

Of course, print book sales actually rising, which is the implication from the recent data, is an independent marker that, if borne out over time, requires another explanation and that would be one that I don’t have yet.


What Oyster going down demonstrates is not mostly about the viability of ebook subscriptions

The news that the general ebook subscription offering Oyster is throwing in the towel was not really a surprise. The business model they were forced to adopt for the biggest publishers — paying full price for each use of a book with a threshold trigger at considerably less than a complete read while, at the same time, offering consumers a monthly subscription price that barely covered the sale of one book, let alone two — was inevitably unprofitable. Their only hope was that they’d build a large enough audience fast enough that publishers would become in some way dependent on it (if not the revenue it produced) and agree to different terms.

It would be a mistake to interpret Oyster’s demise as clear evidence that “subscriptions for ebooks don’t work”. Obviously, they can. Safari has been a successful and profitable business for nearly two decades. The Spain-based 24Symbols has been operating an ebook subscription business, mostly outside the US and mostly not in English, for too many years to be running exclusively on spec VC money. Scribd has very publicly (and a bit clumsily, in my opinion) adjusted their subscription business model to accommodate what were unprofitable segments in romance ebooks and audiobooks, but the inference would be that for other segments the business model is working just fine. And then there’s Amazon’s Kindle Unlimited, which is sui generis because they control so many of the parts, including deciding more or less unilaterally how much they’ll pay for much of the content.

What seemed obvious to many of us from the beginning, though, was that a stand-alone subscription offer for general trade books could not possibly work in the current commercial environment. The Big Five publishers control the lion’s share of the commercial books that any general service would need. All of those publishers operate on “agency” terms, which makes it extremely difficult, if not impossible, for a subscription service to pull those books in unless the publisher allows it. The terms that the publishers would participate in the subscriptions required, which were, apparently, full payment for the book after a token amount was “read” by a subscriber, combined with a limited number of titles offered (no frontlist), made the subscription offer inherently unprofitable.

The publishers see the general subscription offers as risky business for books that are currently selling well a la carte. Not only would they threaten those sales, they threaten to convert readers from a la carte buying to going through the subscription service. To publishers, this just looked like another potential Amazon: an intermediary that would control reader eyeballs and have increasing clout to rewrite the terms of sale.

So they only participated in a limited way. Penguin Random House (the biggest, and in shouting distance of half of the most commercial books all by themselves) and Hachette Book Group did not even experiment with the non-Amazon subscriptions. HarperCollins and Simon & Schuster, and to a lesser extent Macmillan, participate in a limited way. Multiple motivations drove the participation that did take place. The primary goad, probably, was to simply oppose Amazon. Having customers nested anyplace except the behemoth in Seattle can look like a good idea to most publishers. But another was to collect at least some of that VC money poured into an unlikely-to-work business model before it was exhausted. And because the publishers got to decide which books to include, they could choose backlist titles that weren’t generating much revenue anyway and which might benefit from “discovery” within the subscription service.

(Carolyn Reidy, the CEO at Simon & Schuster, tipped to this in her talk last week at the BISG Annual Meeting where she specifically mentioned the value of the discovery S&S has seen take place in the subscription platforms.)

But not all the subscription services were equal. The established Safari was in a market niche, serving mostly B2B customers in technology companies. (They have recently gone to an expanded offering because Boeing and Microsoft techies don’t just need books about programming; they’re also parents and cooks and gardeners so general-interest non-fiction can appeal to them. But that’s not the foundation of Safari’s business and they’re not trying to push fiction.) Scribd had a foundation business as a sort-of “YouTube for documents” that the ebook subscription business both built on and enhanced. For Amazon, Kindle Unlimited just gave them another way to transact with the ebook customer and it gave them another outlet for their exclusive Kindle content.

Only Oyster and another pretty-much simultaneous startup, Entitle (which had a proposition more like a book club than a straight subscription service), were trying to make the alternative ebook revenue stream into a stand-alone business. Entitle went down before Oyster. Librify, another variation on the theme, was acquired by Scribd.

So the failure of Oyster is actually another demonstration of a “new” reality about book publishing, except it is not so new. Book publishing — and book retailing — are no longer stand-alone businesses. Publishing and bookselling are functions, and they can be quite complementary to other businesses. And as adjuncts to other businesses, they don’t actually have to be profitable to be valuable. What that means is that entities trying to make them profitable — or, worse, requiring them to be profitable to survive — are at a stark competitive disadvantage.

Amazon is the past master at making this reality obvious. Remember that they started as a “book retailer” and nothing else. They leaned on Ingram’s Oregon warehouse to enable their business model, which was to take an order for a book and accept payment, then procure the book from Ingram and send it to the customer, and then a little later pay Ingram’s bill. This positive cash-flow model was so brilliant that Ingram could have readily enabled lots of copycats, and they formed a division called Ingram Internet Support Services to do just that. So Amazon killed that idea by cutting their prices to no-margin levels and discouraged anybody else from getting into the game. That was in the late 1990s.

They could do that because the financial community had already accepted Amazon’s strategy of using books to build a customer base and to measure future business prospects by LCV — the “lifetime customer value” of the people they did business with. And it became clear pretty rapidly that they could sell book readers other things so no- or low-margin sales were simply customer acquisition tactics. This was a game Barnes & Noble and Borders couldn’t play.

Now book and ebook sales are almost certainly no more than a single-digit percentage of Amazon’s total revenue. Kindle Unlimited, like their publishing enterprises and self-publishing offerings, are small parts of a powerful organization that has many ways to win with every customer they recruit.

Scribd is not as powerful as Amazon, but they began with a network of content creators and content consumers. That gave them a marketing advantage over Oyster — not every customer had to be acquired at high cost since many potential customers were already “in the tent”. But it also gave them some stability. Eyebrows were raised recently when Scribd put the brakes on the lending of romance books and audiobooks. But tweaking the business model for those verticals simultaneously leaves open that the model is actually working in other niches.

We can see this playing out in a much more limited way in Barnes & Noble stores, where books are being replaced on shelves by toys and games. But that’s not likely to be enough diversification to matter in the long run. It is certainly not going to get B&N where Amazon is, where far more than nine out of every ten dollars comes from something other than books. And Barnes & Noble is nowhere near a point Amazon has reached: where the profit from book sales is incidental if they keep bringing in new customers and also keeps them loyal.

The story on Oyster, still incomplete as of now, is that a lot of their management team is on its way to Google, which, in effect, “bought” the company to get them. Google seems to be trying hard to make sure we don’t think they bought Oyster’s business, they just bought Oyster’s staff. Obviously, Google fits the description of a company with many other interests in which books can play a part. In the beginning, that was all about search. Now it is also about the Android ecosystem and media sales in general. An ebook subscription business, or even a content subscription business, could make sense in Google’s world. But it would be a relatively small play for them. My hunch, and it is only a hunch, is that they have something other than a mere “book subscription service” in mind for that Oyster staff to work on. Smarter observers than I seem to believe that the personnel Google recruited give them knowledge about Oyster’s mobile reading and discovery technology. Of course, that’s core information for Google.

Similarly, Apple, which now has subscription service for music, might also consider doing one for books — or for all media — at iOS at some point. They don’t have one of Amazon’s advantages — a big stable of intellectual property they control — but they are all about creating an ecosystem that people stay in and don’t leave. Book subscriptions could enhance that.

But the central point I’d take away from this is not that subscription failed, but that a pure book business play failed. One obvious question that provokes is when we will see some signs of synergy between Kobo and their owners at Rakuten, who presumably have Amazon-type ambitions but haven’t seemed to use their ebook business to help pursue them.

And what is true of book retail is also true of book publishing, as we observed in this space quite some time ago. Both publishing and book retailing will increasingly become complements to larger enterprises and decreasingly be stand-alone activities that business can dedicate themselves to for profit.

The New York Times this morning has a front-page article essentially reporting that the ebook surge is over, at least for now, and the print business appears stable. This is great news for publishers if the trend is real. Unfortunately, there were a few important points either elided or ignored that might have undercut the narrative.

One is that, while publishers report ebook sales as a percentage of total book sales steady or slightly declining, Amazon says (and Russell Grandinetti was quoted in the article) their ebook sales are going up. Assuming all this is true, is the difference perhaps sales migrating away from publishers (which sales would be reported by the AAP stats they rely on) and moving to cheaper indie titles available only through Amazon (which sales would not)?

Another is that publishers are raising prices on ebooks and making the price rises stick because of Agency. Is all the sales resistance created by higher prices resulting in print sales, or is some of it causing the book to be rejected for something cheaper? In other words, might total sales for many titles be less than publishers would have looked for before? (At least one agent tells me this is the case.)

And another is that the indie bookstore resurgence has occurred in the years following Borders’s demise and the shifting of the product mix in Barnes & Noble. It is worth asking whether the indies are temporary beneficiaries of a sudden shelf space deficiency or whether we’re really seeing not only an increase in print reading, but a renewed interest by book readers to go to stores to buy the print. That question isn’t posed in this piece.


The big global publishers are integrating across both territories and languages

Since I posted this two days ago, one of the Big Five CEOs pointed out some things I missed that are important. These are addressed in a post-script at the bottom. Subscribers to the blog would have received the original post without the “correction”. My apologies.

The announcement this week that John Sargent has apparently moved up another notch in the global Holtzbrinck hierarchy reminds us that the cross-border and now cross-language integration of the publishing giants, a very complex undertaking, continues to develop. Sargent was already the global “trade” head for the company, which suggested that integration of the publishing strategy and operations across Macmillan (Holtzbrinck’s trade division) companies was already an important priority. Now he is EVP of the entire global entity.

This follows an announcement a few months ago by HarperCollins that it was appointing digital head Chantal Restivo-Alessi to be EVP, International, to oversee the publishing through Harper’s growing foreign language capabilities.

Until very recently, just publishing simultaneously in a coordinated way across English language companies located in different countries was a seldom-attempted challenge. HarperCollins and Holtzbrinck seem to be shooting right past that hurdle and are setting themselves up to publish in multiple languages in a coordinated way, which is a much heavier lift.

The publishers who are doing this are seeing at least two things that motivate them.

One is that selling books is considerably more profitable for publishers than selling rights. This fact has been behind the creation of the global trade publishing behemoths in the English language. Until things began to change in the 1970s, there really were no trans-national book publishing companies. Since then, acquisitions have given us five big global trade book publishing houses. The only American-owned one, Simon & Schuster, and the French-owned one, Hachette, seem to have the least integrated global English trade presences. Simon & Schuster just has less in the way of foreign-based assets. Both Hachette and Penguin Random House have a federated structure by which the local companies report up to the parent, not to a global trade head. Macmillan and HarperCollins have both been more aggressive about integrating their international English publishing efforts.

And now both of them appear to be interested in extending that integration beyond their English-language companies.

The logic behind this kind of integration is both clear and unassailable. In the Internet age, as we’ve seen for a long time, there really is no such thing as “local” publication anymore. Anything announced anywhere is heard everywhere. And it actually requires active controls to stop anything that is available anywhere from also being available everywhere. Because English is so widely known beyond native English-speakers, the English language editions of new high-profile books sell in many countries for which the first language is not English. This has become a new factor in placing non-English rights.

Until the Internet really “arrived” two decades ago, the rights-trading activity could take time and it didn’t matter, even within the English-speaking world. I remember about 20 years ago when my friend George Gibson discovered the bestseller phenomenon “Longitude” by Dava Sobel. He published it in the US and it became a big bestseller. But even though it was a story that took place in England, it took him a year or more to make a sale to a UK-based publisher. (When he did, “Longitude” went on to one of the longest-runs of all time on the UK bestseller lists.)

A story like that would be very unlikely today. Gibson owned those rights to sell. The chances are the search traffic numbers alone would have accelerated the process of finding a buyer. Or else the US publisher, even a tiny one like Walker, where Gibson was at the time, would have released the ebook for global distribution and made some sort of deal for print to be made available as well.

Because the marketing of each and every book starts with the enthusiasm of an acquiring editor, and because each new deal an agent can negotiate is a new opportunity to get a publisher to overpay, both agents and publishers were comfortable with the process as it has always been. Relatively few of the high-profile agented books are even sold for “world English”, let alone with rights beyond the English language. Just like publishers’ value is directly related to the number of accounts through which they find customers for a book, an agent’s value is directly related to the number of deals they can make for each property.

If an author can get the reach they need through Amazon alone, then it is hard to accept a royalty from a publisher of a third or less of what Amazon will pay directly. Amazon, the publishers, and the author community are all very aware of this. It is one of the two main reasons why publishers try so hard to shift share away from Amazon. (The other, of course, is that the bigger Amazon’s share of the market, the more leverage it gives them to push for a bigger share of each sale.)

And if we see a trend where one publishing deal gets an author just about all their revenue, it will also be harder for authors to accept paying a full 15 percent agent’s commission to get it, particularly once the author becomes a global brand. (And the big brand authors are precisely the ones whose books will benefit the most from a coordinated global publishing effort.)

The structural impediments to publishing this way are not trivial. It will be a very long time — not in the working careers of any of today’s executives — before coordinated global publishing is important for any but the biggest books on the list. Most titles that each of the local companies puts out will be territorially constrained, as they have always been.

But it will, indeed, be the biggest ones — probably fewer than five percent of the titles that could earn half the revenue — that the coordinated efforts will affect. These are the books that every big global house needs to sustain itself.

Nielsen, through its Books & Consumer data service, is able to create individual author profiles for approximately 350 authors: those with substantial enough sales to enable digging down into the demographics of their book buyers and getting useful information with granularity. I’d guess those profiles will make popular reading as the publishers develop their global capability, particularly since Nielsen is also tracking across both countries and languages. And those 350 authors are almost certainly among the 500 top candidates for this type of treatment.

Sargent and Restivo-Alessi are blazing a new trail. Integration of publishing efforts this way will affect advances, royalties, workflows, and marketing strategies. They will effectively create “new propositions” to put in front of the biggest authors in the world. Penguin Random House and Hachette, because of their internal structures and S&S, because of its relative US-centricity, will be challenged to keep up. (Until their internal structures change, of course, or until they make some other adjustment. Which they will.)

Agents for the biggest authors in the world will be hearing the new pitch. On the one hand, they’ll be looking at opportunities to do record-breaking contracts. On the other hand, they’ll be doing what used to be two, three, four, or more deals in one and, in the long run, probably making at least some of their authors wonder whether they should have to pay that same hefty commission the next time around. When an author in this category asks for a fee reduction to continue the relationship, I suspect that most of the time, they’ll get it.

Of course, working in multiple languages and territories is something Amazon can also do very well. But they will probably stay out of this competition, at least at the beginning, because it will be a high-advance environment and Amazon has shown no taste for that as a strategy.

Nonetheless, the signs are that the ecosystem at the top of the commercial pyramid is going to have some new distinguishing characteristics. It has been noted many times in many places by many people that the economy the Internet creates favors the winners and exacerbates power law distribution. This is about to become another example.


And now the postscript.

In fact, the “structural” differences are not as dramatic as the post describes them, although there are differences and, indeed, HarperCollins and Macmillan are best-positioned to offer and execute on global multi-language and multi-territory deals than the others.

Markus Dohle is the CEO of Penguin Random House. He has the same “authority” as Murray and Sargent do. But Random House has always been highly “federated”, with a lot of power in the imprints. That makes coordination across territories that much more challenging, as does the fact that PRH is twice the size of HarperCollins and six times the size of the other three. Being of a “certain” size is necessary to make global publishing possible, but the larger you are beyond the minimum required, the harder is coordination. It could even be that smaller global publishers — there aren’t many, but Quarto is one example and Bloomsbury another — could execute on this concept even better than the Big Five. On the other hand, smaller publishers won’t compete for the massive books like those of the 350 authors that Nielsen tracks.

In Hachette’s case, Arnaud Nourry in France holds a position above all the companies as well. All the English-language Hachette publishers report to him, as well as others. But since the biggest books have their biggest share of sales in English, and because Hachette too has given great autonomy to the local companies, it is still likely that they would find it difficult to engineer the kind of coordination we’d expect to see from Harper and Macmillan in the relatively near future.

And, finally, Carolyn Reidy of Simon & Schuster is also a global head, but the company doesn’t have nearly the resources across languages and countries that the other four do.

Since I’m adding this post-script, I will also report that a couple of significant agents pushed back at me on Twitter, saying that they were very skeptical of the potential for big company coordinated synergy across the world. They’re saying they’ll be hard to convince. But, then, so did the original piece.

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A 10-point strategy for mini-vertical creation

The last post here, where I suggested that publishers should reconsider how they handle first serials, begs a number of follow-up questions. Two people commenting on the post raised the concern that HarperCollins wouldn’t have been able to handle the traffic the “Go Set A Watchman” excerpt would generate. My IT advisors say that is actually a trivial concern. In fact, if News Corp has the capacity in any of its businesses, that capacity could have been “lent” to HarperCollins for the purpose. Or it could have been leased from someplace outside. All it would take is a modicum of advance notice.

But if the challenge of getting the necessary bandwidth is really a trivial one, it is a bit more complicated to come up with a strategy that addresses this new reality. It is fine and dandy to know you’ll “self-publish” book excerpts and drive links and traffic to them to get visibility for the books and engagement with their audiences, but those are tactics, not strategies, and they need to live within a bigger context.

Here’s the overall point. Any business that makes money by selling content must have a direct marketing component to their strategy. For some, including trade book publishers, that should be about having marketing platforms that they own and control, not primarily about controlling the sales transactions. But content can be used to foster audience engagement and the set of engaged potential customers that can be generated is an asset that will become a necessary component of every publisher’s toolkit.

This post is essentially about creating verticals. It should be emphasized that verticals are not an “all or nothing” proposition. You can build out audience-centric interest to highly varying degrees and gain benefits even with an effort as small as where these suggestions start: a landing page.

With that in mind, here’s a battle plan every large publisher should adopt. The strategic approach suggested here can be configured to work for fiction, but it is best to start with non-fiction topics.

1. Look at every topic, subject, or category for which the house has 20 or more backlist titles and which define audiences to which you intend to publish in the future. Identify all the relevant titles you have for each audience. (Here is a hint that no publisher should need: ask your special sales department.)

2. Select three-to-five categories to start. Make your choices based on which ones have the most active backlists and/or the most new titles being planned. The more focused you can be, the better. That is, “baseball history” is better than “sports history”; “knitting” is better than “crafts”; “adventure travel” is better than “travel”. Everything we will suggest will work best if you have a “tentpole”: a title or author that is very famous and popular so definitely include any categories for which that is true for you.

3. Create landing pages for each of those categories under the publisher domain. So those pages would be called something like “” (which doesn’t exist). We’re recommending this approach initially to exploit (and over time to build) the domain authority of the publisher site, which will be reflected in better SEO for each component and, in fact, for everything the publisher posts.

4. While the “landing page” will contain links to all the relevant books that led to its creation, it is best to have rich and unique title-specific copy created specifically for that page, rather than the “canned” marketing copy that already exists. Aiming the copy at people who probably found the landing page through a search will work better both for SEO and to better engage those who come to it.

5. The excerpts offered for each book should not be “first chapters”. Those already live all over the web. Duplicated content is bad for everybody’s SEO. Different excerpts should be posted for this mini-vertical. And every time you post an excerpt to the vertical, promoting that excerpt through press contacts and social media effectively promotes the entire little enterprise.

6. Authors should be offered the opportunity to post relevant content here, to promote themselves.

7. The appeal and power of the mini-vertical will be enhanced if relevant books from other publishers are included as well. This is not necessary but it would add value.

8. Each mini-vertical needs an “editor-in-chief” who will post something relevant on a regular (weekly) basis. But one EIC could handle several of these sites. Certainly one person can handle the 3-to-5 we suggest as the starting group.

9. The mini-vertical landing pages will develop their own SEO juice over time, in direct proportion to how much new content is posted — which can be a lot if there are lots of new books from which to post excerpts, let alone author Q&As or promo videos or other material — and how much what is posted is promoted, which generates inbound links.

10. The point to this whole exercise is engagement. The site EIC should respond to all queries and comments. If excerpts are offered frequently, signing up for free subscriptions to that content should be enabled. Purchasing should be made as easy as possible, preferably with links to all of the top retail vendors. (Offering a direct purchase from the publisher is the least important sales option.)

Starting and managing a handful of these mini-verticals should be quite doable for less than six figures, a trivial investment for any publisher doing $50 million or more in sales and a manageable one for publishers doing much less than that. At the very least, the publisher who does this will build a network of engaged consumers that can be reached for nearly zero incremental cost, reducing marketing spending and multiplying marketing efficiency for new books far into the future. The publisher’s “domain authority” will be substantially enhanced, adding SEO juice and audience for every piece of content they ever post.

But the payoff could actually end up being a site that becomes a world of its own, worth spinning off to its own domain, and capable of being a self-sustaining (or even profitable) business in its own right.

This is a low-risk, high-reward strategy. Some publishers are already pursuing a variant of it. Any publisher without the capabilities it can deliver will increasingly be challenged to be competitive with those who have it.

I don’t mean to imply that there is no “content marketing” among publishers today. The Content Marketing Institute did a profile on Rodale which, being a vertical publisher, has a more obvious path to thinking this way. But Simon & Schuster has vertical sites — and — and has tried others. Peter McCarthy was in on the building of a number of verticals at Random House. And the genre fiction publishers — perhaps, most notably, Tor — have really tried to talk directly to their readers. But the opportunities to build marketing platforms for publishers that have access to content and to self-interested author labor have hardly begun to be explored.


Four of the big five have new deals with Amazon and only the biggest is still to negotiate one

A reporter called earlier this week focused on what he figures are the upcoming negotiations over trading terms between Amazon and Penguin Random House. I had observed when Amazon was throwing sharp elbows at Hachette during their contractual dispute that Amazon wouldn’t try similar tactics with PRH.

Since then, with HarperCollins and Amazon having announced they’ve reached new terms, deals have been done with all the Following Four US publishers. It would appear that the DoJ’s and Judge Cote’s work to stop publisher-controlled pricing across retailers has been very largely undone by the deals independently arrived at. So it is a sensible question for a reporter to ask, as this one was: can Penguin Random House do better than the others did in these negotiations?

I don’t know the answer to that. And even after a deal is announced, none of us will necessarily know the answer. But this is an appropriate time to consider the power of Penguin Random House’s position in the marketplace. It is very strong. If I were any of the other four major publishers, I would fear PRH more than Amazon as a potential disruptor of my business. When I put that proposition to a UK-based executive of one of those companies at the London Book Fair last week, he readily agreed with me.

When one considers what a segmented business publishing is, the Penguin Random House combination becomes that much more eye-catching. These five companies — PRH, HarperCollins, Simon & Schuster, Hachette, and Macmillan — compete much more with each other than they do with anybody else. Cambridge competes with Oxford and other university presses. Quarto competes with Chronicle and Abrams and Running Press and outside the US with Egmont and other illustrated book publishers. Yes, a bestseller might come from anywhere: Harry Potter came to the US market from Scholastic and the UK market from Bloomsbury. But the publishers who compete for the bestselling authors and the front-of-store slots repeatedly are the Big Five, which were formerly the Big Six.

And when Penguin merged with Random House, that was not just any old merger of the Big Six. It was a merger between Number One and Number Two. It has created a single company that is, in the US market, about twice the size of its next competitor (about $2.5 billion in sales for PRH against about $1.2 billion for HarperCollins). And HarperCollins, in turn, is about double the size of each of the other three.

What that means is that PRH, like Amazon, can make its commercial decisions independently from the rest of the industry. They can take risks that would be very challenging for anybody else. Amazon could afford to get into a dust-up with Hachette that affected the supply of books in ways its customers could clearly see and make it public to try to make a point. Random House, even before the merger, could afford to stay out of the new iBookstore (they wouldn’t play ball with agency terms in the beginning) for a while, which would have seemed a big risk to the others. (Of course, the DoJ and Judge Cote didn’t see it as individually-discernible risk. Their explanation was “collusion”.) That decision by Random House paid off in big ways in 2010 with higher sales per ebook title (because they didn’t go to agency, which reduced the per-title take) and higher unit sales (because agency would have forbidden discounting, and Amazon went to town discounting Random House books against their agency competitors).

In the past year, Scribd and Oyster announced ebook subscription programs. Pretty quickly, HarperCollins and Simon & Schuster announced varying degrees of participation in the services. And then Macmillan followed. But Penguin Random House and Hachette stayed out. Hachette is the most author- and bestseller-driven of the major houses and author brands are the most likely long run casualties if subscription services succeed. But, if they succeed, Hachette will have to go back to them hat in hand. Penguin Random House won’t, necessarily.

Because if subscriptions are actually the wave of the future and the title rosters from Scribd and Oyster are sufficient to make that happen, then PRH could compete with them entirely on their own. They would have as many prominent commercial books from their own reservoir as the other services have aggregated. And they wouldn’t be sharing with a third party vendor.

It is worth noting that PRH has gone into the Scribd service with audiobooks.

When Oyster announced last month that they would now sell ebooks a la carte as well as in subscription bundles, some of the press saw more significance to the move than it warranted. Scribd started out as an a la carte document access site. Amazon itself formed a subscription service (Kindle Unlimited) the minute Scribd and Oyster announced what they were doing. If you have the capability to sell ebooks, why not sell them by whatever commercial arrangement the customer wants?

By the same token, the distinction between publishers and retailers is melting away. Amazon went into publishing very quickly after ebooks enabled self-publishing. Barnes & Noble published proprietary books for years, even before they bought Sterling in 2002. HarperCollins built a retailing capability for themselves in the past year. (The imprint of Macmillan said they’d be selling DRM-free ebooks directly from their own site, but we have seen no evidence that they actually ever did.)

So, the reporter trying to understand the possibly-occurring Amazon-PRH negotiations wondered, would PRH become a retailer?

I don’t think so (at least not anytime soon), but I still believe — as I did when I first speculated about all this 2-1/2 years ago — that a store could have a competitive selection of books with titles exclusively from PRH. No other publisher could serve a general interest audience at retail without other people’s books as well.

How else could PRH be disruptive? They could offer a license to schools for their titles. If a school bought one of those to load its students’ digital devices with content, they wouldn’t have everything they might want but they could conceivably have all they need. How hard would it be to sell a competing license with less good stuff in it? How hard would it be to build an aggregation so that a competing license had as much good stuff in it?

The executives I’ve spoken with at PRH — and I have high personal and professional opinions of all of them — have consistently disclaimed any interest in most of what I’m suggesting. And, indeed, they haven’t started a subscription service and they’ve shown no signs of rolling out a program to create PRH-only bookstores. There are reasons, aside from altruism or short-sightedness, why they might resist these solutions. After all, PRH publishes about half the most commercial titles in the US book trade. Subscription services and retail competition would weaken the existing bookstore network, and PRH benefits from its existence in proportion to its relative size, which is to say “much more than anybody else”.

In fact, I’ve discussed the possibility that they could be so disruptive with the CEOs of two of the other Big Five, and neither executive (unlike the one I met with in London last week) expressed much concern. One said “they don’t want to do that”, meaning “they don’t want to destroy the competition in the trade” (which is a point of view that is actually supported by what the executives at PRH have said to me, as counter-intuitive as it seems). And the other one believes that having PRH in the game to negotiate with Amazon and B&N helps keep the terms of trade in check for everybody else as well. That executive likes having PRH there, with all its size and clout.

I had the conversation with the reporter that was the catalyst for this post on Wednesday morning and it was mostly drafted on Wednesday afternoon. Penguin Random House’s new consumer-centric web site was unveiled Thursday morning and underscores their support of the trade (they’re trying to push sales to retailers, not sell directly themselves). The site appears to give a page for every book they’ve got, which could well prove very useful as they build embellishments.

They refer the sales over to a robust choice of retailers for all formats. One thing I noticed was that a particular ebook I looked for — Napoleon, A Life by Andrew Roberts — is $45 in cloth, $20 in paperback, and the ebook is listed at $29.99! Running through the list of retailers to which PRH links directly, we can see that Amazon and Google Play discount the book down to an identical approximately 14.4% off $25.65 (with Amazon touting the massive saving over the hardcover price!) but the others listed — Apple, B&N Nook, Books-a-Million, and Kobo — offer it at the $29.99 list price. Close observers of the changing state of agency pricing will be watching whether the pricing or the discounting profile changes when PRH concludes that next round of negotiations.

And, incidentally, this also jibes with something we were told very recently by an ex-Nook employee, who said that the DoJ and Judge Cote effectively stopped B&N’s ability to compete with Amazon in its tracks when they opened up discounting of agency. Not only did they strip out margin that B&N desperately needed to compete, competing then effectively required price-monitoring capability to keep up with Amazon that was beyond their capabilities. Google has no problem doing that and maybe nobody else can keep up, but it would take looking at a lot more than one title to prove that.


The Digital Book World program this year covers the waterfront of the digital transition for book publishing

(This is a longer-than-usual Shatzkin Files post reviewing the topics and speakers for the 26 breakout sessions at DBW 2015. It serves as a checklist of “things to think about right now” for book publishers living through the experience of digital change. The entire program is here. We decided not to link to each and every speaker.)

The main stage speakers get most of the promotional attention leading up to Digital Book World. That’s just good marketing because there are many important names. Some have written big books (in addition to many other things they’ve done) like Ken Auletta, Seth Godin, and Walter Isaacson. We have a number of CEOs on the main stage as well, including Brian Murray of HarperCollins, who has just been named PW’s “Person of the Year”.

But half of Digital Book World is the six breakout session slots, at which attendees select from several choices. I take some pride in saying that we’re requiring some of the toughest decisions our attendees will have to make in 2015 very early in the year when they decide for each slot which session to attend and which ones they have to skip.

What we tried to do was to schedule things so that our “tracks” — two or more sessions on marketing, data, global, transformation, kids/education, technology, and new business models — are set up to allow people to attend all the sessions in that track. But there is overlap, of course.

“Marketing” is definitely the marquee subject for DBW 2015. We have seven sessions under that heading. On the first day we have a conversation about the skill sets required for marketing today, chaired by my Logical Marketing partner Pete McCarthy and featuring Jeff Dodes of Macmillan, Angela Tribelli of HarperCollins, Rick Joyce of Perseus, and Hannah Harlow of Houghton Mifflin Harcourt. Since two of the panelists are recent imports from outside publishing, presumably hired precisely because they had skill sets that publishing training wouldn’t have produced, this group is bound to help all publishing marketers identify what they need to bring on board.

That will be followed by a session on Smarter Video Marketing, which will be chaired by Intelligent Television founder Peter Kaufman, leading a discussion among video marketers Scott Mebus of Fast Company, Sue Fleming of Simon & Schuster,  Heidi Vincent of National Geographic Books, and John Clinton of Penguin Random House. In a world where authors are making their own videos and YouTube is the second leading search engine, this is a topic that suddenly needs to be on everybody’s radar.

The third marketing track session on Day One is on mobile marketing. Since tracking data is now showing that people now do more searching on mobile devices than on PCs, making sure books are optimized for mobile discovery has rapidly become essential. Thad McIlroy, a consultant with a long history in publishing, did a report on mobile for Digital Book World and will present some of his findings to kick off the session. Then he will lead a discussion including Nathan Maharaj of Kobo, Kristin Fassler of Penguin Random House, and CJ Alvarado of Snippet, a reading app that has been specializing in creating mobile reading experiences for branded authors/musicians /personalities, to detail how publishers and retailers are responding to this new reality.

Also related to marketing and also running on Monday, we’ve set up a break-out session for Joe Pulizzi, head of the Content Marketing Institute, who will have done a presentation on the main stage. Content marketing is something publishers need to learn from. Certainly all the techniques that are employed by non-publishers to market themselves with content created for a marketing purpose should be employed by publishers who have tons of content available for marketing. Pulizzi knows all the tricks and will have talked about many of them from the main stage. The breakout session will give attendees that want to learn more, and ask questions, an opportunity to do that.

The marketing track continues on DBW’s second day. One session, being moderated by my Idea Logical colleague, Jess Johns, will examine case studies of successful marketing campaigns. We’re featuring representatives from two of the platforms publishers can work with for marketing: Ashleigh Gardner of content platform Wattpad and Alex White from marketing data aggregator Next Big Book. They’ll each be joined by a publisher who has worked with them (about to be announced). Wattpad and Next Big Book, along with their publisher partner, will walk through what they’ve done in marketing that would have been impossible to imagine a couple of years ago.

Also on Day 2, we’ll be examining the new world of digital paid media. This has been a big challenge for publishers. Digital media is apparently cheap; you can do marketing that matters for hundreds of dollars in “media” cost, it doesn’t require thousands. But there’s also a lot of work and management involved to using digital media right. We were glad to get digital marketers from three leading publishers, Alyson Forbes from Hachette, Caitlin Friedman from Scholastic and Christine Hung from Penguin Random House as well as Tom Thompson from Verso Advertising. This session will be moderated by Heather Myers of Spark No. 9.

A marketing topic that has become top-of-mind for many publishing marketers is “price promotion”. A business has been built around it for the ebook business called BookBub, and its founder and CEO Josh Schanker will be on our panel discussing it. He’ll be joined by Matthew Cavnar of Vook, Rachel Chou of Open Road, and Nathan Maharaj of Kobo. We went for three retailers and service providers here because publisher experience with price promotion is still pretty limited, although the ebook pioneers at Open Road are an exception. Laura Hazard Owen of GigaOm will moderate this session.

Our data conversation begins on the main stage on the second morning of DBW with data scientist Hilary Mason, the CEO and Founder of Fast Forward labs. She started looking at Big Data at, the link-shortening and -tracking service. Mason is going to look at data across a content set that is the only one more granular than books: the content on the web. Her presentation will help us all understand how to interpret audiences for very small portions of the available content. Because we expect her presentation, like Pulizzi’s on Day One, to generate lots of questions, we also gave her a breakout session to facilitate questions and further explanations. DBW sponsor LibreDigital, which has a new offering to help their client publishers turn data into business intelligence, will help Hilary manage the Q&A.

Our panel on “Authors Facing the Industry” will be prefaced by two presentations.. Judith Curr, president and publisher of Simon & Schuster’s Atria Publishing Group, will have done a main stage presentation on the choice “self-publish or be published” that authors face. Then the breakout session will begin with a short presentation from Queens College Professor Dana Beth Weinberg of DBW’s annual “author survey”, giving a data-grounded underpinning to the panel discussion that will follow. Bianca D’Arc, an extremely successful writer of paranormal sci-fi and fantasy romance (and a former chemist), will be joined by two non-fiction writers for this conversation. Both David Vinjamuri, a marketing professor, and Rick Chapman, a computer programmer, have marketed their books themselves because they make more money doing it that way to their highly-targeted audiences. The panel will be moderated by Jane Friedman, one of the industry’s thought leaders about self-publishing.

The data we’ve never had before that is just beginning to be appreciated is the subject of our “How People Read” panel. It has become obvious that the platform owners know more about how consumers “behave in the wild” around reading than publishers do. Multiple device use, response to free samples, whether people read more than one book at a time, and how fast they read various books are all clear to those who serve up the ebooks, as well as differences in behavior that are geographically based, including uptake of English-language ebook reading. In a panel which will be moderated by Chris Kennealley of Copyright Clearance Center, Micah Bowers of Bluefire, Michael Tamblyn of Kobo, Jared Friedman of Scribd, and David Burleigh of Overdrive will share data insights their companies have gained by seeing many consumers of many genres in many contexts. Evan Schnittman, who had senior executive positions with Oxford and Bloomsbury and most recently with Hachette, will be moderating.

Of course, that last session is not just about “data”, it is also about “global”, which is another track at DBW 2015 with two sessions on Day Two.

The first of these, moderated by BISG Executive Director Len Vlahos, is on “Global Publishing Tactics”, designed to help publishers know what to do to sell outside their home territory. Speakers from three companies that provide global ebook distribution — Gareth Cuddy of ePub Direct, Marcus Woodburn of Ingram, and Amanda Edmonds of Google — will talk about what it takes to make your ebooks discoverable and get them purchased outside your home market. All of these entities distribute to just about every market in the world on behalf of a wide variety of publishers large and small. They see what works in metadata, pricing, and marketing, and they know what doesn’t. They are in a unique position to help publishers hoping to expand their global sales know what it will take to do that.

Our other dedicated global track session is the “Global Market Spotlight”, which will help our US- and English-centric audience understand the opportunities in four of the biggest emerging digital markets. It will feature local experts Carlo Carrenho from Brazil, Thomas Minkus of the Frankfurt Book Fair speaking about Germany, Marcello Vena from Italy, and Simon Dunlop of Bookmate, the ebook subscription service from Russia. Following a general introduction about how to look at new markets from Gareth Cuddy of ePub Direct, each of them will talk about how both online and ebooks are taking hold in their market, what local competitors are doing (and there is a very interesting ebook competitor coming from Germany), and what the prospects are for English-language sales in their market. This session will give very directed advice to publishers trying to get sales in four of the most promising new digital territories in the world.

Education is a subject on the agenda for trade publishers because how their books will get to students is undergoing dramatic change they’ll need to understand.

College textbook publishing has been remade in the past decade. In a panel moderated by veteran industry executive Joe Esposito, we will have the four giants of college textbook publishing talk about what that has meant in each of their shops. Simon Allen of Macmillan, Ken Brooks of McGraw-Hill, Clancy Marshall of Pearson, and Paul Labay of Wiley will discuss how their businesses have changed over the past few years, and why. Each of the biggest college publishers has changed their organizational structure, their workflows, and even their products themselves in the past decade, sometimes responding to and sometimes anticipating the changes taking place in the market. All of them have essentially switched from selling textbooks to selling learning platforms. Publishers that sell content into the college market will want to understand the new platforms these players have created and how outside content will now make its way to this market.

The school market is also undergoing extreme change. Partly spurred by the new Common Core standards but also by the fact that digital devices are increasingly integrated into the lives of today’s youth, the classroom experience is being changed dramatically. Neal Goff, who has had senior executive positions in several companies, most recently My Weekly Reader, and who is currently consulting with Highlights, will moderate the discussion about the changing K-12 environment. Three companies with very different perspectives on the market will participate. Chris Palma of Google will describe the operating system that works on the district, building, and classroom level that Google is making available free to school systems, achieving remarkable penetration very quickly. Of course, Google also provides hardware (Chromebooks) and content (through Google Play). Neil Jaffe is the CEO of Booksource, which has been providing print and digital content to schools for many years and sees a continuing need to provide both in the future. And Erica Lazzaro speaks for Overdrive, the company that has dominated the ebook library lending business and is making its way in the school market through its penetration of school libraries. They each have a unique view of how this market is changing. Publishers who sell books read by K-12 students will find this session invaluable.

It is becoming increasingly understood that “gamification” is a way to engage a lot of people who might choose non-reading content, particularly potential readers among the young. Our panel on this subject includes two publishers that are using gamifying to create more engaged “readers”. Keith Fretz will speak for Scholastic, which has made this work more than once already, most notably with “39 Clues”. He is being joined by Greg Ferguson of Full Fathom Five, a collaboration created by James Frey among HarperCollins, Fox, and Google’s Niantic Labs. Another way to employ gamification to engage younger readers is being employed by panelist Thomas Leliveld of Blloon, a subscription ebook service that uses “virtual money” both to reward its users and for them to use to pay for what they read. Also on the panel will be Sara Ittelson, Director of Business Development at Knewton, an adaptive learning company that has developed a platform to personalize educational content and which has lots of data showing how students engage with educational content across ages. This session is moderated by publishing attorney Dev Chatillon.

You could call it “education” or you could call it “tech” (another one of our tracks), but either way DBW attendees will learn about some important new propositions on our Publishers Launchpad session on ed-tech. Our Launchpad sessions are moderated by Robin Warner, a tech investor through her role as Managing Director of Dasilva & Phillips. Launchpad seeks to feature companies that many won’t yet have heard about, but we think they should. Johnjoe Farragher, CEO and Founder of Defined Learning has a new approach to mapping skills to curriculum for the K-12 market. Neal Shenoy, CEO of Speakaboos, will explain his subscription platform for digital picture books which is pedagogically designed to promote education. And Jason Singer, CEO of Curriculet, will explain how his company provides a rental model combined with enabling teachers to annotate and structure the student experience. All of these companies effectively become “gatekeepers” for trade content in schools, making their models very important for publishers who want their books delivered to K-12 students to understand.

The other Launchpad session, also moderated by Robin Warner, is more clearly “tech”-centric. Kevin Franco, the CEO of Enthrill, will talk about how his company “makes ebooks physical” by the use of cards with codes, which is now being trialed in Wal-mart in Canada. Peter Hudson of BitLit enables publishers to provide a free or discounted ebook to people who own a print copy and, along the way, has also developed a really nifty technology that will identify the books on anybody’s shelf from a picture (which they call a “shelfie”). Andrew Dorward of BookGenie451, will explain how his company uses semantic search to make books more discoverable. Beni Rachmanov of DBW sponsor iShook, which has a social ebook reading platform for readers, authors, and publishers, will also present at this session.

Following the Launchpad session, we have our techiest session, moderated by my personal “go-to” guy for understanding tech development in book publishing, Bill Kasdorf, Vice-President at Apex Content Solutions. Bill’s panel’s topic is what might be thought of publishing tech’s “magic bullet”: HTML 5, a format that enables the nirvana of “write-once, use-many-ways” content creation. With the need to manage both print and digital formats and with digital now being rendered on what seems like an infinite variety of screens, the need for publishers to make use of this technology has never been greater. The panelists will include Bill McCoy, head of the International Digital Publishing Forum, and publisher practitioners Phil Madans and Dave Cramer of Hachette Book Group USA, Paul Belfanti of Pearson, and Sanders Kleinfeld of O’Reilly.

Because DBW is relentlessly “practical”, we don’t program much that is far from the current commercial mainstream. An exception this year is our “Blue Sky in the eBook World” panel, which will feature three perspectives that are clearly pushing the envelope beyond where we are today. Chris Kubica and Ashley Gordon have been convening a lot of industry thinkers around the invention of a new kind of bookstore, the publishers’ “dream” to compete with Amazon. They’ll be describing what they and their co-brainstormers have come up with. Peter Meyers, until recently at Citia, is author of “Breaking the Page” and the industry’s leading thinker about how straight-text ebooks can be improved. He’ll put forth his thoughts on that. Paul Cameron is the CEO of Booktracks, a company which puts sound tracks to ebooks and has evidence that the music along with the text improves recall and comprehension. All of these propositions are not (yet) commercially employed, but for DBW attendees who might be looking for the big things AFTER the next big thing, this is the session that will talk about those possibilities. This session is moderated by Professor John B. Thompson, author of “Books in the Digital Age” and “Merchants of Culture”.

Although what the educational publishers are doing might also qualify, we have a track dedicated to “transformation” that has three distinct groups of panelists, each demonstrating how radical change can occur in different ways.

The session on “building the trade publisher of the future” focuses on companies that are remaking themselves from what they were before. Carolyn Pittis, now Managing Director of Welman Digital and formerly on the cutting edge of change management with HarperCollins for over two decades, will moderate. We are proud to be the first industry event to host Daniel Houghton, the new CEO of Lonely Planet, a several-decades old travel book publisher, founded as an upstart, and now rethinking its publishing role in a very challenging travel book market. Lucas Wittman is at ReganArts, Judith Regan’s start-up venture which has an entirely different literary character than the art book publisher she’s working within, Phaidon. Andrea Fleck-Nisbet of Workman is in a company that has just reorganized to be better positioned for change. And Sara Domville, President of F+W (owners of Digital Book World), will describe the experience of turning a “book and magazine publisher” into a “content and commerce company” with a diminishing footprint in print and a growing dependence on ecommerce.

We aren’t neglecting publishing start-ups that are really entirely new propositions as well. Lorraine Shanley of Market Partners will moderate a session bringing together a few of them. Liz Pelletier is the publisher of Entangled, a publisher with new economics that rewards the service providers that support authors as partners in the projects they work on. Georgia McBride is the proprietor of Georgia McBride Media Group, a lean publishing start-up that is developing its properties for multiple media, not just books, taking advantage of her background in music and Hollywood. Jason Pinter of Polis Books is a bestselling thriller writer and has worked for a number of publishers (St. Martin’s, RH, Grove Atlantic, Warner Books) before he founded this digital-first genre book publisher with high author royalties (beginning at 40% of net) against advances. And Atria executive Peter Borland heads up an in-house start-up, Keywords Press, which seeks to leverage YouTube fame into bestsellers with the nurturing of an experienced publishing team.

But it isn’t just book publishers and entrepreneurs who are capitalizing on the digital transition. Former editor Jeremy Greenfield, now with The Street, will moderate a session of media companies using digital as an opportunity to change their business models. Sometimes ebooks are very important to this effort and sometimes not so much so. The speakers in this session are Mike Perlis, the President of Forbes, Lynda Hammes, the publisher of Foreign Affairs magazine, Jay Lauf, President and Publisher, Quartz (The Atlantic), and Kerry Dyer, Publisher and Chief Advertising Officer of U.S. News & World Report. The tactics being employed by these three media companies to take advantage of their content and their audiences are harbingers of what all non-book media will be thinking about and doing in the years to come. Publishers can find new collaborators in their ranks, or they’ll be facing these entities as new competitors.

The sessions in the track we call “transformation” are also really about “new business models”. But we have two sessions that are more strictly about publishers exploring new business models.

One of these is on “publishers selling direct”, something that made very little sense for any but the nichiest publishers before the digital era. Dominique Raccah, the founder and CEO of Sourcebooks, pointed out to me that I needed that session (she surely was right!) and will appear on it. She’ll be joined by Eve Bridge from F+W Media, Mary Cummings of Diversion, and Chantal Restivo-Alessi of HarperCollins, the biggest of the publishers to aggressively pursue the direct sales option. The panel will be moderated by industry consultant David Wilk.

Publishers are also exploring new business models with their attention to “verticals”, audience-centric marketing that sticks to a topic in ways that might ultimately allow selling things other than books. This is also a big subject for DBW’s owner, F+W Media, and Phil Sexton, who runs their Writer’s Digest community, will speak about it. Mary Ann Naples, SVP and Publisher at Rodale, Adrian Norman, VP Marketing and New Products at Simon & Schuster, and Eric Shanfelt, Senior VP, eMedia, of HarperCollins Christian Publishing, show us that both specialist and general trade publishers are investing in building these enduring audience connections. Ed Nowatka of Publishing Perspectives moderates this conversation.

There are two panels that will be among the best-attended of all, but which don’t fit comfortably under any of the track headings.

Probably the two most-discussed digital change issues in 2014 have been subscriptions for ebooks and Amazon. We’re pleased to have breakout sessions on each that should really shed some new light on topics that have already been the subject of much conversation.

The subscription conversation will be moderated by Ted Hill, who co-authored a White Paper on subscription for Book Industry Study Group early in 2014 which has looked increasingly prescient as the year has gone along. The session will begin with a brief presentation by Jonathan Stolper of Nielsen Bookscan, who will deliver data from Nielsen’s recent research into subscription sales. Hill will be joined by the two biggest players in ebook subscription, Matt Shatz of Oyster and Andrew Weinstein of Scribd, to describe how their companies have fared building this new model in 2014. He will also have two publishers with books in those services, Doug Stambaugh of Simon & Schuster and Steve Zacharius of Kensington, to talk about how it is going from the publishers’ point of view. As a bonus, Zacharius also has real sales experience with Amazon’s new subscription service, Kindle Unlimited. This will be most people’s first opportunity to get a wide-ranging view of how the subscription model is really working in the marketplace for the subscription services and the publishers themselves.

And, finally, we’ll have an Amazon conversation that is extremely timely against the backdrop of a year when contentious relationships between Amazon and their publisher-suppliers became a matter of public record. Our discussion is on the subject “Can Amazon Be Constrained? And Should They Be?” and it is moderated by Ken Auletta of The New Yorker, a journalist with several decades of experience tracking both media and tech. (Auletta will be appearing earlier that day on the main stage.) He will be talking with Barry Lynn, a scholar at the New America Foundation, who has recently proposed that Amazon be investigated for anti-trust; journalist Annie Lowrey of New York Magazine, who has expressed skepticism about whether the anti-trust rubric fits; and Amazon and indie author Barry Eisler, who has been a full-throated supporter of Amazon’s position against the major publishers. No conference has ever presented such a balanced and provocative conversation about Amazon before; we’re proud it is taking place on the DBW stage.

So there’s a lot to choose from at DBW 2015. We probably won’t settle all the questions around where book publishing is going in the future, but we’re certainly providing engaged conversation about the issues that matter most. And remember after you read this: the highest-profile speakers are mostly not mentioned. We’ll talk about them in a later post about what’s taking place on the main stage.

PS: The last Early Bird discount for Digital Book World expires on Monday, December 15. Save money by registering now!


Penguin Random House does its competitors a favor by walking away from subscription

I sometimes feel like I’m the only guy in town (NYC, but I’d include London too) contemplating out loud how Penguin Random House might use its position as by far the biggest commercial trade publisher to make life a bit more difficult for its competitors, which in the first instance means the Following Four: HarperCollins (which is much bigger than the other three), Simon & Schuster, Hachette, and Macmillan.

What I mean, of course, is that PRH could use its position to either improve its margins in relation to everybody else or to create proprietary distribution. Either way, it would expand its ability to make money on books, fueling further its ability to outbid rivals for attractive properties. That’s why, when I looked at the Amazon agreement with Hachette and Simon & Schuster and the story of those negotiations, I thought first about whether they would tempt PRH to push for a better deal with Amazon than its rivals got.

The two most “obvious” opportunities for them to me, one of which appears to be anything but obvious to the people running PRH, are to build PRH-only general bookstores inside other retailers using VMI (vendor-managed inventory) and to start a PRH-only subscription service. They’ve never commented so I could hear it on my suggestion of the former; they continue to make it abundantly clear that they don’t share my opinion about the latter.

A NY-based executive of PRH told me a year ago that I had the subscription thing all wrong. From PRH’s perspective, it is unwise to offer a service and pricing plan that seems designed to give substantial discounts to your very best customers: those who buy and read many books. This is not a crazy perspective. If PRH sells about half the commercial books, then, on average, they get half the sales from these heavy book readers. Why would they want to help them reduce their book spending?

Last week, Tom Weldon, the CEO of PRH in the UK, issued an emphatic dismissal of the subscription idea. Weldon was speaking with Bookseller editor Philip Jones at the British digital publishing event, Futurebook. And The Bookseller reported it.

Weldon said: “We have two problems with subscription. We are not convinced it is what readers want. ‘Eat everything you can’ isn’t a reader’s mindset. In music or film you might want 10,000 songs or films, but I don’t think you want 10,000 books.”

Weldon also said the company did not “understand the business model”, and who made money. But he acknowledged that subscription could work “in certain markets around the world in emerging economies where access to books and bookshops is extremely limited”.

Nobody has more respect for the intellect and professionalism throughout Penguin Random House than I do, and that certainly includes Tom Weldon, whom I had the opportunity to meet once over a business lunch. But in this case, and assuming (as I do) that Weldon is speaking for his colleagues as well as himself, they seem just about 100 percent wrong. (And, of course, it is obvious that there are people in the home office at Bertelsmann who also don’t agree with him, since they power the German ebook subscription service, Skoobe.)

Weldon is absolutely right that the consumer case for a reading subscription is not as powerful as it is for subscriptions to music or video. Particularly when comparing with music, the point that having access to many thousands of choices all the time is not nearly as valuable for books is totally correct.

But making the leap from that that “it is not what readers want” is a totally unproductive generalization. SOME readers want it, and Oyster, Scribd, and Amazon (as well as 24Symbols, Bookmate, and others) are signing them up. The Oyster and Scribd subscribers will have HarperCollins and Simon & Schuster books to choose from but none from PRH. It won’t take a data scientist to prove that PRH will lose market share among those readers to competitors.

Perhaps Oyster and Scribd will fail. Is PRH essentially predicting that? Is PRH counting on that? Are they assuming that’s what will happen? It would certainly seem from the combination of their non-participation and Weldon’s remarks that they are. (Of course, it is also possible that Harper and S&S also think the subscription services will fail, but they don’t mind getting some revenue for themselves and their authors in the meantime.)

But it is the second objection that is most mystifying. Weldon is saying he doesn’t get the business model, which reinforces the idea that he doesn’t believe in it and expects the big subscription services to fail. But that is not an explanation for why Random House wouldn’t do this themselves. By definition, if a publisher starts a subscription offering for its own books, it is not the same business model as a third party offering it. There is one fewer entity feeding at the same trough. Oyster has to make enough money for themselves and for the publishers and authors whose works they peddle. Random House would only have to make sure their authors were whole, or maybe a little better than whole, and they could keep the rest.

Cutting out the intermediary supply chain, there’s a lot of vig in there for PRH to be able to give consumers a reason to subscribe to a service that provides only PRH books without costing authors a penny.

The joker in the deck, of course, which Oyster and Scribd would only be too glad to point out, is the customer acquisition cost. But even if PRH didn’t want to recruit subscribers for such a service by promoting it on the books themselves — certainly the most efficient and direct way to reach their customers — out of concern for how it would be received by the retailers selling their books, it has all sorts of ways to get the word out about what should be a bargain for many of their readers. Penguin Random House has been building its database for direct customer contact for years. It can reach literally millions of readers virtually free, and in many cases would know the names of their favorite authors which is nice ammo for the subject line of an email to get it opened and read. And it also has millions of page views through author sites, both those PRH controls and those where an author could be recruited to help.

And unlike the other services. PRH wouldn’t have to maintain a whole apparatus to make deals to bring in the content; they’re already doing that! Presuming they could make the right white label deal to manage the subscription service, they wouldn’t really have a “critical mass” issue either. And instead of being on the outside looking in as the extant subscription services sign up readers they could only get access to by putting their books into somebody else’s proprietary platform, they’d be building their own unique distribution that nobody else would have.

And, frankly, a service offering all of Penguin Random House’s books, whether they put in the new ones or not, would deliver a selection at least comparable and perhaps superior to any existing subscription service.

Why they’d simply dismiss this idea is very hard to understand.

Reading tea leaves, I have gotten the impression that PRH is preparing a licensing program to make its content available for use in schools, another very disruptive thing they could do by themselves that could only be effective for their competitors in combination with each other somehow. Maybe my tea leaf reading is wrong; we’ll see if that comes down the pike in the coming months or not. Of course, this kind of subscription licensing is completely different, and they could well believe that the customers do want this and that the business model makes sense.

It has seemed to me for some time that all of the Big Five houses could peddle a subscription service for kids ebooks that would be a reliable generator of cash flow and customer acquisition as well. Many parents would love to be able to let their young kids take the iPad in hand and “buy” books, as long as they weren’t actually spending any money. The big houses all have extensive juvie publishing programs. Each one could offer a subscription service that would keep many kids amused for months. It could be a “totally cool” 6th (or 5th or 8th) birthday present. While it is true that there are others competing for the kids’ market, any of the Big Five could pull something like this together very inexpensively and, over time, build a customer base that would be both proprietary and lucrative.

With the number of ebook subscription services for consumers proliferating, surely the tech to try this out on a smaller scale is getting cheaper and more accessible. In fact, if Weldon is right, and the subscription business model is wrong, then maybe even Oyster or Scribd will want to build a service provision model into their next pivot. And if they succeed, imitators in many ways will follow.

Subscription is here as a tool to sell ebooks that any publisher totally ignores at its peril. And whether it ultimately becomes a significant channel for general trade ebooks or not, it will be tried in many forms and many ebooks will be moved that way in the years to come.

We have a great panel discussion on subscriptions at Digital Book World, Jan 14-15, 2015. It will be moderated by Ted Hill, who co-authored a BISG study on subscriptions earlier in 2014 that is looking increasingly prescient. Ted will have both Oyster and Scribd on the panel along with two publishers providing them with books, Simon & Schuster and Kensington. Kensington, being a non-agency publisher with no choice in the matter, is also a provider to Amazon’s Kindle Unlimited. The discussion will be prefaced by a quick presentation from Nielsen’s Jonathan Stolper around what Bookscan has learned about the reading patterns in subscription services. This should be a very informative discussion.


Amazon and Hachette have settled so there will be no big bang change in the publishing business model

It looks like Big Publishing will maintain its grip, which the most zealous of the indie author militia refer to as a “cartel”, on major authors and big books for another several years. What looked from the outside (where we all are if we’re not involved in the negotiations) to have been an attempt by Amazon to largely reset the terms of trade between publishers and the world’s dominant book retailer appears to have been postponed for a few years.

We don’t know — or certainly I don’t know — precisely what Amazon wanted from Hachette in the negotiations that became a public spat last Spring. All we know is that whatever they asked for (or demanded) was sufficiently onerous to make Hachette take an enormous amount of pain to resist it. The standoff held for six months.

The standoff wasn’t pain-free for Amazon either, although it certainly didn’t have nearly an equivalent commercial impact. Amazon could have expected when the dispute started that Hachette authors would pressure their publisher to settle. They could also have expected public attention to focus on Amazon “fighting for lower prices”. Neither of these things happened and, in fact, Amazon was demonized for their tactics by some pretty high-profile writers. And, although it was almost certainly unrelated to the impact of the Hachette fight, Amazon themselves had some tough financial reporting to weather during this period.

In any case, there was no way Amazon could use the same set of tactics they used on Hachette with another publisher at the same time, and it would appear they didn’t try. Simon & Schuster and Amazon came to a deal last month which both sides suggest they’re pleased with. When that deal was announced, it seemed likely to me that anything S&S would accept, Hachette probably would too (and would have at any point). With the announcement yesterday that Hachette and Amazon have now come to terms, and with the wording of the deal announcement being so similar (but not precisely the same) to what was said when the S&S deal was announced, it would appear that surmise has been justified.

Where the announcements diverge is that it was suggested that S&S has ceded Amazon some limited rights to “discount” from the publisher-set pricing but that suggestion was absent from the Hachette announcement. The more limited the discounting allowed, of course, the more the new arrangement constitutes “agency as it was intended to be”. But forbidding discounting is a double-edged sword. It “protects” print-in-bookstores from price competition from ebooks, but it also potentially disadvantages those price-protected books in the ebook market against other ebooks.

(Of course, an agency publisher can lower prices themselves, but if they do it that way, they reduce their share and the retailer’s share proportionately. If they “allow” discounting, the retailer does it entirely out of their part of the sale price.)

I would now expect that Macmillan, which is about the same size as Hachette and Simon & Schuster, will be offered and will accept a similar deal and probably so will HarperCollins, although they are more than twice the size of these others. How each of these houses will view “strict” agency versus “looser” agency is an open question.

But Penguin Random House is in a different position. Now that it has been demonstrated that Amazon’s most muscular tactics didn’t bring Hachette to heel, why wouldn’t PRH, which is several times the size of Hachette, look for a contract that gives them some real separation from the rest of the pack either in terms of their margins or to get more aggressive with discounting through publishers’ biggest account? Let’s remember that Random House originally outflanked the others tactically in 2010 by sticking with wholesale when everybody else went to agency, putting their ebooks in a price-advantaged position and scoring millions in extra sales as a result.

The overall direction of the book market continues to tilt toward Amazon. Although the dual shifts to ebooks from print and to purchasing of print online rather than in bookstores have slowed down sharply in the past couple of years, the chances are those trends have not yet run their course. It is not a guarantee that those shifts will continue to grow Amazon’s market share but they certainly favor them. It would seem somewhat more likely that Kindle will suffer some competitive erosion as multi-function devices gain more of the ebook share than the online bookstore will, but the chances are that both will continue to grow their share. And, at the same time, the self-published share of the market will continue to grow, mostly to Amazon’s advantage, and so will the impact of other Amazon initiatives including their lending library and subscription service.

The reset ambitions that might have been somewhat premature in 2014 may be achievable in 2018.

But a lot can happen between now and then. Four years is a long time. Four years ago, Random House was still gaming the agency system and Nook was gaining market share by leaps and bounds. Four years before that, there was really no ebook business at all.

Assuming that Macmillan and HarperCollins make a deal similar to what Hachette and S&S have done, the big publishers have little to fear from their biggest trading partner for the next few years. But how they’ll cope with their biggest competitor, particularly if PRH gains either additional margin or greater flexibility around discounting compared to the others, might move to the top of their list of concerns.


Are Amazon exclusives the next big challenge for everybody else in publishing?

Somebody smarter (or more patient about wading through data) than I am could probably figure out how far along this bifurcation is already, but Amazon is doing its very best to build a body of content that is desirable and available from nobody else but them.

This is something you can do when you’re in the neighborhood of 70 percent of ebook sales and already more than half the total sales for many works of fiction, which is where the self-publishing world is strongest. It is not an opportunity that is really available to any other retailer. Apple has given it a try for more complex ebooks for which they provide ebook-building tools and, presumably, offer the most productive distribution environment for complex content. But they’re playing on much less fertile ground and they don’t have anything like the audience share necessary to drive this strategy very far.

It is hard, if not impossible, to imagine that any other ebook ecosystem could offer benefits that would make it worth skipping Amazon.

Two recent developments call attention to this situation.

David Streitfeld in the New York Times reports that Amazon has held a private by-invitation-only conclave for writers the past four years. I knew about this before because I’m a subscriber to Publishers Lunch and they reported on it about three years ago. (I like to say about my conference business partner Michael Cader, proprietor of Publishers Lunch, that you go to him for the facts and you can come to me for opinions.)

It is a smart and sensible thing for Amazon to do. Amazon has been demonstratively aware of the ability of writers to promote their own books to their audiences but also to promote Kindle Direct Publishing among their peers. Bringing authors in for a private chat to exchange ideas is not only flattering to those invited (a benefit to Amazon in and of itself), it almost certainly also informs them about how to be more successful courting authors in the future. This shouldn’t be viewed pejoratively, although Streitfeld’s piece and a companion blog post seem to position it that way.

The other is Hugh Howey’s very public rumination about whether to go exclusive with Amazon or not, in which Howey wonders out loud whether he should stay exclusive with Amazon beyond a 90-day trial period based on his calculation that his audience (perhaps counterintuitively) goes up while his revenue takes a small hit. I’ve had an off-line exchange with Hugh in which he emphasizes what his post says: he really can’t decide which way to go on this.

(It is worth noting, as Hugh does, that when he makes these decisions, they are only commitments for 90 days at a time. Of course, each time he switches he creates work for himself, either putting up the titles in other venues or taking them down. But he can get the benefits of Amazon exclusivity in 90-day chunks with no commitments beyond the 90 days and go in and out as many times as he likes. Hugh makes what I think is an unhelpful and invalid comparison to the life-of-copyright deals publishers ask for in return for advances against royalties and inventory investments that Amazon and other retailers do not make for self-published authors, but he’s right that it is much easier to make a decision when you only have to live with it for three months.)

His open thought process became the subject of a post by Chris Meadows on Teleread. One thing on Hugh’s mind was whether he needed to help keep alternatives to Amazon viable by contributing his content to their mix. Meadows says “that’s not your problem” and I agree with that. Each writer should be making the publishing decisions that are best for their personal brand and career. The first decision — if a publisher offers them a choice — is whether to take an advance and a deal or whether to self-publish. If they self-publish, they have to decide whether to be exclusively Amazon or go for the widest possible distribution.

The reflexive, intuitive choice is to get the most distribution possible. There are certainly readers who shop exclusively in non-Amazon retail environments. There could even be a growing number of those in light of the recent publicity around the Hachette dispute and the negativity directed at Amazon by Authors United. There are certainly people who make a point to avoid shopping at Amazon or buy from them as little as possible. (I’m even related to some of those people.)

But with Amazon’s enormous market share, their ability to promote both through normal commerce and special exposure like their subscription service Kindle Unlimited, and their willingness to put a thumb on the financial scales (KDP Select authors get higher royalties; they pay bonuses to top sellers and top titles being seen in KU), they can make up for whatever might be lost by eschewing other channels of distribution.

The idea that having content that is not available elsewhere can strengthen a retail offering is not the exclusive province of Amazon. It was a core component of the strategy originally announced by upstart retailer Zola Books.

Amazon has not yet ever suggested that “content only available here” was any important part of their customer-marketing strategy. (Update: I’ve been corrected on this. In fact, they do promote the exclusive content, both in press releases and in their Kindle Unlimited promotion online. They tout “over 500,000 digital titles you won’t find anywhere else”.) The exclusive-or-not conversation has been mostly (should be: largely) confined to their dialogue with authors. In fact, the rest of the publishing world has nudged them in that direction by being resistant to stocking books from Amazon Publishing. If at one time the author recruitment team at Amazon might have hoped to deliver ubiquitous distribution for their books, the path to bookstores was effectively blocked by their brick-and-mortar competitors’ lack of willingness to support their program.

The self-publishing revolution, despite the enthusiasm of its strongest advocates (which definitely include Hugh Howey), has only made small inroads among authors who have the option of a substantial advance from a traditional publisher. For that reason, the pool of authors exclusive to Amazon contains very few that could change a book consumer’s shop-of-choice (except perhaps one time for a particular book they wanted to get).

But if a big earner like Hugh Howey thinks he might be better off accepting Amazon’s standard terms for exclusivity, that’s a dangerous sign for everybody else in the book ecosystem. A traditional publisher still offers brick-and-mortar visibility and revenue that Amazon and any self-publishing effort will not. The transfer of market share from stores to online and from print to digital hasn’t ended. Every point of market share that shifts strengthens Amazon’s proposition for exclusivity and increases the likelihood that a high-visibility author will make the self-publishing leap. The combination of the two — highly branded authors and Amazon exclusivity — is among the most unwelcome inevitabilities the rest of the industry will probably face in the years, if not months, to come.

What is already the case is that Amazon is piling up a repository of content that nobody else has. When that hits a tipping point that starts influencing substantial numbers of consumers is another shoe waiting to drop.

Programming at Digital Book World that is highly relevant to this post will be a presentation by Judith Curr, president of the Atria division of S&S, on the math of the author’s decision whether to go with a publisher or publish on their own. Curr’s division works hard to recruit new authors and, in fact, Peter K. Borland, who heads up Atria’s Keywords Press partnership with UTA to publish books from highly successful “digital influencers” (people with big YouTube audiences, for example), is a participant on a panel of “new publishers” who are making their mark. The other participants on that panel — Entangled and Georgia McBride Media — don’t have Big Five roots.

As we were about to post, a rumor hit the Net of a new Amazon program to recruit more self-published authors. The idea is that submissions of manuscript and cover are given a crowd-sourced review; then the highest-ranked are “considered” for a new kind of Amazon publishing contract. This doesn’t seem to have been “officially” announced, but a conversation with an Amazon person is reported and the source, The Digital Reader, is normally reliable. This initiative would be further evidence that Amazon is using its platform to control the distribution of more and more of what authors generate.


Subscriptions are in the news this week

Subscriptions for ebooks are certainly in the news this week. Amazon just announced their Kindle Unlimited offering, taking its place beside Oyster and Scribd as a “one price for all you can eat” Netflix- or Spotify-for-ebooks program. And the Book Industry Study Group has released a lengthy and fact-filled report from Ted Hill and Kate Lara covering subscriptions across publishing segments.

It is hard to quarrel with the report’s contention that “subscriptions are here to stay”. The report makes clear, and documents extensively, that there are a great variety of ways subscriptions can be offered and that tools making it easier to manage them are becoming cheaper, better, and more ubiquitous. The report suggests that subscriptions could occur for as narrow an offering as one author’s works. As technology enables subscription offers to be economically viable with less and less revenue, the tendency for more and more publishers to want to “own” their customers, combined with the tendency for publishers to build up their intellectual property inventory in an audience-centric (vertical) way, either organically or by acquisition, it is easy to see how they could proliferate.

When I have expressed skepticism in the past about the commercial viability — or commercial importance — of subscription services, my intention was (is) to confine my skepticism to broad-based services like KU, Oyster, and Scribd. In other segments, the viability of the model is obvious. Safari has operated successfully for a decade-and-a-half. Journal publishers figured out in the 1990s that selling annual access to the whole catalog of their publications, including backlist, was an opportunity presented by digital delivery because of the value of being able to search across the catalog. The science-fiction publisher Baen has had an apparently successful subscription offering for years. And patron-driven acquisition, which the BISG report calls a form of subscription (loose defining, to be sure), allows a publisher’s whole catalog to be exposed to a library’s patron base with purchase decisions to follow (rather than patrons only being able to see what a library had already bought) just makes sense for everybody.

But the consumer ebook business is a different animal and it is far from obvious (to me) that a model can be constructed that will satisfy all the stakeholders and provide profits for the model owner. But the pieces are certainly in place for us to find out.

It is clear from the catalogs presented by KU, Oyster, and Scribd that the jury on subscriptions is still out because big publishers are still reluctant to participate. No Big Five house has put books into Kindle Unlimited. Only HarperCollins and Simon & Schuster are (as yet) participating with Oyster and Scribd. Penguin Random House, Macmillan, and Hachette have — so far — held out. What those houses do in the next few months will tell us a lot about how likely the concept of the broad-based ebook subscription is to succeed in the future.

The BISG report surmises, and I agree, that only PRH could possibly deliver a general subscription offer on their own. I “predicted” some time ago that they would. A top Random House strategist tried to set me straight on that some months ago. This person asked the rhetorical question: “why would we want to turn $1000 a year book customers into $100 a year book customers?” Last week, an even more senior executive, recalling that s/he had read this speculation from me told me directly and assertively, “we aren’t going to do that.” (Random House executive Madeline McIntosh is quoted in the Hill-Lara report issued by BISG saying “Many people who are buying our books today are spending more than they would with a subscription.  If that amount starts to dip, then subscription services will become more interesting to us.”)

These people are straight shooters. I believe them when they describe their current intentions. But what if Scribd and Oyster and KU build big subscriber bases? And what if those subscriber bases tend to buy fewer books outside the subscription offering? It is in a publisher’s DNA to push books into any channel that will take them. They have resisted the subscription offers so far because they don’t want to empower an aggregating intermediary the way Amazon is now empowered (which is why KU has the hardest time pulling big publisher books into its aggregation) to beat them down on terms. This is good forward thinking if staying out stops the subscription services from reaching viability. But what if it doesn’t? How long can publishers refuse to participate in revenue opportunities for their books and authors?

The offers (as we understand them) by Scribd and Oyster, and in other ways by Amazon, have been very generous. Scribd and Oyster are apparently paying 80% of the cover price (to the big agency publishers; others don’t get that deal) once a book is deemed “bought”, which requires a threshold amount of the book — often suggested to be 10% for the Big Houses, which is where Amazon put the bar for Kindle Direct Publishing authors within Kindle Unlimited — has been perused by the subscriber. (Not everybody gets that deal either.) 

Amazon presumes the right to include books in Kindle Unlimited from its wholesale trading partners (everybody but the Big Five), but it considers the ebook “sold” when it is cracked, a far more generous interpretation of when a book has been consumed. (Nor is that deal for everybody. For authors and pubs participating in KU via KDP Select, the threshold for a “sale” is 10% like Oyster. Then they are compensated from the “KDP Select Global Fund”.) The introduction of KU and the various terms around it have been met by initial grumbling in Amazon’s indie author community, according to both Publishers Lunch and Hugh Howey.

Agents will be seeing what the subscription revenues mean to their clients. It will be harder for them to get a handle on whether those subscription services are cannibalizing regular per-copy sales, but they will have ample information from which to form opinions about that as well.

Part of what holds back the big publishers from participation in subscriptions is a fear that agents share. Today Scribd and Oyster offer 80 percent of cover price, and Amazon pays the minute an ebook is opened, because that’s what they have to do to get books in their service. And the books in the service are what bring in the subscribers.

But if one of these services has a million members three years from now, each individual book won’t be quite as important anymore. Just as Amazon can get along without maximizing their sales of Hachette books today, the subscription owners will see a different, and lower, value for each book and each publisher then. Amazon gambles today that the customers of theirs who don’t find the Hachette book they’re looking for will often just buy something else rather than go shop somewhere else. Their own subscription lock-in, PRIME, shifts the odds in their favor there.

Amazon will be in this game to stay. Offering Kindle Unlimited is relatively painless for them. They have the books and they have the audience; it is just another way to keep their customers loyal. The big questions for the industry are whether Oyster and Scribd succeed in taking a substantial number of single-purchase customers out of the market and, if they can, whether they have a sustainable model with the prices they charge customers and the way they compensate publishers.

If what they have works for them, then all publishers will eventually have to play. That will mean that HarperCollins and S&S will be joined by Hachette and Macmillan. And despite what their executives tell me today, I’d bet a steak dinner that Penguin Random House will see more opportunity and less risk in creating their own service than in joining one of the existing ones. In fact, a Penguin Random House “backlist only” subscription offer today would constitute the most robust commercial assortment in the marketplace if it existed.

It has seemed to me for a long time, and I said in a public forum over a year ago, that all the Big Five (and others) should immediately create a subscription service for kids’ books. Parents want their kids to be able to “shop” without actually delegating to them the decisions to spend money; many would love a service of this kind, even if it were publisher-specific. As the support services Hill and Lara describe get cheaper and better and better known, perhaps that will start to happen.

We will cover subscriptions at Digital Book World with a panel chaired by Ted Hill. Scribd and Oyster have already agreed to participate.