Tim Ferriss

Amazon as a threat to steal big titles from big publishers is still a ways off

When Larry Kirshbaum, the longtime head of TimeWarner Publishing (purchased right after he left in 2007 by Hachette and now the company called Hachette Book Group USA) joined Amazon many people thought — I among them — that Amazon was about to become a threat to take big titles away from the major publishers and, by doing so, also put pressure on competing retailers who would either have to buy from Amazon or do without major books.

An article last week in The Wall Street Journal spells out just how futile have been Amazon’s efforts so far to upend the Big Six. Their two biggest headline acquisitions — a celebrity bio from actress Penny Marshall and the latest from bestselling non-fiction writer Tim Ferriss — are achieving paltry sales outside Amazon as measured by BookScan.

Michael Cader does some deeper digging to suggest that the high-profile books are not the place to be looking for the successes in Amazon’s publishing. They’re publishing lots of genre fiction and buying up some backlists.

Yet, I can’t believe that the high-profile output from the New York office meets Amazon’s original expectations or Kirshbaum’s. If they miscalculated the impact they could make, maybe it was for the same reason I did. An abrupt slowdown in ebook switchover took hold at about the same moment the Kirshbaum era at Amazon began. Big publishers are reporting that ebook sales are now approaching 30% of their revenue, which is about a 50% increase from what they said last year. That follows several years when ebook uptake increased by 100% or more.

(It is important to note here that the reported figures are a percentage of all revenue. Many titles are not “ebookable”: they’re illustrated books or little kids’ books and, if they have ebook equivalents at all, they don’t sell nearly that percentage. So the digital sales of immersive reading would constitute a somewhat higher percentage than that.)

Amazon as a publisher has advantages and disadvantages against more traditional competitors. They have the advantages of direct customer contact, which pay off in two ways. They can send you an email pitching a book as the logical next one to the one you just read; general publishers can’t do that. And, as the publisher, they have more margin to either pay the author more or charge the customer less, which, either way, increases an author’s revenue through online channels.

But their disadvantages are also significant. For most books, and particularly non-fiction (as both of which the high-profile releases the Wall Street Journal wrote about are), more than half of the sales still come from brick-and-mortar stores. Despite their attempt to secure that exposure by a licensing deal with Houghton Harcourt, the resistance to Amazon from Barnes & Noble and many independent stores and mass merchants has curtailed that distribution.

Apparently Amazon led at least some people to believe with their success on the recent Barry Eisler book that they could sell more copies through their own channels than big publishers could through the entire network. The claim that they had outsold all his previous NY Times bestsellers was made to literary agents in a letter that also cited other great successes, all with genre fiction. Without questioning anybody’s numbers, I was skeptical about the significance of the relative Eisler sales because, it seemed to me, whatever they could do for Eisler (whom they published) they could do for any other book they wanted to, whether they published it or not. So it seems illogical to me that they would somehow magically sell more than the whole trade combined on a book because they were publishing it.  It seems apparent that Amazon isn’t succeeding at persuading agents that the Eisler case, even if it is as portrayed, is replicable.

I saw reports of bitter comments from Tim Ferriss, complaining about Barnes & Noble’s apparently-effective boycott of their competitor’s publishing program. Maybe he would be doing that even if Amazon is selling more than his conventional publishers did before. But I doubt it.

This is not a final answer. Amazon’s share of the trade market — ebooks and online print combined — is still growing and shows no sign of abating. Most publishers would still report that Amazon is their fastest-growing account.

But shelf space erosion — a metric with no reliable index anywhere — seems to have slowed down. That means that, at the moment, we have a more stable book trade than we’ve had for at least five years. It is smaller, but it is more stable. In the US at least, our market of three big ebook players (Amazon, B&N, Apple) and two sturdy and persistent upstarts (Kobo and Google) is still welcoming some new entrants. Zola eBooks, promising some interesting merchandising innovations, and Bookish — the repeatedly postponed effort from three major publishers — are expected to join the fray soon. Sony and Copia and Blio are still trying to gain traction, but they’re also still here.

Amazon definitely has the most advantages. Their Kindle ecosystem is still the best-functioning, deepest in title selection, and benefits in numerous ways from having more readers and selling more ebooks (and books, for that matter) than anybody else. The growth in their genre title base that Cader points out increases their market share of dedicated genre readers, who read other things too. They have the most self-published titles and the best ecosystem for self-published authors to make money. And the big title growth enables them to build subscription or subscription-like capabilities like KOLL (Kindle Owners Lending Library) which do take customers out of the game for everybody else.

As their share of the market grows — as long as it continues to grow — their argument to authors to cast their lot with them gets stronger.

But, for now, it would seem that B&N definitely did the right thing for their own good by boycotting Amazon’s titles. And, for now, it would seem that most of the authors Amazon will get for their general list will be those who are annoyed at the publishing establishment like Konrath and Eisler or curious about working with a tech-oriented publisher like Ferriss.

Authors who want bookstore exposure or to maximize their total sales across the US bookselling universe will remain hard to persuade for the forseeable future. But probably a little less so with each passing day.

I note with sadness the passing of Senator George McGovern. I am proud to have worked on all three of his presidential campaigns: 1968 at the Democratic National Convention working for Pierre Salinger, two years on the 1972 campaign, and a weekend in New Hampshire trying to light a fire in 1984.

What motivated us to join Senator McGovern was primarily his opposition to America’s involvement in Vietnam, but his personal and political appeal went far beyond that. He was extraordinarily decent and straightforward. In my stretch of two years working for him in the early 70s, it was remarkable how consistently he took issue positions we young idealists could be proud of. A poorly-vetted choice for vice-president will always be part of the explanation for why he was crushed, but my friend Professor Wade — one of McGovern’s top strategists — told me years ago that it was the assassination attempt that crippled George Wallace that actually was responsible for the defeat. 

Nixon had won the 1968 election with a little over 40% of the vote. Wallace had taken a share in the high teens. The McGovern planning from the beginning assumed a similar race in 1972. When Wallace was eliminated by the assassination attempt, Nixon’s “Southern Strategy” made him the heir to the Wallace vote and a landslide victory.

In the end, of course, it was Nixon’s vice-president, Spiro Agnew, who went to jail and his administration that ended in disgrace. McGovern was always gracious and never bitterBut, as a country, we’ve never spent enough time contemplating how different things could have been if Bobby Kennedy hadn’t been shot in 1968 or if McGovern had won in 1972.


The expected changes in the book business favor Amazon’s share growth

This post is the second that is contemplating two big questions facing the publishing industry:

When will the growth in Amazon’s share of the consumer book business stop?

Who will be left standing when it does?

Amazon applies pressure and generates angst among publishers from two directions. As they grow to be 30% or more of many publishers’ business, they are in a position to push to improve their margins at publishers’ expense. And they do, indeed, push.

At the same time, they are both offering authors attractive opportunities to self-publish and wielding a checkbook to build their own publishing program. Both threaten to constrict publishers’ access to the ultimate source of all their revenue, the output of authors looking for a path to readers. And even when Amazon doesn’t sign a book they go after, they could well be pushing up the price a publisher has to pay to get it.

This pincer maneuver is really unprecedented in its power, even though elements of it have existed before.

Joint ownership of publishing and book retailing is definitely not new; it has been a part of the industry for my entire 50 years in it. My first book publishing job was on the sales floor of Brentano’s Bookstore on 5th Avenue in 1962. My dad was a publisher. He was a vice-president of a company then called Crowell-Collier, which bought the first Macmillan in the early 1960s, eventually changed the corporate name to Macmillan, and was then purchased by Simon & Schuster in 1994. None of these entities have anything to do with the company now called Macmillan, which took its name from the British company the owning Holtzbrinck family had also acquired.

Anyhow, when Crowell-Collier bought Brentano’s, Leonard Shatzkin became the responsible corporate executive. He had gone to Crowell-Collier from Doubleday, which also owned bookstores. Across the street from Brentano’s was the Scribner Bookstore, owned by Charles Scribner’s Sons. They were the publishers of Hemingway and Fitzgerald, among others. (Scribners exists today as an imprint of Simon & Schuster.)

And, of course, it has only been about 10 years since book retailing giant Barnes & Noble expanded its proprietary publishing program by purchasing independent niche publisher Sterling. That doesn’t appear to have worked out particularly well for them; they are apparently having trouble selling Sterling today, even at a fraction of the price they paid for it.

And, in fact, Amazon’s publishing efforts haven’t been particularly disruptive to publishers so far. Their big “gets” to date are Tim Ferriss and Deepak Chopra, two big authors who are unusual because their pattern has been to write for different publishers rather than having a lengthy run at one particular house. The very biggest names, which would be fiction authors, have not yet been enticed to make the jump, although Jackie Collins created a stir last week with some self-publishing plans that don’t have entirely to do with Amazon. It has been nearly a year since Amazon signed former Time Warner Books head Larry Kirshbaum to lead their attempt to woo big trade authors. That was very concerning to the big houses but, so far, the sky has definitely not fallen.

Whether we will really see profound changes that justify the questions that head this series of pieces or whether this turns out to be a totally baseless bout of nervousness by the established players depends on what happens in the overall marketplace in the next few years.

The percentage of a publisher’s business that Amazon represents is largely channel-dependent. If ebook sales go up overall, then Amazon’s share will probably go up. If purchasing shifts from brick stores to online, then Amazon’s share will certainly go up. If print sales in brick stores hold their ground, then Amazon’s sales won’t rise.

I think you’d have to look hard to find a credible voice making the case that print sales in stores will hold their ground. To the extent there is a debate, it revolves around how fast those sales will decline.

AAP says we’ve seen double-digit declines of print sales in 2011 over what they were in 2010. They say print revenue was down 17.5% in adult hardcover and 15.6% in adult paperback.

Forrester’s survey of publishing executives finds few expecting such a big decline in the coming year, but then, few expected such a steep decline last year. Forrester’s own prediction is for sudden drops. I would agree that sales will tend to decline in “step-increments”, as players exit the game. Borders may be responsible for a lot of the loss we saw in 2011. There wouldn’t seem to be any shelf space loss that great on the immediate horizon, but we do see B&N reducing both the number of stores and the percentage of shelf space within them devoted to books and there are many predicting that books might lose their appeal to the mass merchants as well. They are fully capable of substituting other merchandise for books and making that switch very quickly whenever they decide it should happen.

My own expectation is that over the next five years we’ll see the share of sales that are ebooks more than double. (This should be seen as a startlingly conservative prediction, since that number has doubled annually for the past five years!) That would put ebook unit sales at about 65% for commercial immersive reading. (I’m grossing up the 20% of revenue number the big houses are reporting because ebooks produce less revenue than print hardcovers and because many titles in the print revenue base aren’t in the ebook revenue base.)

Of the remaining 35% allocated to print, I’d expect half of the sales, at least, to be online. If those numbers are right, then 17.5% of immersive book sales would be in brick stores.

If Amazon remains about 60% of ebook sales and 90% of print books sold online, that would put their share of immersive reading sales at about 50%. And were a book available in Kindle that people knew about and wanted to read and not available in other formats, Amazon could pick up a lot of the ebook sales they would otherwise miss. (Remember, anybody using a Nook or Kobo app as opposed to a Nook or Kobo device could just switch to the Kindle app to read that particular book.) All that is really hard for them to capture is the 17.5% allocated here for print sold in stores. And even the loss of that share wouldn’t be total, since, for any really big book, in-store buyers would buy online if they had to. So they’d be in a position to reach well more than 70%, perhaps even more than 80%, of the market for all books that are principally text. (And those are the books that lead the industry.)

Imagine what that will do for Kirshbaum’s ability to go get big authors. Today an author considering an Amazon publishing deal must figure that half or more of the market is unreachable through that arrangement. No matter how much money Amazon is willing to pay, no matter how much they increase the ebook royalty over the publishers’ offers (which they have ample margin to do), it is a pretty tough sell to get an author to write off more than half the marketplace, particularly the half most visible to the public.

In other words, overall trends are moving things increasingly in Amazon’s direction. Even if nothing changes in the deals offered or resources available to the competitors for author attention in the next five years, Amazon’s position will have grown considerably more powerful. And, in fact, Amazon’s share of publisher sales just about assures that any changes in deals and resources in the meantime will favor Amazon as well.

Of course, there is more to successful publishing than just signing up a book and managing an online audience. Editing and presentation count. A marketing plan that goes beyond just reaching online bookstore customers counts. Rights sales count. And pricing to maximize a particular title’s revenue, not a bookseller’s overall share and customer loyalty, also counts. None of these are things that Amazon’s experience naturally leads them to do. All of them require investment and development of infrastructure and team skills. Will Amazon invest in and perform these functions?

And the more books a publisher does, the more challenging it becomes to manage all these things. Title growth might also challenge Amazon’s marketing resources, such as they are. There are only so many slots on the home page for a category of books to use to feature your own titles. (And there’s a risk of alienating your customers if they think your featuring and recommendations are just shilling for your own books.) There are only so many emails you can send pushing your own books before you lose people’s attention (and perhaps their permission). The special sales and vertical marketing functions that will be increasingly important for publishers are not natural fits at Amazon. Will they do these things?

Of course, we need to remember that while Amazon signs up titles directly, they pressure competitive retailers as well as publishers. There are two approaches Amazon can take in that circumstance and one can imagine them choosing which approach to apply by title.

Either they are a supplier of titles to the rest of the trade, which gives them a different kind of power. Or they withhold what they’ve got from the rest of the trade, which means the Amazon title selection is advantaged over the competition.

You have to excuse publishers if it makes them nervous to think about living in a world where the company through which they get 50% of their sales is also competing with them to sign up titles directly. This is a situation where it is accurate to say that any other player in the ecosystem who is not at least mildly panicked probably doesn’t fully understand what’s going on.

The challenges faced by Amazon as they try to grow as a publisher are not trivial, but neither is the strength they bring to address them. The world five years from now where Amazon is stronger because they can reach 80% of the market rather than somewhat less than 50% is also one where the big players with whom they’re competing for authors are also weaker. In fact, if the number following “Big” isn’t smaller than “6” by then, I’ll be one very surprised prognosticator.

It’s taken me two posts (here’s the first one) to lay out what I see as the dynamic forces tilting the trade book business toward Amazon. I have at least three more components of this story to consider: how these changes look from each spot in the value chain (author, agent, large and small publisher, retailer, reader); a discussion of the “cultural gap”, which can be traced as much to different objectives as to the lack of shared history, between Amazon and the legacy book business; and a discussion of the Amazon antidotes: what other players in the industry can do, within the constraints of the law and practicality, to slow down or reverse the Amazon share growth before it changes the nature of the industry, and its cast of characters, beyond recognition.


John Locke and S&S show us another kind of deal we can expect to see again

OK, now we know another new paradigm for book publishing in the digital age with the announcement of self-publishing author John Locke’s new deal for print distribution with Simon & Schuster.

The big publishers have said for a while now that they won’t be signing up books for print rights only. That makes sense, up to a point.

It is logical that with print declining and digital sales rising, publishers don’t want to be investing in an author only to control the getting-smaller part of the sales. We’re in this moment when print sales are still vitally important but less so every day. Ebooks don’t require the same organizational scale as distributed print, so authors legitimately feel that they can get the substantial part of that sale without giving up the 75% of the ebook royalties big publishers demand as the price to gain access to the print distribution capability that makes real use of big publisher scale.

But there are limits to the publishers’ logic to walk away from print-only deals. Publishers also have the challenge of feeding the big organization they’ve built to deliver print to its shrinking marketplace. It is hard to ignore sales volume you need to support expensive operations.

The first crack in the wall of “we don’t do print-only” was Houghton Harcourt’s deal with Amazon to publish the print edition of some titles originated by Amazon imprints. Houghton made the point that although it might look like what they were doing was a print-only deal, it really broke no precedents. They pointed out, accurately, that when a publisher acquires paperback rights to a book another house did in hardcover (the most common sort of licensing deal 30 or 40 years ago but not so common now), the ebook rights would stay with the originating publisher. That, they said, was all that was happening in this case.

As a fan of Locke’s Donovan Creed books (I just finished reading another one yesterday!), I had already done some analysis and written that I thought he was leaving a lot of money on the table working exclusively on the ebook side. (I ignored a deal he had with “Telemachus Press” to do print of his books because I figured they’d hardly sell any; the deal announced today would tend to confirm that assumption.)

Although the details of the Locke deal with Simon & Schuster haven’t been revealed, it is characterized as a distribution deal. Strictly speaking, that would make Locke himself the publisher and the party responsible for the cost of inventory. S&S would warehouse that inventory and handle all the mechanics of distribution, including billing and collecting. Then they would remit the larger portion — probably more than 70% and less than 80% — of the revenue they receive to Locke.

How profitable Locke’s print sales will be for him depend on his costs for print (which are in turn a function of how well he and Simon & Schuster match what is printed and distributed to the demand for his books), the retail price he sets, and, of course, the numbers he can sell.

There is another way Locke will profit. The increased awareness of his books that he’ll gain by having them in stores should generate more ebook sales and he presumably doesn’t share those with his print distributor.

There have been a number of signs this year that the publishing world is changing dramatically.

In March we had Barry Eisler, who had sold many books through conventional deals with major publishers, decline a six-figure deal with a major house. At first, Eisler was going to self-publish, but then he decided to take a (presumably) six-figure deal to be published by Amazon instead.

Amanda Hocking, who had started (like Locke) as a startlingly successful self-publishing author, accepted a deal with a major house to continue her career, pretty much the opposite of Eisler’s originally-intended path (although closer to what he actually did in the end).

Then J.K. Rowling, the author of the Harry Potter series, announced she was creating her own online destination, Pottermore, to deliver ebooks. Rowling is apparently not just disintermediating her publisher from her ebook sales; she’s leaving out many of the online retail channels as well.

Last week we had the news that superstar non-fiction author Tim Ferriss became the first truly marquee signing for Amazon’s own publishing efforts.

And now we have Locke entirely self-publishing, but working through a major house to get his printed material into the supply chain.

When we discussed Eisler’s original decision, we talked about the fact that self-publishing left the substantial revenues from print untapped. The Hocking and Ferriss deals are similar, even though hers is with a traditional publisher and his is with Amazon. They are both pursuing what they think will be the most lucrative alternative for them, choosing from among options by which they get paid and somebody else does all the non-writing parts of the work.

Rowling’s initiative and Locke’s are both real self-publishing plays. I am skeptical that Pottermore is worth tracking as a commercial example by any but a small handful of wildly successful authors. It’s an anomaly in many ways. Harry Potter to publishing in the past decade is like the Beatles to music in the 1960s; nothing else comes close to its level of commercial success. What Rowling is doing might work just fine (although I have my doubts that it will reach more readers than if she used more conventional means, she might make more money and she might build a platform for other opportunities), but that doesn’t mean it would work for anybody else.

Locke might be an outlier as well. Nobody else except perhaps Hocking has achieved his level of self-publishing success. And, unlike Hocking, who is a writer who just wants to be a writer and is delighted to have a publisher take over her business responsibilities, Locke is an experienced businessperson who seems to prefer managing his own commercial affairs.

In the Locke deal, though, we can see the outlines of future arrangements by which publishers can reconfigure their dealmaking to adjust to changing times. It isn’t just agents who are changing their business models or offering new services to accommodate the reality of self-publishing fostered by the growing ebook market share (and Locke’s agent, Jane Dystel, is one that has announced that her office is doing just that), publishers will adjust as well.

The model of “self-publishing through a major house ” can be a workable one for all sides if it is restricted to authors whose commercial appeal has already been established. Since all the major houses have distribution deal models, it might not be long before there’s a person at each one assigned to making sure that authors and agents are as well taken care of as “clients” as they were in the past working through their editors.

These deals will morph. For example, does Locke really have to pay the printer, or will S&S cover him on that and just take the costs out of proceeds? If S&S were doing a deal like this for books that hadn’t already been published digitally, would they be able to extract a modest share of ebook sales as compensation for doing the ebook setup? And deals like this could evolve to also include some other costs — like copy-editing or cover creation — being fronted by the publisher, or I guess I should say “the distributor”.


Tim Ferriss’s deal with Amazon is both an outlier and a harbinger

News of the 7-figure Tim Ferriss deal with Amazon that hit the news this (Wednesday) morning must have leaked out to the press yesterday (Tuesday) because I got a call from a reporter asking for comment on Amazon’s “big new hardcover” book deal. The question confused me yesterday, but seeing the announcement about Ferriss today featuring the hardcover makes it clear what the trigger was for that call.

I’d call this deal both an outlier and a harbinger.

It’s an outlier because Ferriss clearly did it for reasons that weren’t strictly financial. According to The New York Times and Publishers Lunch, Ferriss called Amazon seeking the deal. Ferriss decided he’d rather be with a technology company than a publishing company. Ferriss is excited by the unenumerated opportunities he sees having a publisher that has direct relationships with the ultimate consumers.

To analyze the competition between the big publishers and Amazon, I think we need to think about four components of the deal and the publication.

The first thing on many authors minds is the advance against royalties they can get for signing a contract. This deal is reported as 7-figures. We know that Amazon has deeper pockets than any publisher. So they can compete with advances. Since Crown (a division of Random House) had reportedly paid 7-figures for Ferriss’ last book in 2008, perhaps Amazon offered only a sensible competitive number here. But publishers, all too aware that Amazon competed in the ebook marketplace by selling big titles at a loss, have to be concerned that they might be willing to sign some big authors at a loss as well.

The other components to think about are the main channels of sale for the book. I will stipulate in advance that this is a bit over-simplified but I think simplification here promotes understanding (and unncecessarily complicating things would obscure it).

Ferriss is a non-fiction author. For big non-fiction books today, the largest sales channel is usually print sold in stores. Generalizations are dangerous (and generally wrong), but it would be reasonable to think that Ferriss sells 50% of his books that way. If so, that’s a problem for him with Amazon because store sales of print will be the hardest for Amazon to get. Barnes & Noble recently made clear that they would only consider stocking an Amazon-originated title if they could sell the ebook (Nook) edition as well as the print. Amazon hasn’t stated a policy on that, but, to my knowledge, all the publishing deals they’ve made have required ebook exclusivity for the Kindle.

At our on-stage conversation at the Publishers Launch BEA show, Barry Eisler — who had just done his own book deal with Amazon for a substantial advance — admitted that Kindle exclusivity was the one part of the deal he wasn’t crazy about. More on what that means to ebook sales further down in this post, but it would appear that ebook exclusivity is blocking print store sales at the largest possible outlet. Unless Amazon has some distribution cards up its sleeve that we haven’t seen yet, the loss of brick store print sales (and exposure) would appear to be the biggest negative for Ferriss in doing this deal.

It is likely that Amazon expects to sell a lot of those hardcover books through the next channel to consider, print books sold online. In this case, Amazon has a very high percentage of the total market, perhaps in the 80-to-90 percent range. Given their ability to give a book of theirs exposure and perhaps even using that direct customer knowledge that Ferriss seems so intrigued by, it isn’t unreasonable to think that they can sell more than their fair share of those books. It’s also seems likely (generalizing again) that 25% of Ferriss’s publisher-generated revenue could come from print sold online. Maybe Amazon is paying him a higher royalty than the standard on that as well.

Of course, the main commercial reason for both sides to do this deal is for sales of the ebook, the Kindle edition. On the one hand, Kindle sales are said by publishers I’ve spoken with to have fallen from 90% to 50-60% of the total ebook sale. (Barnes & Noble’s Nook is credited with the lion’s share of the rest.) But the publishers don’t know how much of Kindle’s sale (or Nook’s sale or Kobo’s sale) is consumed on the proprietary device. If I read on a Nook and Kindle has an exclusive on a book, I’m stuck. But if I read Nook books on my iPhone or iPad and Kindle has an exclusive on a book, I can just switch over for that one book without a problem.

That means that some big part of the 40-50% of the ebook market that isn’t Kindle is accessible through the Kindle reader on an iOS or Android device. It’s a guess, but I think a reasonable one (maybe even a very conservative one) to say that 35% of Kindle reading is done on non-Kindle devices. Adding those people in would suggest that the Kindle store has meaningful access to anywhere from 67% to 75% of the total ebook marketplace.

And we’d assume that Ferriss is getting a 70% royalty from Amazon on those sales, four times what he’d get if a publisher gave him 25% of the ebook royalty (because they’d be dividing the same 70%.)

My bottom line on this is that Ferriss would get a sliver of what would be half the business (print in stores). He could well get as little as 10 percent of that potential (or 5% instead of 50% of what would have been his total publisher revenue.) Depending on the royalty structure, he’ll get at least as much and perhaps a bit more on the online revenue piece, so let’s call it 30% instead of what would have been 25% of his total publisher revenue. So on those two pieces, he’d be getting 35% of the former total whole, rather than 75%, or a bit less than half.

But on the ebook side, he’ll get about 4 times the royalty on about 70% of the sales, or 2.8 times as much revenue as he would have gotten from a publisher. If that had been 25% of revenue of the former “whole”, it would be 70% of the former whole now. Added to the 35% he’s getting from what would have been the other 75%, that back-of-the-envelope set of guesses delivers him 105% of what he would have gotten from a publisher, even giving up almost all the print store sales.

And, of course, he has high expectations for what he and Amazon can do together with all that customer knowledge. If he’s right about that, he could do considerably better.

This is sobering math for the big publishers. The numbers would look better for Amazon if we were generalizing about fiction, where the percentage sold as ebooks is somewhat higher. But, more important, the segment of the business where Amazon is disadvantaged — print in stores — is shrinking inexorably as a total of the whole. When we run this same exercise a year from now, the percentage assumptions we’ll be making will be lower for that component and higher for the other two.

So it’s clear why the deal is both an outlier and a harbinger. Giving up the store sale is a difficult thing for any author to do, particularly when the math works out to be so close to breakeven (and we haven’t factored in the marketing impact of books in stores, which is real.) It took an author with a particular personal bent to pursue that choice. But it is a harbinger because the math would appear to be moving in Amazon’s direction. The one way I can see for publishers to improve their chances of looking good in this calculation is to raise their ebook royalty percentage. Of course, there’s no reason that Amazon couldn’t do the same thing.

If you’re going to Frankfurt, you must consider attending one of our Publishers Launch Conferences events there. On Monday, October 10, we’ll present “eBooks Around the World”, which will include lots of original data, talks from every major global ebook retailer, the scoop on the growing importance of collective licensing, documentation of the benefits that a medium-sized publisher got from a digital workflow, an instructive presentation connecting metadata quality and sales results, and (as they say) much, much more.

On Tuesday, October 11, we’ll deliver a half-day event called “Children’s Publishing Goes Digital”, chaired by Lorraine Shanley of Market Partners, which will explore creation, marketing, rights, brand new product types and brand new players in what might be the fastest-changing part of our business.