Viking

Amazon channels Orwell in its latest blast


Anybody who reads Amazon’s latest volley in the Amazon-Hachette war and then David Streitfeld’s takedown of it on the New York Times’s web site will know that Amazon — either deliberately or with striking ignorance — distorted a George Orwell quote to make it appear that he was against low-priced paperbacks when he was actually for them.

This recalls the irrelevant but delicious irony that the one time Amazon exercised its ability to claw back ebooks it had sold was when they discovered that they were selling unauthorized ebooks of Orwell’s “1984”. The right thing to do was exactly what they did: pull back the copyright-violating ebooks and refund the money to the purchasers. This (apparently) one-time event has often been cited as some sort of generic fault with ebooks, as though ebook vendors would make a practice of taking back what they had sold their customers. This was a case where Amazon was villified in some quarters for doing the right thing which simply adds to the irony.

However, the most misleading aspect of the Amazon piece is not the Orwellian treatment of Orwell, but the twisted metaphor in which the low-priced ebook is the low-priced paperback of today’s world. (The analogy was one I wrote about three years ago with, I think somewhat more care for the facts.) Yes, they were both new formats with a lower cost basis that enabled a lower retail price to yield positive margins. And there’s one other striking similarity: they both unleashed a spate of genre fiction to satisfy the demand for the format, largely because the rights to higher-value books were not available for the cheaper format, but also because lower prices attract some readers more than others. But that is where the similarities end.

This argument against Hachette, using authors as proxies and lower-prices-for-consumers as the indisputable public good, once again employs two logical fallacies that are central to their argument that Hachette (and its parent company, invoked to give the appearance of relative equality of size between the combatants, which is still nowhere near the case) is craven and muleheaded and that Amazon is merely engaged in a fight for right.

1. Amazon’s logic is entirely internal to Amazon. It does not attempt to take into account, or even acknowledge, that publishers and their authors are dependent on other channels besides Amazon. And, in fact, the publishers and authors know for sure that the more the sales do concentrate within Amazon, the more their margins will be reduced.

2. The price elasticity statistics they invoke (for the second time in as many public statements), which are also entirely internal to Amazon, are averages. They don’t even offer us a standard deviation so we can get a sense of what share of the measured titles are near the average, let alone a genre- and topic-specific breakdown which would show, beyond the shadow of a doubt, that many Hachette books would not achieve the average elasticity rate. See if you can find anybody with an ounce of statistical sophistication who thinks a book by Malcolm Gladwell has the same price elasticity as a romance or sci-fi novel by a relatively unknown author.

The actual history of the paperback in America contains elements of what Amazon claims. It actually begins after World War II, not before (although Penguin began in this country in 1939). During World War II, under the leadership of historian and renaissance man Philip Van Doren Stern, the military made 25 cent paperbacks available to the troops. That introduced the idea to the masses and after the war several mass-market paperback houses started.

They distributed through the magazine distribution network: local wholesalers that “pushed” copies of printed material to newsstands and other intermediaries who took their distribution of copies, displayed them until the next edition of the magazine would come out, and then sent back the covers to get credit for what was not sold. The first paperback books had a similar short shelf life in that distribution environment.

What made the cheap prices possible were several factors:

1. The books themselves were frequently formulaic and short and therefore cheap for the publisher to buy. The universe of titles for the first several years was, aside from classics from the public domain, a different set of titles than those sold by mainline publishers through bookstores.

2. There was no expensive negotiation between publishers and the accounts over an order for each shipment of books. The wholesaler simply decided how many copies each outlet would get and, in the beginning, the wholesaler pretty much distributed what the publisher asked them to. The “check and balance” was that the publisher would get worthless covers back for the unsold books and that was their constraint against oversupplying the system. Over time, that aspect of things broke down and the publisher had to work the wholesalers to get the distributions they wanted.

3. The books themselves were cheaper too: less and cheaper paper and much less expensive binding.

4. The adoption of the magazine system of covers-only for returns created a big saving compared to the trade book practice that required returns of the whole book in saleable condition to get credit.

5. The retailer took a considerably smaller share of the retail price than bookstores got on trade books.

At the same time that the mass-market revolution was beginning, conventional trade publishers also started experimenting with the paperback format. The first extensive foray of this kind was by Doubleday in the early 1950s, when wunderkind Jason Epstein (later the founder of NY Review of Books and still active as one of the founding visionaries behind the Espresso Book Machine) created the Anchor Books line.

My father, Leonard Shatzkin, was Director of Research at Doubleday (today they would call it “New Business Development” or “Change Management”) at the time. He often talked about a sales conference at Bear Mountain where Sid Gross, who headed the Doubleday bookstores, railed against the cheap paperbacks on which the stores couldn’t make any money! So, it was true that the established publishing industry and the upstart paperback business had a period of almost two decades of very separate development.

It took until the 1960s — a decade-and-a-half after the paperback revolution started — before the two businesses really started to coalesce into one. And the process of integrating the two businesses really took another decade-and-a-half, finally concluding in the late 1970s when Penguin acquired Viking, Random House acquired Ballantine and Fawcett, and Bantam started to publish hardcover books.

My own first job in trade publishing was in 1962, working on the sales floor of the brand new, just-opened paperback department of Brentano’s Bookstore on 5th Avenue. Even then, the two businesses operated separately. The floor of the department had chin-high shelves all around with what we’d call “trade paperbacks” today, arranged by topic. They were mostly academic. On a wall were the racks of mass-market paperbacks and they were organized by publisher. If you wanted to find the paperbacks of a famous author whose rights had gone to a mass-market house, you had to know which house published that author to find the book. (That was good; it made work for sales clerks!)

There was a simple reason for that. The two kinds of paperbacks worked with different economics and distribution protocols. The trade paperbacks were bought like hardcovers; everything that was shipped in was because a buyer for Brentano’s had ordered it. The mass-markets were “rack-jobbed” by the publisher. They sent their own reps in to check stock on a weekly basis and they decided what new books went into the racks and what dead stock was pulled. It was to make the work of the publishers efficient that the mass-markets were grouped by publisher.

The highly successful commercial books that became mass-market paperbacks got there because the hardcover publisher, after it had booked most of the revenue it expected to get for the book, then sold mass-market rights to get another bite of the apple.

Little of this bears much resemblance to what is happening today. Little of this is comparable to the challenges trade publishers face keeping alive a multi-channel distribution system and a printed book market that still accounts for most of the sales for most of the books.

But the most striking difference today is that a single retailer controls so much of the commerce that it can, on its own, influence pricing for the entire industry. The mere fact that one single retailer can try that is itself a signal that we have an imbalance in the value chain that is unprecedented in the history of publishing.

One other aspect of this whole discussion which is mystifying (or revealing) is Amazon’s success getting indie authors to cheer them on as they pound the publishers to lower prices. (The new Amazon statement is made in a letter sent to KDP authors.) This is absolutely indisputably against the interests of the self-published authors themselves, who are much better off if the branded books have higher prices and leave the lower price tiers to them. That seemed obvious to me years ago. Yet, Amazon still successfully invokes the indie author militia to support them as they fight higher prices for the indies’ competition! You will undoubtedly see evidence of that in the comment string for this post (if history is any guide).

The tactic of publishing Michael Pietsch’s name and email address with a clear appeal for the indie authors to flood his inbox is an odious tactic, but, in fairness to Amazon, that odious tactic was initiated by the Authors United advertisement headed by Douglas Preston which gave Bezos’s email address. This is something that both sides should refrain from and, in this case, Amazon didn’t start it.

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Peering into the future and seeing more value in the Random Penguin merger


So now in addition to the Random House and Penguin merger that is being reviewed by governments far and wide, we have the news that HarperCollins is exploring a tie-up with Simon & Schuster in a deal that hasn’t been made yet. That leaves Hachette and Macmillan, among the so-called Big Six, still on the outside as the general trade publishing behemoths rearrange themselves for whatever is the next stage of book publishing’s existence.

I am not sure we really need an “explanation” for what is the resumption of a perfectly natural phenomenon. Big publishers have been merging with each other for several decades in a process that suddenly stopped after Bertelsmann acquired Random House (to add to its holding of Bantam Doubleday Dell) in 1998. We didn’t know it at the time, but that concluded a long string of mergers that had recently included Penguin’s acquisition of Putnam-Berkley, but which stretched back to the 1970s when pursuit of the paperback-hardover synergy had driven Viking and Penguin; Doubleday and Dell; and Random House-Ballantine and Fawcett into each other’s arms.

(Perhaps HarperCollins should get credit for the resumption of the era of consolidation. Their acquisition of Christian publisher Thomas Nelson, combined with their holding of Zondervan, created a powerful position in one of publishing’s biggest vertical markets shortly before Penguin and Random House announced their plans.)

But consequential events always get an explanation, whether they deserve one or not, and this merger appears to many to be driven by consolidation among the retail intermediaries and the rational concern — amply documented by recent experience — that the retailers would use their leverage to press for more and more margin. This is complicated by the fact that both of the dominant retailers — Amazon in the online world and Barnes & Noble in the brick-and-mortar space — have small publishing operations of their own that are always available to put additional pressure on publishers at the originating end of the value chain.

There is an important asymmetry to take note of here. The retailers publish and are always a threat to acquire manuscripts directly and cut the publishers out but the publishers, particularly the biggest ones, don’t do retail and there is no obvious path for them to enter retailing in any significant way. (That last sentence was written with full cognizance that we await the debut of Bookish, which is an attempt by three of the Big Six to enter retailing in a significant way. Maybe when concrete plans for it are announced there will be some reasons provided to amend that thought.)

In my opinion, the dominant position that Amazon holds in online retailing and that B&N owns in shops are impregnable on their own terms in ways that the positions of each of the big publishers are not.

The threat to Barnes & Noble is that bookstores will become unsustainable: that a retailer trying to exist at scale with books as its primary product offering will, because of ebooks and online purchasing of print, simply become unviable. The threat to Amazon is more nuanced and more distant. One can imagine a world developing where content retailing evolves into niches by subject or tastemaker. But that world is not around the corner (an environment toxic to bookstore chains appears to be much closer) and it would be far easier to imagine how Amazon could adapt to niche online retailing than to see B&N adapting to deliver retail book selections that are only viable at a fraction of their current size.

(I consulted to them a decade ago and suggested that to no interest. They were shutting down their mall stores at the time and the idea seemed totally counterintuitive.  I’ve also written about it.)

I saw recent data (sorry, can’t remember where…) suggesting that something like 38% of the book business is now done online, taking both ebooks and sales of print into account. This seems to be confirmed by a chart built on BookStats data by reporter Laura Owen of PaidContent, if you take “institutional sales” out of the equation and assume that wholesalers sold books to online and store retailers as well as libraries.

Whatever the percentage is, it is almost certainly higher for immersive reading than for illustrated or reference books because immersive works for ebooks and the others mostly don’t. So it would appear that something like 60% of the book business is still a bricks-and-mortar game, with the number being somewhat lower for straight text and higher for illustrated.

That, in a nutshell, explains why the big publishers are still extremely powerful. The 60% sold at retailers is what they’re uniquely skilled at getting and what Amazon is uniquely challenged to penetrate.

But the one thing we know for sure is that the shift to online purchasing — while it has slowed down — will continue to progress for a long time. The increased ubiquity of devices; the always-larger selection from an online merchant; the increase in availability of appealing and useful content that is either too short or too specialized for print; the steadily increasing cost and hassle of shopping by car rather than by computer; the natural results of birth, death, and demography; and the increase in online word-of-mouth and recommendation sources are among the many factors that assure that.

As the percentage of a publishers’ sales that are made through retail stores decreases, the cost of covering them increases. This has already become an issue as the big publishers view their overheads and come to the conclusion that they can’t afford to pay ebook royalties greater than 25% of receipts. Surely, some of the cost basis they see driving that necessity are really print-based (creation and distribution), which makes them calculate what’s affordable differently than a more new-fangled publisher that is planning primarily on digital and online distribution.

The publishers who are merging or thinking about merging are not doing so out of immediate desperation. The financial reports we see from trade publishers are not frightening. Top line sales are challenged — there is little or no growth — but margins have been maintained through the seismic marketplace shifts of the past few years and the pace of change is slowing. So it is probably preparing for a world a few years off that drives publishers to merge today. What will that world look like?

The world of publishing we’re going to see five or ten years from now will probably look quite different. Even if store sales only decline 10% a year against the industry total, what is a 60% share today will be about a third after five years have passed and below 20% in ten. Those are sales well worth having, of course, but they’ll be a lot more expensive to get. And if I were predicting rather than just speculating, I’d expect the erosion of retail sales to be a bit faster than that.

My expectation is that freestanding bookstores will be less and less common, and smaller book sections in other retailers (the way they’re in mass merchants today) will proliferate. We already see this in “specialty” retail: stores stock books that fit alongside their other product offerings. But as bookstores get scarcer, it will probably begin to make sense for general book selections — bestsellers, classics, and the cream of popular categories like cooking and current affairs — to be offered by other merchants. Part of the reason that doesn’t happen now is that it is too hard for the retailer not in the book business to do. A representative selection either requires dealing with many publishers or buying from a wholesaler. And the wholesalers are working on tight margins, not allowing them much room to offer expensive services (like inventory management) unless they really cut into the store’s margin.

But you don’t have to have every book — or even every bestseller — to deliver a compelling consumer offering. Book-of-the-Month Club and The Literary Guild proved that half a century ago when they competed for the general book club market. They demanded exclusives on the bestsellers, so they tended to split them. And they each had enough to pull a very large audience.

Well, the combination of Random House and Penguin has damn near half the bestsellers too. And Random House, at least, has already developed vendor-management capabilities that they can apply at the store level. So as the bookstores disappear from town after town, a Random Penguin combination (they really ought to call it that!) becomes able to offer any local retailer a selection of books that will look pretty good to the average consumer.

In addition, they’ll find that the combined lists give them a great head start on having enough titles to deliver retailers other vertical selections — cooking, crafts, home improvement — that their VMI skills will also help them serve.

Right now the challenge Amazon is having is that they’re trying to publish with a grip on no more than half the market. That’s great, as far as it goes, because that’s where they have a real margin advantage when they cut the publisher out of the chain. But because there is so much Amazon fear-and-loathing around the rest of the industry, they’re not able to build out beyond their proprietary position. (See the recent frustrations expressed by their author, Tim Ferriss, to appreciate how that’s working out in the market today.)

But if Amazon could reach 75% of the market — that is, if store purchasing declined below 25% of the total, which is in the cards for the next ten years — leverage would be reversed. (I’m eliding the format and proprietary reader device issues around ebooks here, but I’m guessing they’ll mostly go away in the next five or ten years.) Then Amazon wouldn’t want or need distribution to the stores or other online outlets. In fact, chances are they’d see it in their best interests to withhold those titles from other retailers and use them as tools to compel shopping with Amazon.

(This would not be a peculiar selfishness of Amazon if they did it. I remember well the battles my friends at Sterling had when they were first acquired by Barnes & Noble trying to convince their new owners that it was necessary to distribute the books as broadly as possible or they would start finding it impossible to sign new titles. B&N’s instinct was to want what they published available only from their stores, an instinct they acted on with SparkNotes.)

But if I’m right about where Random Penguin might go, they could play this same game. As the cost of running book departments increases as a percentage of sales, as they surely will as sales in stores decline, the mass merchants will diminish their presence. If Random Penguin has half the bestsellers, they will be able to use VMI to build secondary locations to keep their print books available. Those locations will be theirs and theirs alone. Maybe they’ll only be making 10% or 15% of the total sales this way, but those sales will be unavailable to other publishers (unless they go through RP at diminished margins.)

The proprietary distribution will give RP an advantaged position signing up the biggest books. In time, they might even have enough of the biggest books to pursue one of the current active fantasies of Amazon and a bunch of entrepreneurs: creating a value proposition for big authors that will enable a subscription library with headline titles. And that would be another proprietary distribution channel that this next generation of scale might make possible.

The resistance of the bookstores to doing anything that helps Amazon will make it difficult for Amazon the publisher to build a general trade list of bestsellers until a much bigger chunk of the market has moved online. Barnes & Noble, which had a chance to become the one dominant trade publisher if they’d played their Sterling card differently, seems not to be interested in that role. So it will be one or two of the incumbents that will be left standing ten years from now managing the most commercial titles in the marketplace. The odds are very good that one of them will be Random Penguin.

I (usually) resist the temptation to make political observations on the blog, because that’s not what people come here for. But I have to make an exception because I think one of the most important points to be made about the results of November 6 has not been made anywhere else. And it is, ultimately, a non-partisan point.

Among the many reasons that President Obama convincingly defeated Governor Romney was the superior execution of the Obama campaign around data and operations. They were simply better analysts and managers and they executed better than the Romney campaign.

So can we please put to rest the notion that “getting rich” or “running a business” is a proxy for “management skill”? The most frequently-offered argument from Romney was “I’m a successful businessman so therefore I can run things better than this guy who is community-organizer-turned-public-official.” Actually, Governor, you couldn’t. You didn’t.

The last presidents we had with business experience were (working backwards) George W. Bush, Jimmy Carter, Herbert Hoover, Calvin Coolidge, and Warren Harding. There is no historical evidence in there that shows that business success correlates with the ability to run the United States government. Or even, as we’ve just been shown, an effective national campaign.

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Should trade publishers start ditching their B2B imprints for a B2C world?


I spent last Friday at the On Copyright 2012 conference staged by my clients at Copyright Clearance Center. CCC is an organization dedicated to generating revenue for content creators from what is referred to as “secondary” licensing, or uses that are not core to the publisher’s revenue stream and which are often impossible to manage from an individual publisher’s point of view. CCC has the interests of copyright-holders at heart and at the core of their enterprise, but they also live on the cutting edge of digital content consumption where mash-ups, fair use, and the reality that piracy often happens because rights are too difficult to license can’t be avoided.

I’ll admit that discussions of the nuances of copyright itself leave me mostly befogged. Fortunately, this event was much more about the practicalities of the marketplace than about the theories of the law.

The most engaging and interesting speaker of the day was Robert Levine, author of “Free Ride”, an analysis of content and the Internet that deeply questions the increasingly ingrained notion that getting paid for content is inherently contradictory with the growth of digital media. Levine is smart and open-minded about content models and DRM and piracy and enforcement. Indeed, one of the noteworthy features of the entire day was its willingness to entertain notions that might be considered heretical by copyright and old model zealots.

In fact, Maja Thomas, the chief digital thinker and strategist for Hachette Book Group USA, opened the door just a bit to the idea that DRM on ebooks might be counterproductive (at worst) or futile (at best). Maja’s background is extensive in audiobooks. She told the conference that she had been assigned to monitor the destruction of her audio business when DRM was removed from those products a few years ago. And, in fact, there was no destruction!

When the program ended, I dashed down to the front to introduce myself to Levine. He knew me before I said my name and “reminded” me that he had interviewed me during his research for his book. (Somebody else later told me, “oh yes, you’re in there.” I’ll have to read it…) I don’t know whether to blame the fact that my memory for these details is a sieve or that I do an interview or two a week with somebody about something and am seldom called upon to remember them later.

What triggered further thoughts for me (and, ultimately, the point to this post) was a discussion in that last panel, chaired by Michael Healy and including Levine and Thomas, about branding. There was a reprise of the frequent (and mostly accurate) meme that author brands are the ones that matter to consumers, not publisher names, with rare exceptions such as Harlequin.

I think that could be changing. Certainly the circumstances around it are. As publishers are challenged to think about and articulate the value they bring to the process, they often cite curation (publishing just the good stuff and filtering out all the inferior stuff) and editorial development (helping the author improve the work before it is published) as significant contributions. Thomas seemed to suggest that a lot of thinking is going into articulating a publisher’s value at her shop.

I have said for some time that the core value proposition for a trade publisher is “we put books on shelves.” That’s looking at it from the author’s point of view. From the consumer perspective, the curation function is seen to be performed by the bookstore and the hurdles that stores create to getting on those shelves assure that only well-conceived and well-edited books make it there. (There have always been exceptions, of course.) As the shelves for print books diminish and are replaced by virtual shelves that are not nearly so limited, books that might not have made the selection grade in a physical world are sharing space with the carefully (and expensively) selected and edited works of major houses.

And that brings us back to branding. Brands are shortcuts for their users, telling them in a name what they can expect from a product or service they haven’t sampled yet.

Publishing brands until the digital era were really shortcuts for the trade, not for the consumer. The buyers at chain and independent bookstores, the collection development team at libraries, and the editors of major book review media all believe they understand the difference between a Farrar Straus or Knopf book and one from a “lesser” house. That figures into the “hurdles” I cite above. Top publishing imprints found it easier to get placement and reviews and get their books in front of the purchasing public.

That fact (alongside the fact that big publishers grew by acquisition of smaller companies and often would preserve the name of the company they bought, which is how Knopf ends up a Random House imprint and Scribners is an imprint at Simon & Schuster, to cite two of far more examples than you’d care for me to name) started the proliferation of imprints we now see. It has been fueled by publishers’ use of imprints as way to attract and award top acquisition talent.

Imprints have dedicated editorial teams and usually some internal marketing resources, but their value as identities is diminishing. The point to them was always to provide useful branding for business intermediaries, not the end consumer. And, as they proliferate, their value for their original B2B purpose is diluted.

(It is currently fashionable to castigate publishers for their focus on the supply chain rather than the end purchaser. This fashion, along with the totally ignorant bashing of the convention of “returns”, is based on apparent indifference to the history and development of the business. When the entire imprint structure of publishing houses is built around B2B brand recognition and has been built up that way over a century, you’d think people would think twice before being reflexively dismissive of the B2B focus. It is really only recent developments that have turned it into a questionable idea.)

But times really have changed. Attention on the end user is rising; the intermediary structure is declining. And publishers should be rethinking their branding strategies, at the core of which are imprints, as they address the emerging marketplace realities.

Publishers seem to recognize that the competitive statement they need to make going forward is about quality, expertise, and investment in professional support for the creative effort. This will distinguish theirs from the swelling mass of self-published books which are usually sorted out today by their pricing. On the agency model, the Big Six books are $9.99 to $14.99 (a few bucks cheaper on the backlist) while the self-published books cluster around a band centered at $2.99.

That may actually work, for now. But what if big publishers want to compete at the lower price points but still make a “quality” statement? And some indie writers are trying to nudge pricing up a bit while publishers are experimenting with bringing them down, so what if we start to see both indie and branded ebooks in the $5.99 range? Can the big publishers do anything that would help them then?

I think they can, but it will be require a decision that is painful to make, considering their history. They should, for the most part, get rid of their imprints. They should brand every general trade book they publish for quality and professionalism, and that only requires one name per major house and could never benefit from more than two.

That is, knowing that a book is from the Random House family of books is all the quality branding the consumer needs. They don’t benefit from from the more nuanced distinctions between Crown and Knopf, and Random House scatters its consumer firepower to its disadvantage trying to establish multiple names in the consumer mind. (In fact, I’m not sure the big houses even try to establish all these imprints as consumer brands. If they’ve already abandoned that effort, they’ve taken the first step in the direction I’m trying to encourage here.)

If this idea is right, then each Big Six house should select one name (and logically, the single best known name they now have among consumers would be the most sensible choice), or perhaps two, and promote it. (The second name might make sense if there is an imprint already known for “quality”, like Farrar Straus or Knopf.) No other name should be promoted to consumers unless it is establishing a clear niche identity (Fodor travel books or tor.com science fiction, as examples). There’s no point establishing brand identity unless you expect consumers to return to it repeatedly, the way they return to stores to buy reading material.

Consumers can’t keep dozens of imprint names straight in their heads, but they can learn the names of six big houses, particularly if they’re starting with names they already know. Like the possibility that Random House should preserve the brand equity in Knopf in addition to building Random House as the general trade imprint, there are nuances to consider in other houses to best implement this strategy.

For example, should Penguin perhaps restrict the use of the Penguin name to classics and established backlist and use something different (Viking?) for everything else? Penguin, because of its publishing history, means something to some people, although I’d argue that not restricting the use of the imprint name to classics and the most distinguished backlist actually dilutes the meaning it might have.

Should Hachette, a name that probably has very low recognition to US consumers as a quality book imprint, be ditched as the brand? Should the company use Little Brown, the most venerable and best known of its imprint names, even though it has created an internal distinction between LB and its relatively new (and therefore mostly unknown to consumers) Grand Central imprint?

What’s the best known name the company now known as Macmillan has? Is it Macmillan? Or is it St. Martin’s or Henry Holt? Farrar Straus might have a cachet worth preserving at the high end, but it would be diluted if it were the overall brand. I suspect that should be Macmillan, but that’s not what they’ve ever called their books; it is just what they have recently started to call their company!

America’s biggest consumers of books can readily remember a few company names to signifying “quality”, and perhaps a few more to mean premium content. Knowing a book comes from an established company with a long list of previously-published titles that book readers are familiar with is the kind of signal people need to be persuaded to part with a few additional bucks for an otherwise unknown author. But that’s all we can ask the brand to do: signal professionalism and quality. The much more nuanced distinctions that the imprint names have been intended to communicate within the trade can’t possibly be delivered cogently to the public at large.

And since the public is now the brand target that matters, it is time to align brand strategy and the brands themselves to that reality.

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Ebooks are making me recall the history of mass-market publishing


The ebook revolution is really beginning to remind me of the mass-market papeback revolution.

The mass paperback was really “invented” by Sir Allan Lane when he created Penguin in Britain before World War II. (Wikipedia credits a German publisher with the first cheap paperbacks a few years earlier, but Lane was certainly the first in English and deserving of some extra credit because the company he started continues in the same business to the present day.) Pocket Books in the US was also born just before the war. During World War II, historian and polymath Philip Van Doren Stern (who wrote, among other things, the New Yorker short story on which the movie classic  “It’s A Wonderful Life” was based) ran a program for the US military by which inexpensive paperbacks were made available to the troops.

After the war ended, mass market publishing really grew. Many houses — Ballantine, Bantam, Signet, Avon — were launched immediately following the war. The key to mass-market publishing was that it achieved distribution through the network of wholesalers that put magazines on newsstands and in local stores (often drugstroes) nationwide. Unlike trade books, which required an agreement between publisher and bookseller to get a copy of any book on a retail shelf, mass markets were “allocated” by the publisher to the wholesaler and in turn pushed out by the wholesaler to the racks they controlled.

The advantage of this distribution technique was that it enabled lots of copies to be pushed out to lots of places with much lower sales and distribution costs. The disadvantage was that it really only worked if books were treated like magazines, with “on sale dates” when they went out and “off sale dates” when they were pulled back and, like magazines, had their guts pulped while only the covers were returned for credit.

The paperbacks were typically priced at 25 cents when hardcover books were $2 or $3. (Compare that 8-to-1 or 12-to-1 pricing ratio to what exists today. It doesn’t.) And mass-markets were available in tens of thousands of locations nationwide, perhaps more than a hundred thousand, when bookstores were few, department stores tended to have only one location, and trade books were typically available in hundreds of locations, or at most a couple of thousand.

The much more widespread availability of these titles combined with their much lower prices created legions of new readers. And, in the beginning, most mass-markets titles tended to fit into “genres”. Westerns were a really big one fifty years ago. Bantam’s perennial bestselling author of westerns, Louis L’Amour, may still be the biggest-selling author in unit sales in (what is now) Random House history. Crime and science fiction lines were also popular as were raunchy books. I’m not sure that romance lines existed in the way they do now (although I’ll bet that among the readers of this blog are people who will tell me that answer); at that time there were lots of magazines peddling romance stories (as there were for other genres.)

If this is ringing some bells for an observer of the ebook transition who didn’t know paperback history, it is entirely intended to. Let’s ring a few more.

The hardcover publishers were very snobby about the paperback houses. Over time it developed that the mass-marketers were able to create enormous additional revenues from books previously published as hardcovers. (This did require the mass-market publishers to keep some titles on sale for longer than a normal cycle, which was not simple, but worth the trouble for books that sold really well.)

The name recognition of successful books, along with the ability to put words which said “established bestseller” on the cover, could be converted into huge sales given the much lower prices and much wider distribution mass-market could achieve. Over time this led to rapidly rising paperback license payments from paperback publishers to hardcover publishers. These were, by traditional contract, shared 50-50 with the authors. They provided a substantial, if temporary, bonanza for the trade houses in the 1950s, 1960s, and 1970s.

But the new marketplace also led to the growth of genre authors whose audiences were established for low-priced paperbacks. It was often difficult for those authors to move “up” to more expensive hardcover publication. Their audiences didn’t want to pay the higher prices, but they also didn’t necessarily shop in the bookstores and book departments where those books were found; they were used to buying their books at newsstands and in drugstores.

When I was first coming into New York from the suburbs as a kid in the late 1950s and early 1960s, there was a fabulous selection of paperbacks at a drug store that occupied the corner location in the Grand Central building at 42nd Street and Vanderbilt Avenue. I found a series of baseball biographies there published by Sport Magazine. I remember a book about 1001 things you could get for free by writing away for them. And, of course, the public domain classics were all there. And I got some great trash like “I Sell Love” and a book about airline stewardesses whose title now escapes me but which was great naughty reading for an early teenager.

Then in the summer of 1962, when I was 15, I worked a 2-month stint at the very classy Brentano’s Bookstore on 5th Avenue and 47th Street. My assignment was downstairs in the brand new, just-opened, paperback department. The center of the basement contained the “trade” paperbacks, mostly academic, on shelves. Around the outside were the mass-markets in racks. The mass-markets were on racks arranged by publisher, because the publishers’ reps serviced them on a weekly basis.

Scribners Bookstore, across the street, didn’t deign to stock paperbacks for some years thereafter.

My dad, Leonard Shatzkin, told a story about the legendary Jason Epstein’s Anchor line of paperbacks at Doubleday (perhaps the first line of quality, or trade, paperbacks, but almost certainly the first such line to come from a mainstream trade house). Dad’s responsibilities as Director of Research extended to the sales force and he ran the sales conferences. At one such conference when Anchor Books (and Jason) were very young, Dad told me that Sid Gross, the head of merchandise for the company’s Doubleday Book Stores, tore into the whole concept of the cheap paperback. He hated them. From his perspective, it was bad for a book retailer to be selling 25 cent items instead of $3 items! Many other booksellers back then felt the same way.

My father’s reaction, pretty typical for him, was to support the contrarian and revolutionary view. He pushed the reps to make Anchor Books a success and, a few years later when Epstein had moved on to Random House, Dad created the Dolphin Books line of quality paperbacks to complement Anchor, whose title selection was pretty highbrow, with public domain and more popular current titles.

That anti-paperback snobbery was widespread and the separation between trade and mass-market publishing persisted for a long time. For at least a couple of decades, paperback houses didn’t do hardcovers and didn’t try to put their titles directly into bookstores (as bookstores started to carry mass-markets, at first they bought them from the wholesalers who racked them) and the trade publishers didn’t try to access the mass-market distribution system. This changed in the 1970s. First Peter Mayer and Bill Shinker pioneered the use of mass-market techniques for oversized trade paperbacks published by a mass-market house (Avon). Then a few years later, Bantam starting publishing hardcovers with distribution to mass accounts.

In the end, mass-market distribution was dismantled by a number of forces. The best retail accounts started buying direct from publishers rather than through the local wholesalers. The number of titles grew so that the “allocation” methods wouldn’t work anymore; there were too many publishers and too many titles for a diminishing number of pockets to handle, so the more expensive negotation method became required.

Patterns are being replicated now with inexpensive and widely-available ebooks. New authors are being spawned. Genre fiction works best. Books that were previously successful in more expensive formats can find new audiences as their prices come down and they go where new customers are shopping. And traditional publishers are sure that their “quality” protects them from low-brow competition, even while that competition is taking millions of customer dollars and countless hours of customer mindshare off the table.

But here’s how that old story ended. Mostly, the mass-market publishers won. Penguin bought Viking. Bantam bought Doubleday and then Random House. Simon & Schuster survived largely because they merged very early with Pocket Books. What is now Hachette is largely called Little, Brown, which was a hardcover house, but it really developed over the last two decades of the 20th century as Warner Books, a mass-market house. Really, only HarperCollins and Macmillan of the current Big Six are true descendents of the trade publishers that were dominant when mass-market publishing arose.

There are a slew of differences between the transitions; ebook publishing has a title glut to deal with just like mass-market did, but the challenges are not the same when you don’t have printed books to manufacture and ship around and your distribution isn’t limited by shelf space or pockets to display them. And authors couldn’t do it themselves in the mass-market era the way they can today. But there is a very basic lesson I think publishers better take on board from this history.

Much-less-expensive editions, combined with access to audiences for authors that couldn’t get past the gatekeepers in the established houses, can create millions of new readers that weren’t available to the legacy products at the legacy prices.

And that can lead to economic power that can ultimately swallow up large chunks of the legacy publishing establishment.

I posted more than six months ago that I had read my first self-published ebook, a history of the 1962 New York Mets called “A Year in Mudville”. Then I had an exchange in the comments string of my last post with Joe Konrath, who used to be published by NY publishers but is now finding it much more lucrative to do it himself, and a reader named Chris. They urged me to read a self-published ebook bestseller, “Wish List” by John Locke. It was fabulous, sort of a cross between contemporary bestselling author Carl Hiaasen and a relic of the early mass-market days, Jim Thompson: bold, caustic, and funny with characters you like who suddenly do outrageously anti-social things. Locke has apparently come out of nowhere with just his talent to help him and is selling shedloads of ebooks. (He’ll certainly sell another one or two to me!) I am not price-sensitive about my reading and I haven’t ever shopped the 99 cent pile, but Locke is certainly evidence that there is stuff in there that is the equal of anything the big publishers are doing at major multiples of that price point. It will be an interesting challenge to see if any major publisher can deliver enough added value to make a deal with Locke or Amanda Hocking, another writer who has found a huge market without any help from the establishment.

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