One of the first times I talked to a book publishing audience trying to visualize the future that digital change would bring was about ten years ago at Book Expo America. It was already apparent at that time that the music business might have a major problem and there seemed to be ways that publishing might follow.
It would appear as of today — April 14, 2005 — that the businesses of music, film, TV, and radio have been more seriously impacted by the digital content revolution than the book business has. Their products are delivered, largely intact, by a digital distribution system that allows consumers to bypass the tollgates. They can get the file that allows them to see and/or hear the intellectual property through their stereo, TV, or computer, without buying the CD or DVD, or without watching or hearing the commercials.
These businesses have been roiled by digital change, and not all the pain is caused by theft. Internet radio is not stealing anything except listeners from broadcast radio. It just allows a preposterously low cost of entry, by historical standards, and the ability to reach a global audience that is beyond the range of the tallest broadcast tower. This phenomenom has become ubiquitous enough to get a name: “podcasting.” You can be sure you’ll hear more about it in the months to come.
In addition to the change wrought directly by digital formats and delivery, the brick-and-mortar delivery systems for all this content are quite obviously under assault. Record stores are disappearing and Blockbuster is having its clocked cleaned by the new Netflix model, which was really enabled when the delivery form for video changed from videocassettes to DVDs and vastly simplified mail delivery.
I should say, parenthetically, that I am leaving out the journals business — close kin to the book business and more distant from the others — from today’s discussion. Because, literally, I don’t “have all day” and for other reasons that should become increasingly clear, I am focused on the trade book business, which is much more analogous to music and movies. Any in-depth discussion of college or professional publishing, however, would have to include journals. That group of intellectual property has its own shared issues, but maintaining a retail infrastructure is not among them.
All media owe their basic forms to increasingly outdated delivery mechanisms. The 3-minute pop song was created for AM commercial radio. The 90-minute movie works best for theatrical exhibition. Record albums had 12 songs when vinyl made about 20 minutes a side sound best and started to routinely include more songs when the format shifted to CDs that could hold more minutes of sound. And the 30- and 60-minute television shows, minus time for commercials, were created for the convenience of network schedules. The National Football League has even crafted their timeouts to make 60 minutes of playing time on the “official” clock take a pretty consistent 3 hours for TV convenience.
But what we deliver in a “book” might be useful to its consumer as a mere fragment. One chunk — a chapter, a chart, or even a paragraph — might be the answer to somebody’s search and they wouldn’t need the rest of the book at all, even for a mere “consumer”. While it is true that professionals might only need the chorus of a song or a snippet of a movie, and the audio-visual world has a time-based identifier called the “umid” to allow identifying and defining those fragments, music copyright-owners never had the trepidation about having fragments delivered to potential customers on the web as a sample or tease the way certain publishers, say, of cookbooks, do.
Like the creators and disseminators of other media, publishers face the difficult challenge of maintaining an infrastructure on an audience base that is declining at least partly because some of the audience is moving ahead to the new digital world. This also does not have to be about theft. If some consumers buy their music from iTunes, there are consequent “critical mass” issues for the manufacture, storage, and shipment of the CDs for the record company and the maintenance of a physical retail infrastructure for the majority of customers who still prefer the 20th century model. The impact of this has already been pronounced in the audio-visual businesses and it could be that publishers and their bookstore channel are feeling early signs of the same pain.
Where book publishing really differs from music, TV, radio, and movies, though is that it is much more granular and diverse. Not only do we have a lot more discrete products than anybody else (500 new movies a year, maybe? and well over 100,000 new books!), book publishing serves a lot more purposes than other media, even than magazines — another industry challenged by digital change. Just acknowledging the basic segments of book publishing demonstrates that we have a number of quite different businesses operating here — different in their purpose and different in their economic models — and the impact of change is different on all of them.
Trade publishing is what most people you’d meet on the street think of as “publishing”; it is the consumer segment that reaches the public primarily through bookstores and libraries. And, for many reasons, it is trade on which we will focus in today’s conversation. But even trade publishing breaks down into segments. Some might see “fiction” and “non-fiction” as a good dividing line. A publisher recently suggested a better dividing line between books as entertainment and books providing information. For thinking about how the future will affect them, that’s a very good way to visualize it.
College and school publishing are quite distinct from each other as businesses, and neither of them has much to do with trade.
Professional publishing, which includes journals as well as books, is perhaps closer to college publishing than any of the other segments are to each other, although professional also shares characteristics with trade. Under professional publishing we could also include “directory” publishing, ranging from mass audience information like the Yellow Pages to industry verticals like Literary Marketplace, as well as scholarly journals.
Of all of these, we’d maintain that trade publishing has the toughest row to hoe into the new paradigms, whatever they end up being. All the other segments have markets which are somewhat institutionalized. Colleges and schools and professions have customers who adopt technology in groups and batches. General trade breaks into undefined segments whose take-up of technology is highly variable. As painful and difficult as it is for college publishers, say, to figure out what web-and-book or DVD-and-book combinations can be made to work, at least they can publish with a clear understanding of how much of their audience has broadband access or DVD players. Even when trade publishers think they know these things about the broad general audience, there is really no way to know it for any particular book. Non-trade publishers are certainly feeling pressure brought on by digital change, and many of them might find it hard to accept the notion that trade’s challenges are greater. However, I think we’ll demonstrate today that trade’s challenges are different than those faced in other segments and, as we said earlier, more akin to what the obviously-suffering music and movie industries face, with the complexity that publishing provides information as well as entertainment.
Digital change has already turned the world of trade publishing upside down in the last ten years.
Ten years ago today, there was virtually no online bookselling. Amazon dot com launched in July of 1995. Bookstacks had been live for a year at that point with no real impact.
Ten years ago today, the used book business hardly touched trade. Used books were highly scattered and effectively unavailable to any but the hardest-working consumer. You could do a “search”, all right, but you had to hire a professional antiquarian bookseller to actually do it for you and you sometimes had to wait weeks to get an answer.
Ten years ago today,the biggest calamity that digital information had inflicted on publishing was the crippling blow to Encyclopedia Britannica and World Book dealt by Microsoft’s Encarta. For those of you who have forgotten, Microsoft licensed the relatively weak Funk & Wagnalls encyclopedia, enhanced it on a CD-ROM, and then gave it away with new computers. Although Grolier and Compton’s had tried this idea earlier, Microsoft’s effort, very temporarily, changed the whole value proposition for encyclopedia. Up to that point, you bought one to make sure your kid got into college. Then you had to buy a computer for the same reason, and the encyclopedia came free. It is worth noting that this displacement was almost universally misunderstood by publishers, many of whom went headlong into CD-ROM development as a result. That error bled dollars so quickly that it only lasted for the blink of an eye.
Ten years ago today,the Internet was for university professors and the World Wide Web was unknown to more than 90% of the people. Citizens of the US could get to the net through Compuserve, but not yet through Prodigy or AOL. And Microsoft had plans for Microsoft Network, but no internet strategy. Amazing, but true.
And ten years ago today,there were a lot more independent bookstores for publishers to sell to and a lot more large-ish publishers for agents and packagers to sell to in all markets than there are now.
As profound as the change has been over the last ten years, we might see even more in the next ten years. There are a large number of forces in motion that have momentum that seems sure to continue our period of flux.
Internet bookselling today is variably estimated at 12-to-15 percent of all trade and professional book sales. But that’s an average and, admittedly, an arguable number. One publisher in a good position to know tells me he thinks it is 6% of the business and has plateaued. But one major University Press in the US told us that they sell more through Amazon today than through all other U.S. retail outlets combined! Although we may be in a period where web sales are not growing dynamically, there are all sorts of trends that suggest the sales through this channel will continue to accelerate in fits and starts: growth of broadband, more internet-savvy young people buying books, and improvements in product presentation on the web certainly being three of them.
Two new trends that will boost internet book sales are Amazon’s “Look Inside the Book” and Google Print. Apparently the French have been moved by the Google initiative to get more aggressive about putting French-language book material on the web so that it, too, can be found by spiders and turn up in searches. And Google has a foreign language initiative taking place as well, headquartered in Paris. We are only a very few years away from having the entire contents of the world’s greatest libraries available from every computer desktop.
The internet has turned out to be an effective facilitator of used book sales. Evidence about the precise impact — both the magnitude and whether backlist or frontlist is being more severely impacted — is still sketchy, although America’s Book Industry Study Group has an effort under way to examine it. But we know intuitively that seeing a lower-cost used book option when you search on Amazon for a title can’t possibly be helpful to the publisher’s or author’s revenue stream. This is a major concern of most publishers today; very few gave it a thought two years ago. Almost everybody seems stumped by this problem. The only solution I can see seems like a mighty long shot, but we’ll talk about that later.
Print-on-demand has grown to become a force, led by Ingram’s Lightning Print. But they are not alone. University of Chicago’s “Bibliovault” initiative is keeping many scholarly books in print. BookSurge has a network of printers for “distributed POD”, making the book as close as possible to the place it is needed. There are many effects of POD, but one of them is surely to keep old books that would have been gone and forgotten in continuous competition for the book customer’s dollar.
Writers have a few choices today that they didn’t have 10 years ago, which are likely to have an increasing economic impact. Blogs first hit my radar screen about 18 months ago; today everybody knows about them and any aspiring writer worth his salt has one. At the same time, “author service” companies like iUniverse and Author House make vanity publishing reputable and, under certain circumstances, profitable. Ten years ago — even FIVE years ago — an entrepreneur who gathered groups to teach them about finance or franchises or real estate and who wanted to have a book to sell or give to his group had little choice but to find a publisher. The publisher would get a deal with built-in, guaranteed, and highly profitable “buy backs”. It didn’t much matter whether the book sold through any public channel; the author could make it profitable. Today, that author uses a rent-a-company instead and keeps all the profits.
Audio books really began in the 1980s, when the Walkman cassette player became a standard item for many runners and exercisers, adding “installed base” to the tape players in automobiles. Sales of audio books have grown steadily since then, and some predict a new growth surge based on the growing use of the iPod. Audio books require real investment and expertise from publishers — it is a production based on a book, rather than a simple “repurposing” of the content. But it is definitely a growing piece of our business and it should continue to grow.
Ebook sales have been extremely disappointing to many of us — and I do mean us — who expected it to be the “next big thing”. It hasn’t been. But it continues to grow and as more and more of us carry around little computers (phones, Blackberries, PDAs) with one or many functions, ebooks will increasingly be discovered as a great convenience. Since Amazon has acquired Mobipocket, the one cross-platform ebook format, the book community may well be about to get a whole lot more ebook promotion than it has had in the recent past. The beauty of ebooks for publishers, of course, is that they are a simple repurposing of content and it only adds a smidgen to the cost of publication to add this channel for most titles. There are many — not including me, but definitely including people whose opinions I respect — who believe that ebooks will thrive when they start enhancing, updating, or commenting upon the content in the printed book itself. If that proves to be true, the ebook will still be a very low-cost new product and channel, relative to audio.
Mass merchants — Costco, Sam’s, Walmart, and others — discovered books some time ago, but increasingly efficient systems from wholesalers make it easier and easier for them to stock a wider range of titles without solving the problems of buying that have always bedeviled bookstores. Of course, they can’t really become bookstores, but they surely can hurt bookstores. They already have. They sell a lot of books. This is often very good for publishers and authors, but their growth is not without real risks. Since the mass merchants have become the primary channel for the biggest sellers, we are evolving a two-tier retail distribution system: mass merchants for the biggest sellers, Barnes & Noble and other large bookstores for everything else.
The network of large general trade bookstores, along with libraries, constitutes the essential backbone of the trade publishing business. Because of them, hundreds of thousands of titles are in broad general physical distribution on this continent. Consolidation over the past ten years means that trade publishing in North America depends on the financial health of two companies in America — Barnes & Noble and Borders — and one in Canada — Indigo. This aspect of consolidation is one “trend” that better have reached its end, for all our sakes. That is a strategic reality no trade-dependent publisher should ignore.
The infrastructure a publisher needs to compete is getting more and more expensive. In the past ten years, several of the biggest publishers have gone for SAP systems installations. Some have worked well, some have been disastrous, but all have been terribly expensive. These systems spur the movement for consolidation, about which more later.
At the same time that investment demands are rising, the sources of capital for trade book publishers seem to be diminishing. Those large enterprises which own trade publishers and are diversified — like Viacom, TimeWarner, and Pearson — seem less and less inclined to throw cash consumer publishing’s way.
Advertising on the Internet, which looked good in the 1990s and looked very bad for a few years after the turn of the century, seems to have come around. Page views can now be monetized and, at least for the moment, there is really demand for all the pages which are open to ads. This is a potential opportunity for publishers which very few today seem to be aware of.
Consolidation continues among trade book publishers in every market. This is a continuing quest for “scale”, which is every publisher’s perpetual goal. The publishers’ problem is very complicated. Increased systems costs require increased volumes to support them, but publishers are being hit by a double whammy. Backlist sales appear to be declining and publishers all know it is harder and harder to publish a new title successfully, so many are trying to cut their lists. Then where can the necessary volume growth come from? The short-term answer seems to be “distribution clients”, which has created a buyer’s market for distribution services today such as has never been seen in the industry before. The recent entry of Random House and Ingram in the US into what was already a field crowded field of dedicated players like PGW, NBN, CDS, IPG, Consortium and others along with big publishers like Harper, Simon, and Holtzbrinck, tells us that a shakeout is bound to happen in the months and years to come. We seem to have more warehouses and computer systems than the sales can support.
Perseus tacitly acknowleged that reality last week. When they left their longtime distribution arrangement with HarperCollins, they then bought former indie distributor CDS. That way Perseus took care of their own distribution needs with a back end already subsidized by distributed lines and gave themselves a platform to create further growth by taking on additional distribution clients of their own.
The English-language market has become increasingly unified across territories, so it has become necessary to coordinate the launch of a title globally. This adds power to the large trans-national companies, but it is not the best thing for every book in every market. Every agent, editor, and author knows about books that didn’t get the treatment they should have in a market outside of where they were acquired. But every publisher knows about sales that were lost through inadequate coordination or profits that were lost by selling off rights rather than keeping a book in-house in all territories. This is an area that might even become legally contentious for publishers, because their best financial interests and the author’s often diverge on the most profitable way to exploit foreign territories, and the publisher is supposed to be a fiduciary working on the author’s behalf when it comes to foreign rights.
Another clear trend of the past ten years which one assumes will continue into the future is a great paradox. On the one hand, more and more of the market share is being taken by the top handful of titles, say the top 200, following the “power law distribution” articulated by digital analyst Clay Shirky of shirky.com. On the other hand, the becoming-famous “long tail”, identified by Chris Anderson in “Wired” last year and soon to be the subject of a book by him, is getting longer and longer; more and more titles are dividing the market that is left. This is particularly painful for publishers because the top titles are usually known in advance. With guaranteed volume so desperately needed, due to the scale issues we touched on earlier, publishers will pay a premium for books they know will sell. So the big profit in the big sellers is often gone before they’re published, while the rest of the books fight for pennies and nickels, rather than nickels and dimes!
A publisher friend of mine who read this speech to give me comments observed that, in fact, the business rules in big publishing houses would encourage them to both overprint and overprice the book for which they had overpaid which makes it that much harder to realize a profit on books that provide the surest volume. He’s right about that, which is a subject we’ll explore in greater detail tomorrow.
I want to spend a moment contemplating the possibility that Walmart suddenly jumps into the trade book business with both feet. Now, I have seen no signs from Bentonville that they plan to do this and, in fact, a limited title strategy is more consistent with their overall store presentation than a full bookstore inside Walmart would be. And there are challenges to becoming a full bookstore that I don’t think Walmart wants to tackle: inventory management, clerk knowledge, the special ordering requirement, and the sheer granularity of merchandising and promotion when you are dealing with tens of thousands of titles, let alone hundreds of thousands.
But if Walmart were to make the decision to try a more ambitious approach to bookselling, publishers would be placed at extreme risk. Imagine the size of the order publishers would be getting if Walmart suddenly stocked 2800 stores with backlist! Many titles would have to be reprinted to supply it. But, if it doesn’t work, if the books generally don’t sell to expectations, imagine the consequences of seeing much of it come back three months, six months, or a year later. The “risks” associated with shipping a large returnable order to Barnes & Noble, Borders, or Indigo are well known. The risks associated with shipping to AMS for price clubs are also known, and they are great, but the number of titles involved is limited. Can trade publishing take on the risks of Walmart becoming a full-line bookseller? Only at great peril.
When we started this discussion, I made the point that general trade publishing was the most challenged branch of our business going into the future. Part of the reason for that is that so many dollars are burned making decisions. Acquiring title-by-title as agents put things in front of you and then marketing title-by-title, where each book has a different audience and requires a unique marketing campaign, is a very expensive way to run a business. With the bestsellers becoming less profitable over time, it may be a doomed way to run a business.
Publishers seem to be seeing that. Trade publishers today grow two ways: by acquiring other people’s backlists and by taking on other people’s lists for distribution. Many houses have initiatives to sell more backlist, but that is usually a response to the fact that sales are already declining. And not everything scales. Publishers worldwide should take note of the Canada-based Raincoast strategy of having two distinct distribution organizations (and a publisher and a wholesaler) operating out of the same warehouse, billing on the same invoice. Warehouses and billing systems “scale.” Sales and marketing organizations often do not. What Raincoast has done is similar to publishers having many imprints but even those, as we have seen as imprints like Fourth Estate disappear in the US, have scale requirements which can be challenging to meet.
So, what’s a publisher to do to survive — or even to thrive — through the changes of the next ten years? Here are a few suggestions.
ONE. Mimimize the need for one-title-at-a-time acquisition and marketing by developing lines and alliances that enable one set of acquisition decisions, packaging decisions, and marketing decisions to be spread across many titles. And a subset of this concept is to create rubrics into which at least some of the titles that are acquired individually can be placed.
Here’s an example from my own real life. Our company operates a baseball history web site called BaseballLibrary.com. As a result, I found myself several years ago with a slew of baseball trivia questions and answers, enough to aggregate into a book. When I suggested the book to Charles Nurnberg of Sterling, he said “I can make a Little Giant Encyclopedia out of it.” So he put it in his line of Little Giant Encyclopedias, with a standard trim size, page length, and price. That gave the book marketing impetus and distribution opportunities it would never have had as a stand-alone. We earned five times the advance in royalties over a few years and Sterling has just published a brand new, and updated, version. I have no doubt that Sterling’s marketing, production, and decision-making costs were lower because they had this line in which to place the book, and that our royalties were higher for the same reason.
TWO. Develop non-trade revenue sources for your content. Whether by selling content on the web, building traffic that can be monetized on the web, creating “custom” books for “private labeling”, or simply distributing through non-trade retail channels, it is critical for a publisher who wants to survive to find non-trade legs to stand on.
This is a good time to raise another concern about the transitions trade publishers face. Almost any book that is selling an aggregation of individual intellectual items: a cookbook, most obviously; books of craft or hobby projects; dictionaries and encyclopedias and references of all kinds; is bound for some path of demand reduction, if not extinction, as people take this information one item at a time on the Web. That’s certainly how I look up every word I encounter that I don’t know and it is how I always look for a restaurant. I used books for those purposes five years ago. Although in the case of the restaurants, I still use Zagats! And I still pay them. There’s a lesson in that.
If I were a publisher with a cookbook line, I’d have every recipe I owned on the Web. How it should be organized, what should be free and whether anything can actually be sold, how to manage the various brand equities and create new ones, how to aggregate other people’s content into the Web offering to create additional value — these are all really good questions that would need to be answered. The publisher of cookbooks is competing as directly with every web purveyor of recipes as he is with other cookbook publishers. To own the content and not be pursuing what is obviously one of the next great channels for exploiting it just can’t be the right strategy.
It is also worth touching here on the cell phone channel. Both Random House and Wiley have recently announced deals in that space. Cell phones are like web sites in that they distribute digitally, but they also have a built-in meter and billing system. This will make them a preferred channel for publishers to experiment. Some of the disaggregated content we referred to a moment ago — let’s say you’re looking for a hotel room in Paris — fits really well into this channel. And the cell equivalent of 1-900-dictionary would be a natural.
THREE. Develop virtual relationships with end-users. Publishers can do this in aggregates, by signing up reading groups and developing subject-specific web sites and blogs. But it can also be as simple as doing the basics: collecting email alert lists for specific authors or book subjects, for example. This is not primarily about direct selling of books, although it can be. It is about driving interest and sales via an almost-free alert system that can be activated the minute a book is available. Any publisher not already collecting and archiving email addresses is at least a step behind the survival race over the coming years.
FOUR. Put forth some effort to understand the nature and extent of the erosion from used book sales. It seems inevitable that used book sales will start to have an impact on the biggest books and authors; perhaps it already has. In time, if not already, this will affect the calculations publishers make on what advance payments make sense for big books. A recent article about Penguin documented book-to book sales slippage of the titles from some of their lead authors. Is that due to “mature” authors suffering a natural erosion? Or is it part of a new phenomenom that all publishers will be dealing with over time? Nobody really knows, but publishers plunking down big bucks for a book to be published a year or two from now really should be trying to find out. My hunch is that the first place publishers will really feel a negative impact from used book sales is on the paperback edition that follows the hardcover of a big book.
There is also likely to be a difference here between books people tend to read once, like narrative fiction and non-fiction, and books people would keep to refer to, such as references or collections of recipes and projects. It is reasonable to assume that the “read-once” books get recycled more often.
FIVE.Make sure your internal decision-making formulas aren’t putting bull’s-eyes on your feet. Acquisition formulas that contain hefty allocations for overheads, or that allow retail price increases without postulating a sales reduction as a result, or that tempt you to print books you’ll never sell, do systematic harm to your business. The two most common financial mistakes publishers make are charging high overheads to every transaction or, the twin, requiring a certain percentage gross margin for each sale or publication. Both of these tend to shut off incremental margin dollars and will make survival harder, not easier. Publishers have, for years, thought in terms of percentages and unit costs rather than real dollars. That was never correct thinking, but nobody can afford any longer to make the mistakes those scorecards inevitably lead to.
SIX. Keep your marketing efforts for books going longer than you used to. Word of mouth, even on the Internet, builds over time. And the Internet keeps your books available, virtually forever. I always likened our publishing efforts as being akin to launching rockets. Either they went into orbit or they crashed to earth. They should be more like guided missiles, steered and directed until they hit a target.
This is a good time for me to express the opinion that the three publishers in the US who seem to do the most things right are, in alphabetical order, HarperCollins, Sterling, and John Wiley. This particular point about marketing was expressed recently by Harper CEO Jane Friedman when she was asked to explain her company’s recent success. She said she thought part of the explanation was that they sustained their marketing efforts for each title longer than they used to. Charles Nurnberg of Sterling has made the obvious, but often forgotten, point that “no matter how old it actually is, every book is new to a customer who didn’t know about it before.”
SEVEN. Think in “verticals” for acquisition, marketing, and sales. One defining characteristic of two of the three companies whose current work I admire — Sterling and Wiley — is that they try to “own” subjects. Most of their programs fall within subject niches that they mine in both depth and breadth. This reduces acquisition costs and editorial development costs; it creates marketing efficiencies which are increasingly pronounced in the Internet age; and it creates “critical masses” that enable much more aggressive special sales efforts. This is the corollary to the rule of minimizing “one-at-a-time” publishing.
EIGHT. Make sure all your content is “agile”: XML-tagged. Setting up XML-compatible editorial, production, and marketing procedures may require some painful process reengineering, but it is necessary both for survival and to maximize the value of your assets if your company is ever sold. The right procedures can make ebook and POD exploitation virtually “free”, give you the flexibility to use material on the Web inexpensively, and allow repurposing and recombining pieces of your books into new products efficiently. Obviously, this is less important for a novel than it is for a cookbook, but once the processes are established correctly, all of your books will benefit.
The ability to get multiple uses from the same content will be one of the most important distinctions that separate the publishers who will be here 10 years from now from the ones that don’t survive.
NINE. Do all of your narrative books — fiction or non-fiction — as ebooks. Even as low as the sales are, the costs can be covered if you have the right production processes. Ebooks get a tad more complicated if there are charts or illustrations that are integral to the presentation and they don’t apply in today’s world to heavily-illustrated books. But ebooks, along with audio books, are a growing segment (although ebooks have a much lower base today than audio), and you want to be participating in any growing segment to the extent you can. And ebook participation is very cheap.
TEN. Monitor and manage inventories rigorously, relentlessly, and thoroughly throughout the world. In today’s world, you can get a sales and inventory feed from virtually every account holding significant inventories of your books. Some make it easy, some make it hard, but all of them can do it. That means you can always know a lot about your supply chain exposure on a title you are reprinting. Reducing inventory obsolescence year to year must be a key metric for your business from now on; it is one sure way to help you compensate for declining markets and margins. Even measuring obsolescence on an annual basis isn’t easy; you don’t always pulp or remainder books in the year you created the obsolescence, and that is what you want to be measuring. But this is a key area in which to put management effort that will plug leaks that spring up in every publishing boat.
ELEVEN. Manage all your customers in databases and, from now on, that means both end user customers and your time-honored list of intermediaries. Sometimes you will need to tie the individuals TO the intermediaries in your database. If there is one thing you can be sure of, it is that the successful publishers of ten and twenty years from now — regardless of what “form” books and publishers have taken by then — will have clear and segmented customer lists to put against every title being considered or published. The gardening book publisher must have email and URL lists of greenhouses, seed merchants, and, of course, gardeners. The gardening publisher who doesn’t build those lists will either sell out to, or have its assets acquired by, the gardening publisher who does.
TWELVE. Make sure all your books are ready to be sold and publicized by computers talking to computers. That requires that a publisher know and understand how to use every metadata scheme: ISBN-13, DOIs, IPIs, and particularly ONIX — all of them. This is not a simple matter. For example, let’s consider the DOI, the digital object identifier. What it allows is for a particular snippet of a book, wherever it appears on the Internet, to be traced back to the book and publisher from which it originated. But a DOI can be assigned to a book, a chapter, a picture, even a sentence! Defining the process by which various bits and chunks of a book get a DOI when they need one will entail significant management attention and expense. Indeed, it can be a bottomless pit if it isn’t managed well. But it also will, over time, provide an increasing competitive advantage for publishers that employ it over those who don’t.
THIRTEEN. Use the power all publishers have to promote URLs — internet Web addresses — to build cumulative traffic over many websites and then monetize the page views! Every publisher should be putting authors in business on blogs, if they didn’t come that way in the first place. Every publisher should be developing sites that contain vertical aggregations of their content. Organizations that publish hundreds or thousands of titles annually, selling millions of units, can pretty painlessly create a large amount of web traffic. Internet page rates will have ups and downs, but with potentially millions of page views under their control, publishers will be able to add real revenues over time. There are complicated issues to be worked out about how that revenue will be realized and then divided, but the process of creating sites, publicizing URLs, and creating traffic that can be monetized, should have already begun.
FOURTEEN. I want to close with the hardest suggestions to implement of all those I can offer, because they are really industry solutions that are costly to an individual company and have little impact if others don’t go along. Of course, any agreement among publishers to implement them would be illegal in the US, and probably elsewhere. But I break no laws throwing the thoughts out there and I think they are important.
The first is to point out that remaindering is gasoline on the fire of the used book market. Although retailers love remainders, I think everybody really suffers because they exist. Not only do they enable customers to buy substitutes for full-priced books that neither the publisher nor the author make a profit on, they devalue the retail prices publishers establish. The one case where a company would almost certainly help itself by ceasing remainders is with a brand name, repeat author. Repeat customers learn pretty quickly if they can wait a few months and save more than half the price on a book. Increases over the last book by successful authors are going to get harder and harder to achieve anyhow; remainders just add another obstacle.
The second is to suggest an ambitious solution to the used book problem: a worldwide mandated “royalty” on every used book sold, to be shared between the author and the publisher. There are a lot of complications to such a scheme and it will take a lot of cooperation among a lot of people to make such a thing happen. But the used book problem will potentially kill large segments of our industry unless it is addressed; I can’t even think of another theoretical antidote. With apologies to Sherlock Holmes, having eliminated everything else as impossible, I am left with this as the only answer.
And the last near-impossible industry-wide point harkens back to something we touched on earlier: the critical importance of the full-line trade bookstore to trade publishers. It is a sad fact — to my mind it is actually a silent scandal — that virtually every publisher in the US gives more favorable margins to NON-book stores than to bookstores. When our customer buys a book at a mass merchant, the add-on purchase is more likely to be a garden hose than it is another book. But, even more important, we depend on the survival of bookstores for our entire trade book industry. If one of the big three in North America goes down, the pain will be much more widespread than if one of the big mass merchants ceases to sell books. This is something far more dependent on publishers’ policies than most of us would care to admit. I am certain that if every publisher vowed today that no non-book retailer would ever get more margin than a full-line book retailer does, we’d have a much healthier industry, even if some bestsellers sold fewer total copies. But I’m afraid we can put this one under the heading of “it will never happen”, unless, of course, the community of full-line book retailers finds some legal way to make it happen.
As much as the trade publishing industry has changed over the past ten years, we’re certainly not done changing yet. I hope these suggestions, and a slew of other ideas you will pick up from the distinguished group of thinkers assembled for this conference, will help assure that the people in this room are among the survivors and thrivers a decade hence.