Good morning. I hope to give you a few things to think about today. And maybe even things to act on without much further thought.
We’re going to start with a view of what digital technology could mean to the overall world of communication over the next decade or two. What the history of the Internet seems to be telling us so far is that we will see a growth in niche organization — what people like to call “community” on the web — and a corresponding decline in horizontal media, which is much more threatening to magazines, newspapers, and broadcast than it is to us in the book business. But it will change us too.
I have some real skepticism about how general trade publishing maps into this future world which I’ll also elaborate on.
The two together will beg the question, but “what do we do?” And we’ll tackle that question too. Some of the answers are to simply “get more efficient” and nobody can really argue with that, but other answers require a change in thinking that I think plenty of people will argue with.
And, before the end, I want to introduce you to a new model for publishing books to small audiences that is already being used by many American university presses, and which I think might well apply to the publishing primarily intended for your home market as well.
Since I have now been in your hemisphere for 36 hours, I am quite sure my ignorance of your local perspective will show. I am going to deliver you what is, admittedly, a set of facts and opinions formed by extensive experience with the publishing communities in New York and London. You will recognize what I don’t know and, I hope, over the next couple of days, educate me a bit about that.
But I DO know you’re different in many ways.
For one thing, a big chunk of the books sold in Australian shops were written and commissioned half a world away. Although data from 2004 says that sales of non-fiction books in Australia are 75% of domestic origin, more than half of your fiction and children’s books originate abroad.
And I know that, whatever copyright law says or corporate practices require, your territorial rights are protected by vast oceans between you and most potential commercial violators. Of course, consumers going to Amazon, even without a local operation here, create increased buying around that can’t effectively be stopped.
But you’re not completely insulated even commercially, because most of your biggest publishers are branches of multi-nationals. Their overall economic health, a big chunk of their output, their employment practices; all are at least somewhat dependent on the performance of their parent companies in the US and UK. That means that the health of your book trade is tied to theirs.
And if most of the books sold in your shops come from those companies, that means the locally produced books are living in an ecosystem that depends on books from elsewhere as well.
So if anything I say sounds strange or alien, indeed, it might be. But it should still be of interest for two reasons. One is that it is affecting big parts of your biggest publishing enterprises. And the other is that what we’re feeling across the world today might hit here tomorrow, even if it hasn’t been evident yet. You know the story: the bomb may have exploded a while ago, but the radiation could still be travelling through the atmosphere. You can’t imagine what I had to fly through to get here!
If anybody came to today’s sessions thinking book publishers don’t have to change in the decade or two to come, that we can just keep doing things about as we have for the past 100 years or so, I would ask them, “why should books be different from EVERYthing else?”
Where I come from, newspapers are desperately changing their models, even though they are still throwing off cash profits. They can see that they’re being squeezed from all sides. The big national stories are all reported, absorbed, and discussed by the most alert parts of their audience before they can get print into the hands of a consumer. The classified ads have just about completely deserted them, for general sites like Craig’s List or eBay or for specialist sites that sell real estate and cars. The most local of the information they provide, about community school boards or local town governments, has become the material of blogs and bulletin boards. So the smartest newspapers are trying all manner of new models, including “crowd-sourcing”, where the site visitors become the reporters and the professional organization provides the editors. That’s radical, but it is being pioneered by Gannett in the US, which is has always been a pretty conventional organization. They are also the publishers of the only intentionally national general newspaper in the US: USA Today.
Magazines are also struggling with their models. Major companies like Hachette and Time Inc are shuffling their portfolios, and trying experiments where they go web-only with some publications to avoid the costs of physical production and distribution.
Both newspapers and magazines are generating real revenues on the web; the problem is that those revenues aren’t sufficient to replace what they are losing in print. So they’re running hard on a treadmill that moves a little faster and gets pitched a little steeper every day. It will get hard to stay on when that treadmill is perpendicular to the floor.
Movies and TV have also seen their business models turned upside down. This was happening even before YouTube turned the digital download from a phenomenon into a common event. But as we approach the day when the Net, through downloading or streaming, is the primary distribution mechanism for visual entertainment, all of the structural advantages of the big companies are being erased. Movie studios used to control distribution. TV networks used to dominate audiences. And not long ago, either.
And music? We ALL know what THEY are going through. Similar story in its way. Digital downloads are selling like crazy, but they aren’t selling fast enough to replace the decline in CD sales. The whole concept of an “album”; 8 or 10 or 12 or 15 songs by one artist sold in a bundle, is headed for extinction. In the very first speech I gave about digital change, at a book convention in the US in 1994 or 1995, I said “thank goodness we’re not in the music business.” That’s one prediction that turned out to be correct.
But even though we’ve seen our business get tougher in many ways, some of the predictions made at the turn of the century for big changes in this decade, such as disruptive ebook takeup, just haven’t come true. The book business has, arguably, been less affected than any of the other major media by digital change. Or maybe I shouldn’t say “arguably.” Maybe I should say “apparently.” And CERTAINLY I should say “so far.”
But it is true that books are different, as we in the business frequently explain to others to defend practices — like, say, returns or the lack of test-marketing or the dearth of space advertising — that seem strange to people from other industries.
First of all, books are — again I’d say, so far — not advertising-supported. Many of the problems of newspapers, magazines, and television have to do with the flight of advertising dollars to the web, and the desire of advertisers for better targeting and more interactivity, which the old media forms can’t supply.
And books have also been insulated from digital change by the “user experience.” Your ears don’t care whether the music got to the speakers or headphones via a CD played through a stereo system or by a digital download into your iPod. When you watch a movie on a screen of any size, you see the same movie made larger or smaller to fit the screen you’ve chosen for the purpose.
But an ebook is qualitatively different from a paper book. It feels different. And your interaction with it — and page-turning doesn’t really have an equivalent for music or video; nor does underlining or dog-earing a page — is distinctly different. Of course, while we’ve been telling each other in the book business that “people don’t want to read on a screen”, people ARE reading on a screen. Most people in this room read on a screen for many hours every day. Most of us just don’t read BOOKS. But just about all of us read emails and articles and reports and spreadsheets. That books are not among what we read is not something the book business should be proud of.
So it appears that the book, as a form, locks in users in ways that a Walkman and a movie screen and a daily broadsheet didn’t.
One thing the web does very well is disaggregate and reaggregate content. All newspapers and almost all magazines are content aggregations, collections of content “nuggets” that can each stand without the rest of the aggregation. That characteristic immediately confers an advantage on electronic delivery.
And those books which are aggregates of nuggets of information have been the first to be negatively affected by the electronic delivery of information. There has been much more turmoil lately in the market for gardening books, or computer instruction books, or travel books than in fiction or biography. Some books “chunk” very easily. If people want chunks of content, not long narratives, the barriers to electronic consumption fall very fast.
Still, in many ways, the media story of the last 15 or 20 years could be the resilience of the book form. Book publishers, particularly consumer book publishers, have managed to keep their product and their business practices pretty close to what they’ve been for a century. I don’t think the next 15 or 20 years will be quite as change-free.
Let’s start with this fact. The progress being made at expanding storage capacity for digital information will lead us to an iPod in 2020 that would hold every movie, every TV show, every sound recording, and every book ever created in the history of man. That’s what you would be able to hold in your hand, unconnected to the Internet, and read or view with a couple of clicks. That’s competition the book never had before.
There will also be new screens abounding. You may be aware of the Sony reader and other devices like the iRex now using what is called e-ink. These screens will be flexible and foldable; they’ll be able to be read under the same light conditions in which ink on paper can be read. You’ll also be able to “throw” the content from your iPod containing everything — or everything on which rights have cleared — to larger screens mounted on walls or placed on desktops.
In fact, you’ll likely be able to throw content to your own home print-and-bind machine, if you remain pervy for paper. That preserves the paper book “experience”, but it doesn’t do much for the paper book supply chain.
As we’ve touched on and will elaborate on shortly, today’s mass audiences will be fragmenting into niches. That will certainly create niche publishing opportunities, but it will make it increasingly difficult to pull audiences across niches. The horizontal — cross-niche — media we have been used to, particularly newspapers and TV, will find the niche-interest world increasingly difficult to navigate.
Because the net will create niche communities, within which the costs of marketing and distribution will drop to near zero and with each containing many potential content creators, the capital and organizational barriers to competition for publishers will also come down. Publishers will find more and more frequently that the book they’ve planned has been beaten to the market by something not quite as good and not quite as professional, but “good enough” to spoil their commercial prospects.
And book publishers can’t be helped by the dying off of the population that formed all its media consumption habits in a simpler world with less competition and less choice. Can anybody really doubt that today’s kids will be more comfortable reading something other than bound paper when they are adults 15 or 20 years from now?
So change from where we’ve been and where we are now is inevitable. People will be consuming information differently and that includes much information which has, historically, been found in books. Markets will also be organized and reached differently. Since publishers are about bringing content to markets, and both components of that equation are undergoing a transformation, publishers can’t expect to just continue historical practices if they want to survive.
Let’s take a look at publishing’s position in the bigger world, the ecosystem in which book publishing lives.
Up until what seems like about 15 minutes ago, people got their information more or less the same way for about a century. The fresh news came to them through daily newspapers, radio, and, for the last 50 years, television. Although different countries have different patterns and combinations of local and national print and broadcast media, those choices were certainly limited. And until the 1980s and the proliferation of TV choices engendered by cable TV, almost all news was at least hours old and vetted by professionals before it was delivered. We need to remember that this was our routine for nearly 100 years.
It may need to be emphasized that the information we are talking about here includes information about books: reviews or author profiles or interviews. After all, we learn about books through the same media forms, and often from the same media, that tell us about everything else.
For greater depth of information than newspapers or broadcast media delivered, or to aggregate information about a specific subject, people turned to magazines and to — books.
Further depth could be found in libraries, where archives of old books and magazines sit side-by-side with new issues, and with librarians to help with navigation and, increasingly in the last quarter of the 20th century, electronic databases and archives augmenting the offering as well.
And, of course, we in the book business have always been aware of the importance of personal recommendations, which we call “word of mouth.” Until very recently, of course, “word of mouth” could only be delivered by telephone, snail mail, or face-to-face. That created inherent limitations on how much information flowed, or what we would call today “limited bandwidth.”
One more time: included in this information flow was the information about books, not just the information in books.
Now let’s consider how people seek and get infomation today, which are various ways to use the Internet.
The first thing anybody looking for information does is “search” for it, which more than half the time means “Google” it.
Most people sign up for email alerts from a variety of sources; slightly more sophisticated Internet users get RSS feeds straight to their browser instead of email.
Increasingly, information travels to people through personal networking sites, such as MySpace, where telling your “friends”, a word in the process of redefinition, is part and parcel of the experience.
And people exchange information among each other by a proliferating array of tools: email, of course, but also instant-messaging on the computer, text-messaging on the phone, and by tagging content, posting to sites like deli.cio.us, and blogging.
And all of these new means of getting information are making the old means less and less relevant. You know what is in the newspaper before you read it and what is on the evening news before you see it. You’ve been told about a book or a movie or a joke by your friends or a trusted web resource — or by your friends forwarding something to you from a trusted web resource — before any of the “old media” can deliver it to you.
This is all part of the shift from “horizontal” to “vertical”. When you choose your information sources from the Net, you get just what you want without the rest. It would be as though your newspaper skipped the funnies, beefing up on the financial news and mine skipped the TV listings, beefing up on the sports reporting. What we used to call the “Daily Me” ten years ago — a customized newspaper we imagined would be the new vehicle of choice on the net — has happened piecemeal.
Now, pardon a US-based example, but I’m sure it replicates elsewhere. Until the 1970s, three national TV networks shared the entire national audience, undiluted by many distractions, some of which compete for the TV screen itself, which exist today. This is horizontal programming writ large; every show had to be tolerable, if not satisfying, to about a third of a very large country. Now there are five networks competing for about a third of the national audience — two-thirds having switched their TV watching to one of hundreds of smaller channels, or to DVDs, or to nothing at all.
When TV was truly mass, the budgets for the TV shows themselves reflected it. With the attention of many tens of millions of American viewers to pay for it, they could afford to spend a lot for talent and production values. With those audiences reduced by half and half again, the production budgets must be slashed to suit. That further reduces the audiences for mass, or horizontal, or cross-niche programming. Meanwhile, every niche is getting more and more robust on the web: more content, easier navigation, more community participation.
In the world of 20th century media, books were the tool to provide content to niche audiences. You could barely do a TV show on a subject as narrow as “gardening.” But you could do a book on “vegetable gardens” or “house plants.” The bigger the audience you need to support the content form, the harder it is to get granular with the information you deliver.
In the world of 21st century media, books need a lot more audience to be viable than a web site does.
As a result of the changes in media we’ve talked about, and some others, there are a number of global realities that I believe the book business will face in the next two decades.
Last month, at BookExpo America in New York, I delivered a talk called The End of General Trade Publishing Houses. It’s on the web at www.idealog.com/speeches/endoftrade.htm. That speech was as long as this one, so I won’t try to repeat it here now. But the gist is this: the niche world that we’re heading toward and the drying up of horizontal media will make it increasingly difficult for a format-specific play, regardless of market, to be commercially viable. We’re going to find publishers — even the biggest ones — obliged to specialize so that their marketing efforts build on each other in the niche world we’re all going to be living in. Since the biggest providers of product to the Australian book trade are general trade houses based in New York and London, this change will certainly be felt here.
We are also bound to see a diminution of publishers’ territorial control. Online bookselling, spearheaded by Amazon, is already making sure of that. If the price differential between the locally-sold edition and one available in another market is large enough, and the consumer is patient enough, ordering from another market becomes a desirable option and it is easy to do. The British territory is under threat from American-origin books coming in through Europe, if not directly from American wholesalers. American wholesalers Ingram and Baker & Taylor serve Canada like a home market. They are much more disruptive to local rights than they are here in Australia, and I know your book trade heavily depends on them already. Saying how close we’ll be to a laissez-faire market in two decades can only be conjecture, but it is pretty clear that territorial protections are getting weaker as time passes.
This is a good point at which to mention another problem the internet has delivered to today’s publishers: the ubiquitous availability of used books. This is a headache, and it isn’t going away. Amazon very cheekily runs their used book marketplace right alongside their new book offers; you search for a book and they really don’t care which way you buy it. So used books are out of the low-rent neighborhood on the other side of the tracks; they’re being displayed right alongside the pristine new copies. We don’t know how much this is costing in sales, but it is certainly costing something.
I asked a couple of experts I know how used books fit into the picture of protected territories. The answer I got was that they don’t fit in at all; they don’t count. So Norton in the US may not be allowed to sell a book for which they only have US rights in Australia, but if my sister buys a copy in the US, she can then sell that book to somebody in Australia without breaking any laws. So even if you could get Amazon.com to perform perfectly within your borders on the sale of new books on which they don’t have rights, they could still sell the used books, which are even more troublesome from a price-competition point of view.
Internet retailing and print-on-demand each are playing their part in reconfiguring the supply chain. The more we go “direct to consumer” by internet ordering and common carrier delivery, the more we enable used books to compete with new; printed-on-demand books to compete with press runs; and customized books to compete with standardized publishers’ editions.
We will also increasingly see rich media tied to books. At O’Reilly’s “Tools of Change” conference in San Jose last month, the show-stopper was a technology called bLink by which digital content gets linked right into physical books by printing “links” in conductive ink on the same page as the text. Of course, you need to be reading the book nearby a computer to make use of this feature, but it underscores the fact that text, or text and pictures, need not be “stand-alones” anymore.
As we know, material that will be read on a screen can readily contain audio or video or hyperlinked text or databases. As more and more original content is created for online consumption, text being supported by rich media will become a pretty routine experience for many readers. That’s a challenge for publishers who have traditionally worked in print, but it is a challenge that is already being met in ways we will elaborate on in a few minutes.
Publishing is also transitioning from being driven by deadlines and editions to becoming continuous. This is clearly a much more relevant concern to The New York Times than it is to Random House, or even to Wiley or McGraw-Hill more than it is to Random House. Publishing in non-fiction areas, particularly fast-changing ones like politics or science, will require constant updating. The market will expect it. But this can be as much an opportunity as a problem.
For example, one client of ours publishes many books on crafts. For years, they would publish “resource directories” in the backs of their books: lists of the retailers that would sell you the yarn or the buttons, or which offered the classes in a particular technique introduced in the book. This created a problem for them in the old days: these resource directories would be out of date by the time the book came out and would be more trouble to update on future printings than the effort was worth.
So, some years ago, the publisher moved the resource directories for each book to the web, with a URL provided in the book. That solved the problem, and now is creating an opportunity.
The directories were created book-by-book, and offered in book-defined silos on the web. They can now be easily reorganized into one big database of crafts resources. When it is reorganized and launched, it will be both a branding tool and an independent revenue center on the web. It takes the requirement of perpetual publishing — because you can’t do resource directories without updating them continuously — and turns it into a revenue center.
So we can project a bit, understanding the changes that have already taken place over the past couple of decades in how people get information and how communities cluster together on the web, and see the outline of our future niche information world.
Niche communities will exist — if they don’t already — for every imaginable subject. Over time, aggregators will pull together diverse web efforts, blogs, and commentary. Members of the community will review the information, tag it, rate it, append to it.
Over time, preferred channels will develop for each niche and become established. Whoever controls those channels, which are web sites, will, in effect, “own” the audiences to which they lead.
The audiences themselves are “players”. They create content, their rating and appending and tagging are, in effect, huge components of both the editorial and marketing functions in the 21st century.
Because information searches, content creation, and, ultimately, the community conversation move to these web niches, so does the power of “brand.” These web communities will be influenced locally, not globally, in an informational, not geographical, sense. Whether the discussion is about knitting stitches or surfing or literary translations, the community that forms around the information and discussion leadership will be the first stop for any marketer promoting an idea or a product to this niche. And that community will know whom it trusts, and it will confer credibility based at least partly on familiarity. The brand identity will have to be established niche by niche.
Of course, the niches ultimately interact. The niche for “military uniforms” will exist within the niches for each country’s military or within the niches for particular wars. Marketers of the future will need to understand the taxonomies of their interests as they evolve, which they will constantly do.
So these niches are organizing, tagging, and rating various nuggets of information in any conceivable media form and, to the extent that rights issues don’t interfere, making all those nuggets available to be read, viewed, or listened to, always with the ability to add one’s own comment or rating, and all of it deliverable to a device no larger than today’s iPod that can be carried in a pocket.
Quite aside from how the systems of information distribution will reconfigure, and how people learn about what they want to read will change, there are the questions about reading on paper and reading long narratives in any form. Everybody in this room grew up in a world where we had no choice about paper and with very clear expectations about long forms. Today’s youth are already in a completely changed information environment. Texting and instant-messaging and emailing and blog posting all exist without paper and place a premium on brevity. What impact will this have on reading habits?
Well, truthfully, nobody knows. Nobody can know. Can a generation that grew up reading more on screens than anywhere else develop the affection we have — the addiction we have — to reading on paper?
Whether we are reading on paper or screens, will the text-message generation have the patience and interest to read 50,000 or 100,000 or more words on a single subject or constituting a single narrative? Perhaps not, if attention spans are truncated. But perhaps with greater enthusiasm than ever, to get a dose of sustained thinking in an increasingly attention-deficited world.
We know that the music-listeners are moving away from albums to songs. But that doesn’t necessarily prove anything, since the unit of appreciation was always the song. Album length was just a unit of transfer, which is different. Only if almost all books were collections of short stories would the comparison be valid.
We can expect that technology will drive us to different business and distribution models in the future, though. Wouldn’t it make more sense for publishers to license you the file for a book for one price, but charge you something more if you want it printed on paper and bound? After all, the physical book comes at an additional cost, so why shouldn’t it bear an additional price?
The NY Public Library last month became home to an Expresso Machine, a new technology that delivers a printed and bound paperback book from a file. This is the next new entrant in our changing supply chain: a distributed print-on-demand technology that can sit in any library, bookstore, or copy shop. How far away can we be from an equivalent technology that could be put in offices and homes? What are the implications to today’s commercial models for publishing, or to the competitive advantages of today’s publishers, when this capability becomes widespread, as it must almost surely in the next 15 or 20 years?
Let’s take a few moments to discuss ebooks. Since the explosion of digital downloading that has transpired since the iPod came on the scene, many people who expected ebooks to become popular have been looking for what can trigger the “iPod moment” for ebooks. Although increased digital downloading of music and video does have the potential to have impact on the ebook market, the parallels are very imprecise. We shouldn’t be expecting the music experience to tell us what the book experience will be. The differences in user experience and the unit of appreciation make the music and video experiences so different that they don’t tell us much about books.
I have an admittedly biased view about ebooks, because I have been reading them on my PDA since 2000. In the past seven years, I’d say my personal consumption has been about three or four ebooks to every paper book. I don’t find the small screen the least bit of a problem for immersive reading. The ratio of consumption partly reflects the ratio of opportunity; I have my PDA with me almost all the time. But it also reflects a preference for the small-screen form.
When I first started thinking about and writing about ebook takeup around the turn of the century, I thought it would take the form of many other technology adoptions, beginning at work and migrating to home. I figured that ebooks would be used in many professional situations where they would constitute a big functional improvement. Think about something like aircraft repair manuals where updating and version control are at a premium. Many tech introductions occurred this way: personal computers, spreadsheet programs, word processing, fax machines, even email and the internet. All of these were tech that people had to learn to do their jobs but which easily ported over to personal use once the learning curve was conquered. But that didn’t happen; whatever use of ebooks has occurred in professional spaces — and reading on PDAs has apparently only caught on with doctors in emergency rooms among potential professional users — it has not had much impact on people’s personal reading habits.
Because ebooks seem so obvious, there has been a great deal of speculation as to what holds them back. The most commonly cited constraints are consumer-unfriendly DRM (digital rights management), inadequate devices for reading, unimaginative non-interactive products, and pricing, as in not low enough in relation to the physical book price.
I find all of these unconvincing and, certainly, none of them deterred me.
But what has deterred me is the fragmentation of the product offerings: not enough books are offered as ebooks, and the number of new titles on offer has actually diminished over the past few years. Until Powells.com started offering ebooks recently, the major internet booksellers seemed actively discouraging about ebook sales. Amazon has ghettoized them; you can see the used books available for any title you look for, right alongside the new copy you thought you’d buy. You can even pre-order a paperback that isn’t coming out for many months. But their ebook offer is buried and uncharacteristically chaotic. Barnes & Noble doesn’t sell ebooks at all.
The ebook only site that I have frequented because, until recently, it was the only place to buy in the Palm format, is ereader.com. This site is one of the user-unfriendly sites on the web: slow, clunky, and virtually unsearchable.
The other problem with ebook takeup is format. Microsoft tried hard for a little while, but their dot lit format just didn’t make it. Right now we have Adobe, Palm, and Amazon-owned Mobipocket, as well as Sony Reader’s proprietary format. The digital rights management element is a nuisance, but the wide variety of formats and the fact that not all of them are sold wherever you might find ebooks for sale — Sony, of course, is only available from them — is another large barrier to adoption.
One presumes that Amazon will get better at this when they start selling their long-awaited new reader, Kindle, and when they have a large number of titles available in their owned Mobipocket format. Mobi has the advantage of being readable by both Palm and dot lit readers. Kindle is just one of a number of new developments that will propel ebooks forward. The new iPhone, which has a very large device-sized screen is another new entrant expected shortly. There is a new iRex reader which uses the e-ink technology in the Sony Reader. And a new operation called NetGalley, which aims to cut review copy costs and increase review copy distribution by employing digital technology, could also add participants in the ebook marketplace.
Some stats I got recently from the International Digital Publishing Forum, the US-based trade association for ebooks, suggests that, after a sluggish period earlier in the decade, growth in the market is now 50-75% a year and is expected to continue at that pace. So the market is expanding, and it would be foolish for any publisher of narrative writing to ignore it, because it promises far more incremental income than incremental cost. There are a few things to think about as you get into this business.
First of all, it might be that expensive and restrictive DRM — “protecting” the ebook from being circulated by a user to somebody else — might not be necessary. Another approach is called “social DRM”. You simply get the purchaser to agree before purchase that what they’re getting is a “license” that allows them to use it — restricted however the seller wants to do that. Then you “watermark” the purchaser’s name and email address throughout the product. Now, watermarks can be removed by hackers, but so can DRM. This kind of restriction will really slow down the distribution by just plain folks; maybe that would be enough and it would certainly solve the problem of my needing to move something from one computer of mine to another, or letting my wife read it.
If ebooks do start to really happen, they open up a big opportunity for “living” books, books that don’t stop developing after they are first printed. Customization, updating, and localizing would become very simple and non-disruptive to the production process. It would seem that would create opportunities for Australian publishers to add local value to many books that come from abroad much more readily than you could in print.
Ebooks are a nightmare for controlling territorial rights. Although one could imagine ways to do it — say, by restricting what domains could order a digital download based on the publisher’s territorial rights — nobody has seemed to want to try. So the growth in the ebook marketplace just punches another hole in the increasingly porous wall protecting territorial rights.
It is worth taking note of the fact that Amazon is building a nice little publishing platform with proprietary capabilities. Once they roll out their Kindle reader — which, by the way, they officially deny they are developing — and, presumably, start to make a much more aggressive play to get titles loaded into Mobipocket format, they will be able to team this up with their unparalleled market reach and their BookSurge print-on-demand capability to offer a complete service for somebody that wants to take a manuscript to market. This puts them into a directly competitive position to Ingram, which has Lightning for print-on-demand and for ebook distribution. Amazon takes you direct to millions of end users and Ingram takes you to every intermediary in the world. Ingram has always been very cautious about “channel conflict”, taking care not to be seen as competitive to either publishers or retailers. Amazon is clearly already in direct competition with retailers the world over. There have been indications over the past few years that they’re going to be no less concerned about competing with publishers for relationships with authors.
The linking of ebooks and POD has been very spotty. I think we’ll see the two much more closely tied in the future, in ways I’ll suggest in a couple of minutes.
All of this says that circumstances march us to three significant changes over the coming two decades.
The old marketing techniques for publishers, which were based on book-centric marketing mostly through what we can call “horizontal” media most interested in the book as a form, rather than in the subject the book is about, aren’t going to work anymore. Most of the horizontal media will no longer be there and will have been replaced by vertical niche media, centered in communities which are mostly found through the web.
Second, the companies providing most of the product to the Australian book trade, by which I mean the big global general trade publishers, will be forced to change their business model. So will the local publishers which are not already niche-centric.
Third, we are moving from an era where information purveyors have been defined by form: publishers of books weren’t publishers of magazines and TV producers were not print product producers, to one where information purveyors will be defined by the niche they serve, and the owners of information and audience will move their content to their markets in whatever form makes the most sense.
This is not going to happen overnight. It is actually already beginning. Professional publishing shows the way. In every market niche, the number of players controlling the lion’s share of the audience is shrinking. The Internet demands aggregation of content and interaction prefers larger numbers of potential participants for better network effects. And once the interaction with the customer base is online, delivery of audio and video becomes as easy as delivery of words or data. The journal “Nature” now has an audio recording studio on the premises; they wouldn’t have needed one prior to the coming of the digital download world we live in today.
We are seeing this in the consumer publishing world as well. Digital downloads have really fueled growth of the already robust consumer audiobook business. In fact, audio has become a sort-of placeholder for ebooks, particularly in public libraries in the US. Libraries set up mechanisms to distribute ebooks, but their patrons didn’t bite. The infrastructure might have atrophied or been abandoned, but the iPod and the explosion in podcasting created a market very happy to download audiobooks from libraries and what was set up for ebooks works just fine.
At the same time, the publishers are encouraging their authors to make podcasts and are themselves making more and more video “trailers” to promote books. As publishers get more and more comfortable with rich media — sound and video — it will start making its way into electronic products as well. It’s inevitable.
So the requirement I envision that the publisher of the future not be limited to one media form — books — won’t be a problem by the time it really is a requirement. And today’s book publishers have some significant advantages as they compete for their places of prominence in the niched world that is evolving.
When book publishers start to compete for community presence, they come to the contest with certain advantages over all the other players, including those who are publishers of newspapers, magazines, journals, or web sites.
The book publishers’ royalty relationship with authors is a key strength. It means that authors will collaborate by blogging or posting articles without necessarily demanding compensation, because they are already partners with the publisher in an effort to sell books. In fact, what we have dubbed a “new marketing partnership” is a key aspect of the internet and the book publishing world; the new technology makes author-based promotion much more productive and enables it to be much more enduring than it ever was before. We did a consulting job in 2006 about marketing in the new digital world and as part of it arranged for a survey of agents about their expectations for authors regarding online marketing. A preponderence of agents felt that author websites were essential, that they didn’t need to cost very much, and that authors should be spending 2-to-10 hours a week promoting themselves online. A publisher who does the math on how much free publicity can be generated if the house’s authors actually do work an average of, say, five hours a week promoting would see that the effect could be the same as substantially adding to staff. It is harnessing those efforts and making them productive which is one of the new challenges for publishers that they need to tackle right away.
Another advantage book publishers have over non-publishers is an ability to distribute URLs, or web addresses. We have reached the point that every book should be carrying at least one. But it is a bit of a waste to use that opportunity to drive traffic to a publisher’s own branded site, which should in most cases be a B2B site for the trade, not one aimed at consumers. This is where the need for a niche strategy becomes more apparent. Where on the Net do you send the customers for a book? An author web site is fine, if it is dynamic and changing and involving. But many aren’t. A publisher who does not have a good place to send a reader is actually wasting an asset.
Assuming a publisher already has some kind of niche publishing strategy, there is content from the backlist that could help build an attractive niche web site. The things which are hardest to publish these days: “nuggets” of standalone information, constitute the best content for this purpose. This is something almost everybody else does not have, even magazines and newspapers, whose old content is likely to be more dated than book content — since book content had to live with a year-long creation cycle to begin with and then was often expected to survive in the marketplace for years. In the case of magazines, sometimes they don’t even have the online rights to material they published in print.
And publishers have one other natural advantage: something to sell. If the objective is to build an enduring community, selling books should not be front and center of a web site, but something conveyed with more subtlety and nuance. But if you have a site on “buying a home” and one of your little features is a calculator for “how much mortgage can you afford” that comes from a book, of course you should attribute the calculator to its source and offer a “buy the book” link when you deliver it.
A very important rule here is that you must build your community first, and then monetize it. If everything you do looks like a commercial and if your attempt at community is just a catalog of books you offer, you will neither create a community nor sell very many books.
The things we’re saying here apply quite differently to different publishers in this room. Obviously, an Australian publisher using Australian authors to publish Australian-based information is going to be positioned best to apply these insights. A publisher here whose books mostly originate abroad, particularly if it is fiction or belles-lettres from abroad, is going to find it difficult to leverage the authors or even to come up with a unifying principle that will form a community on the web. But if you believe the world is headed in this direction, it does suggest some new tactics no matter where on the spectrum you fit.
Even if you’re buying a novel from a New York publisher written by an Omaha-based writer, you should find out about the author’s web presence and whether you can get the author to give some marketing time to interact with an Australian audience. If you’re publishing a local book on a subject of worldwide interest — surfing or wine or coral reefs — there is an international web community you need to tap into. Many of your readers here already have.
And an idea that should not be lost is that all the new technology really can help you export much more than you ever have. You can get your local books seen by an international core audience through the web. For the right books, you can even generate fast and sure delivery in the United States and Europe without a complex distribution relationship by using POD installations associated with Ingram and Amazon. Even the Australian ex-pat community constitutes a market that is now in reach and that should not be ignored.
I want to turn now to a completely different kind of opportunity made possible by digital change and one which my admittedly inadequate knowledge suggests is not being exploited here. It will take cooperation from retailers and publishers to make it work, but it would be to everybody’s benefit if you could.
While BookScan is here, I know, the supply chain data you get through BookScan really only scratches the surface of an enormous opportunity to improve efficiency. Major accounts in the US, UK, and Canada augment what is available through a national point-of-sale aggregator with much richer and deeper data delivered by each account to each publisher only for that publisher’s books. What data is offered varies by account; as does its quality, frankly. But a weekly feed from any account holding significant inventory telling the publisher what’s on hand, what’s on order, and what sold in the prior week enables a publisher to build a database that has two big payoffs. It helps spot over- and under-distributed books, in relation to sales, so that opportunities otherwise missed can be exploited. And it allows a view of what is in the supply chain to inform every reprint or reorder decision.
Because you currently appear not to have this kind of data, I will save elaborating on exactly how to use it for my next trip, when I hope you will. But publishers should start now lobbying the major accounts to make this kind of data available. It is in their interests as well as the publishers’, as retailers such as Barnes & Noble, Indigo in Canada, and Waterstone’s could tell them. Delivering this kind of information allows a publisher’s rep to be an additional set of eyes for opportunity and also helps assure that the publisher can order reprints with confidence that they won’t be meeting returns at the warehouse door.
The June 2007 issue of Bookseller + Publisher had an article by Scribe publisher Henry Rosenbloom about how futile it was to make reprint decisions from BookScan data, which lacked the inventory component as well as any clear picture of what sales might have been missed in the reporting. Having a picture of the titles across the industry is perhaps helpful in making publishing decisions that require knowledge of books published by others. But for controlling your own inventory and making informed printing decisions, the kind of data you can and should get from your major accounts about only your own books would be much more helpful.
We will touch on it a bit more in a minute, but short-run printing and print-on-demand also should be an integral part of every publisher’s print-and-inventory strategy.
It’s a bit further away, you also want to start informing yourself about RFID, “radio frequency identification” chips. This technology — which has come into widespread use as a way to collect highway tolls from cars moving through a collection point where trying to “read” a bar code would be just about impossible — is getting cheap enough to individually identify every copy of every book. A bookseller in Holland has become the pioneer, starting about a year ago to put their own RFID chip in every book they stock. Soon, the chips will be printed into the books or their jackets.
RFID allows a bookstore to take inventory by putting a reader near a shelf, not needing to “see” each book. It allows a bookstore or library to “check out” a customer with all the books inside a bag. It stymies theft. And it even allows a retailer to see which of multiple locations in a store displaying a book is the one from which the copy being bought right now came.
Although RFID is a bit futuristic, supply chain data and digital printing technology are not. And they are already enabling publishers in the US, Canada, and Britain to come much closer to matching the creation of inventory to its need, freeing up capital and improving cash flow. Up to this point in our conversation, we’ve been exploring changes publishers must make that will require cash investment. Increasing supply chain efficiency is where some of that cash can come from.
The University of Chicago has been distributing the books of other university presses for some time. About five years ago, they got Edwards Brothers, an American printer, to put a print-on-demand installation right into their warehouse and started to get all of their books and those of their distributed publishers into a POD program. Their arrangement isn’t actually “pure” POD, because they print each book in multiples of 2, not 1. That wouldn’t work if you didn’t already have a place to store the second copy when you’re printing two because you need one; with POD right in the warehouse it presents no problem at all.
This capability has enabled the evolution of a new publishing model, which I would encourage Australian publishers, particularly those serving small audiences, to study very closely. The standard routine now for the university presses working from this distribution capability is that there is one real press run, the first printing. After that, everything is printed to meet confirmed demand. There are exceptions, of course; occasionally even a University press book shows “legs” in the consumer marketplace and a second or later press run is warranted. But that’s rare.
Since university presses exist primarily to support scholarship, and place a high premium on making intellectual content available in book form, another model is bound to emerge as well. If you don’t even need to do the first press run, the cost of putting a book into the marketplace drops to a fraction of what we got used to in the 20th century. The number of titles that can be published this way on the savings from eliminating even one print run can be substantial. We would expect to see an ebook-and-POD combination ultimately become the norm for university press publishing with the press run becoming the exception, rather than a requirement. Remember that all these titles are as available to the consumer as they would have been if they’d printed 2,000, or 5,000, or even 50,000. Waste is eliminated. Cash isn’t tied up. In fact, once the book is rendered as a printable PDF, publishing each title becomes very close to a cash-neutral exercise.
In fact, if you are serving small audiences, a strategy like this becomes essential. You will not be able to compete effectively any other way. A commitment to small audiences means you have to do more than books. You will need the full arsenal of 21st century communication tools: blogs, ways for your audience to tag and comment, ways for them to interact with each other and, in fact, to substitute their filtering and recommendations for your own.
The smaller the audience, the more the marketing leverage provided by a web community is essential; there is simply no other way to reach the people you want to sell to that is remotely cost-effective.
And, as we suggested earlier, adopting this strategy extends your audience beyond geographical boundaries. Publishers serving niches and who restrict themselves to the customer base which is geographically convenient will also find it difficult to compete against publishers who are reaching out to the world. If you were an author, based anywhere, you’d see the difference pretty clearly and it would matter to you a lot.
I want to cover one more development from the worldwide stage before we close. A new infrastructure is developing for the distribution of digital assets which parallels what we’ve seen in the physical world. My company has been doing a lot of work in this space and, in fact, has coined some nomenclature for it which I think will become widespread. So I want to introduce you to the world of DADs, DAPs, and DARs.
DADs are “digital asset distributors”. What DADs do is work for publishers, taking their content into a repository in whatever form it can be delivered, which can be books to be scanned, printer PDFs, or something in between. The DAD converts, or arranges for conversion, of the content into any form necessary to deliver ebooks in any format or materials for print or web pages. We count about 10 companies in the world competing to be the industry’s DADs; although their numbers may grow in the short run, we think they will probably consolidate in the long run. The companies competing in this space now include publishers — Random House, HarperCollins and Holtzbrinck — as well as digital conversion houses like codeMantra and Value Chain International, a new venture called Ingram Digital Services, and a few others.
DARs are “digital asset recipients”. This category includes search engines like Google, online retailers like Amazon, web sites, ebook vendors, and, of course, printers, who work from digital files. Many DARs are in the distribution business; certainly Amazon is, Google might be thought of that way, ebook vendors are. What defines a DAD, though, is that they are in service to publishers; DARs may distribute, but they do it in service to their own business model and customer base.
DAPs are “digital asset producers”. These are the publishers who choose not to build their own digital infrastructure.
The cost and continuous tech challenge of handling digital asset distribution will, we believe, continue to drive consolidation of this function. It just doesn’t make sense for 1000 publishers around the world to figure out how to solve the conversion problem to put files into the form required by a new ebook reader or to imitate the book widget: a little app that permits book content to easily be displayed on anybody’s web site for promotion purposes. In fact, the widget is the first battleground of the DADs. Random House and HarperCollins announced their own versions of them within a week of each other a few months ago. Now all the DADs are planning a similar offer because publishers have gotten excited about the widgets’ utility as a marketing device. Kids are beginning to decorate their MySpace pages with them; they’re quickly becoming an important viral marketing tool.
The rise of the DADs is a significant development. They are not expensive to use and putting a book file into their hands suddenly multiplies the ways a publisher can promote it or draw revenue from it. We’ve been saying that 2007 is the year every publisher needs to find a DAD; it certainly is the year every publisher needs to start looking for one.
I want to conclude with a manageable checklist of next steps. But any “to do” list for a roomful of people is hard. Each publisher is in a different place today in terms of workflows and opportunities. And some things really have to be done by the industry; they can’t be left to an individual publisher.
At the risk that I am leaving something important out, which, if I have, I hope we’ll discover in conversations later today and this week, here’s what I suggest you put top of mind.
First of all, as an industry, try to create useful data flows in your supply chain. Any retailer capturing POS information at the cash register can, without extravagant effort, give publishers weekly reporting of inventory, orders, and sales. Publishers are, in my opinion, really entitled to visibility of any inventory that could come back to them. The positive financial impact of organizing these data streams will be signficant for all publishers and all retailers. It needs to be a priority. One good early step might be to contact your counterparts at BookNet Canada, which has organized this kind of reporting in the past two years for a market very much the same size as yours.
Second, you need a robust in-country POD capability and perhaps an Australasian DAD. The DAD function might work fine with the offshore choices; after all, one great virtue of digital is that it removes the need for geographic proximity. But a robust POD capability is essential precisely because of your geographical isolation. This is something else that is beyond the reach of any single publisher or retailer to provide. You need to go after it as an industry.
Turning to publishers, you must develop digital workflows, so that your content is properly archived, tagged, and accessible to you. A DAD can be a band-aid for this problem, taking a book and turning it back into digital files. But the book won’t tell you what rights you have to the picture on page 37, and, unless you are archiving that kind of information, you really constrain your ability to use the intellectual property for marketing, or to sell it.
Publishers also need to start thinking about how they make the leap to the niche world. That starts by mapping your content to web niches. That is a continuous process, because new web sites of interest in any niche spring up all the time. But there is a big initial task understanding what niches your backlist can vault you into.
And last, for now, is that each publisher needs to understand the world of digital asset distribution. One way to start is to go to www.klopotek.com and get ahold of the White Paper we’ve created on the subject in the project I referred to earlier. Contact the DADs and get them to pitch their services to you. Getting your intellectual property into their databases can produce positive results for you very quickly.
The world we know and the industry we’ve grown up in are undergoing dramatic change. I hope these remarks have given you some useable suggestions for navigating it. I’ll be happy to field questions to the extent that time today allows; please feel free to email me with anything we don’t have time for today or which occurs to you later. As I hope is clear, most of what we need to know about the future isn’t really figured out yet; the questions provoked by each discussion light the way to the answers we all seek.
Thanks very much for your attention.