There is no doubt that digital technology changes the way publishers and booksellers handle their most basic business processes, but it is likely that the most profound changes digital technology will create will be in the marketplace itself.
We will spend the next few minutes speculating about what changes we might expect in the environment for publishers and booksellers in the next five years.
Most projections of book consumption in units over the next five years are pretty flat. This has most recently been confirmed by Al Greco, a Fordham University economist and book industry analyst, in a digest of consumer trend data he has just completed for The Book Industry Study Group, which will be released shortly.
So if the market is growing at all, it is not, apparently, getting bigger very quickly.
But that market is being fragmented into many more pieces, with results that seem predictable although they have not yet been adequately acknowledged yet by much of the industry’s strategic planning.
The growth of book sales on the Internet, which recent forecasts suggest is headed past 15 percent, but which we’d guess will be past 25 percent by 2005, is tending to push whatever sales level is achieved across a growing number of titles. Of course, backlist titles benefit. The fact that people search by keyword and not by year of publication changes what comes to the foreground for the consumer compared with what has been true in the brick-and-mortar world. And online sales reflect it.
Every online retailer’s and publisher’s experience that we have heard about demonstrates that the backlist benefits disproportionately when the sales environment moves to online.
One other effect, perhaps not as obvious yet, is that books from non-consumer segments start to compete with consumer books. Publishers who did not have the capability or the vision to put the books they published into bookstores are finding sales through online channels. So those books accelerate the effect of dispersing the book sales dollar over a greater number of titles.
That’s the tip of the iceberg which has been made visible so far, as we near the end of the fourth year of the Internet bookselling revolution. But even more dispersal of the sales dollar is coming.
Added to the titles in print and those put into print by the heretofore normal processes, we now have the “print one” solution, most evidently but certainly not exclusively Ingram’s Lightning Print program. What “print one” does is make “out of print” and, eventually even “temporarily out of stock” into archaic historical concepts with no current meaning.
What it is doing now is sparking an Oklahoma Land Rush for out of print titles with some future sales life, even a very faint pulse of sales life. Authors, agents, and publishers are all waking up to the fact that for a very modest investment, a title is not only back “in print”, it is also in stock at Ingram, which puts it in stock at every Internet retailer, certainly including, in alphabetical order, Amazon, Barnes & Noble, and Borders, as well as every other retailer who sources from Ingram.
Publishers have the added incentive to employ the print-one solution that doing so can forestall the reversion of book rights to authors under many publishing contracts which simply require the publisher to be able to fill any order to maintain control of the book. Rights reversion has been casual in the past 20 years since tax rulings that penalized publishers for holding on to slow-moving inventory. Print-one removes the requirement to maintain inventory.
And we might add at this juncture, the print-in-store model, being pioneered by Sprout and ODMC and other entrepreneurial companies, could also well become ubiquitous in the next few years. This will add hundreds, or perhaps even many thousands, of terrestrial instant delivery locations for every book loaded for print one delivery.
So the number of backlist titles, or “small sale” titles, available to share that not-much-increasing pie is growing at an accelerating rate of speed. How many titles will go back into print through a “print one” solution? We have heard estimates into the hundreds of thousands in the period we are now contemplating, between now and 2005.
But of course, if authors and agents learn how to work the Lightning Print and dot com seller connection for out-of-print books, they could use it for new books too. Certainly that will start to happen for books that publishers, correctly or incorrectly, deem not commercially viable. And since a publisher’s definition of commercial viability usually includes factoring in the publisher’s level of overhead, authors, agents, and small publishers will find it easier and easier to attain commercial viability of their own with titles big publishers can’t see being profitable.
So add a few more tens of thousands of titles to share the flat sales.
Anything else? Yes, indeed.
The book simulator, the Ebook, is now making its debut. Several commercially viable versions, including the Softbook and the Rocket Book, are now in the marketplace. They work pretty well; they’ll work better in time. They cost a few hundred dollars; they’ll cost less in time. They’re having both rights and technology hang-ups building their content libraries; they’ll solve those in time. In the window we’re now talking about, between now and 2005, these ebooks will become a fixture in the marketplace.
Some people today in 1999 just can’t see people reading books from a screen, no matter how it is designed. I personally am of the school that says that, ultimately, the electronic device can be developed that will give you everything a paper book gives you now. “Ultimately” takes a little longer for art books than it does for novels.
But even if you don’t believe what I believe, think about this. In the next few years, corporations all over the world will find Softbooks and Rocket Books (and their successors and competitors) a cost-effective way to for their employees to process instruction and reference and training that is now distributed to them in print. It is quite significant that a recent PW Daily story on Rocket emphasized the ease with which one’s own files could be “loaded” to be read by the device, rather than what otherwise-published material was available.
Colleges and schools are also likely to be powerful distributors of ebook hardware. Students permit amortizing hardware cost over a lot of content.
So, institutionally-driven distribution will assure that by 2005 millions of people will own these devices and use them. The corporate institutions that distribute them will want to buy books to put on them when they want to distribute a book as part of their instruction, reference, or training offerings. And the universities and schools will be loading both trade and non-trade books on the ebooks they distribute.
One might assume that, before too long, somebody will get the idea that an employee or a student might sneak a peak at something of *personal* interest on the institution’s machine. Remember that many companies resisted, and perhaps still resist, broadly distributing Web browsers because employees would find sites of personal interest on company time.
So, it is really not necessary to believe that people will enthusiastically embrace a screen as a substitute for a printed book to accept the idea that there will be a book market in downloads for these screens.
In fact, the existing installed base phenomenon is already visible. A couple of enterprises are distributing “books” to be read on Palm Pilots. Palm Pilots are not nearly as good for that dedicated purpose as any of the Ebooks are, but they do have the virtue of already being widely distributed. Some of the many people who own and carry them will, if the compatible files are made available, read books on them.
So ebook files will share the flat sales numbers too.
I think you can see that there’s a problem building for publishers here. With flat sales being chipped off by bits and pieces in all directions, it will get harder and harder to launch new titles in the ways the industry has gotten used to. The share of sales they will command will be less and less.
In fact, if the flat sales projection is anything LIKE correct, it implies that the actual sales of new titles, year on year, will start to decline, if it hasn’t already. Of course, the mass market itself doesn’t shrink, and the biggest names will continue to sell in ever greater numbers. But it will be harder and harder to break something out, harder and harder for original material to break even, the way it is published today.
And whether the big publishers who practice list management like it or not, there will be an increased number of new titles in the marketplace, as authors learn to operate the new digital distribution apparatus on behalf of works publishers deem to have markets too small to be worth publishing.
There is an essential strategic message for publishers in all this: if your new title publishing strategy is not a backlist-creating strategy, you’re headed for increasingly hard times between now and 2005.
The challenges are no less for booksellers.
In the grandest sense, all this change is very good news for booksellers. The wider the array of potential titles for the consumer to shop, the more dependent consumers will be on intelligent intermediation. Our search engine technology, to the extent that the title metadata is accurate and available, (an issue we will give a bit more attention in a moment) helps scope out the wide range of published possibilities to answer any question. It is not as good at providing more focused and precise answers. And it doesn’t help a consumer judge the quality or the suitability of any particular book to any particular purpose or user.
So a bookseller we can trust, who can help us sort out the possibilities, is increasingly worthwhile. Maybe even worth enough to pay a little margin, even if somebody else on the Internet will sell us one of the books we need a little cheaper.
But the challenges of being a good bookseller will also grow. If you think there are inaccuracies in title metadata now, when Books in Print and the major wholesalers and retailers struggle with large publishers and small to keep information timely and accurate from a book’s inception to its demise, you ain’t seen nothin’ yet. The coming explosion in the diversity of the active title base will be matched only by the explosion in entities providing that title base growth. And even though metadata integrity is critical to Internet sales, it is likely that many of these newer and smaller entities will learn to make books and promote them before they master all the niceties of managing them through the supply chain.
And, of course, what we now call “books”, even with the definitions expanded by print one books and ebooks, will no longer be the boundary of the bookseller’s world. With the Internet, a pamphlet with a Web page can be a “book”, or at least a “bookselling opportunity.”
The growing complexity of the supply problem makes life more difficult for today’s booksellers, but it also insulates them from another evident trend we are likely to see accelerating in the next five years: the selling of non-fiction books by retailers whose primary business is to sell other products related to those books’ content rather than selling other books.
The “affiliate” model pioneered by Amazon is now a proven way for booksellers to cooperate with other retailers or information purveyors to grow sales for everybody. And Amazon is not the only one who can use it. An intelligent and informed specialist in business books, for example, might persuade some very appropriate Web sites that it was a better choice for an affiliate relationship than Amazon. That signifies the new opportunity frontier for independent booksellers.
In the next five years, this tendency for non-fiction books to be marketed and sold in a subject-specific environment will accelerate both on the Web and off. We will see a growing distinction in the distribution patterns for fiction, belles lettres, and art books on the one hand, and everything else on the other.
What this all means is that publishers will be challenged to alter their content delivery mechanisms and their basic economic models, and make corresponding adjustments in how they promote, with more attention to backlist and, almost certainly, less speculative attention to new titles. And the successful publisher in 2005 will have to be a master of marketing, if not selling, through the Net as well as expert at distributing to a widening array of brick-and-mortar retailers, often through wholesalers and subject-specific distributors.
Booksellers will have to capitalize on distributing books in any form the consumer wants them. That, and an increased emphasis on the fiction, belles lettres, and art books that most other retailers can never sell, very likely means that terrestrial bookstores will increasingly see new books and used books being sold in the same outlets, perhaps even shelved side-by-side.
And booksellers will have to be increasingly creative at providing customized services, offering chapters and other summary offerings through the Web both to trigger customer demand and to respond to it. And, as the number of active titles proliferates, the relatively easy sourcing through one or two wholesalers which has satisfied most demand for the past decade or two may also become an artifact of a simpler by-gone day.
Of course, the wholesalers will try to keep up. The fragmentation of the sales over an ever-larger number of titles published by an ever-larger number of publishers keeps raising the bar of wholesaler competition at the very same time that it makes them increasingly useful to the whole supply chain. But the concept of “complete” will become increasingly elusive as old and new titles pour into the marketplace from diverse sources and as pamphlets and magazine article reprints and every other collection of words somebody might want to read becomes part of some bookseller’s universe.
Of course, I have saved the most dramatic prediction for the next five years, and I hope the most comforting one for this audience, for last. Let us conclude by thinking, for a moment, about we still commonly, but anachronistically, refer to as “the record business.”
They have Ebooks too; the technology du jour for it is called MP3. Ebooks are debatably capable replacements for printed books; MP3 is a totally functionally equivalent replacement for CDs or tapes.
They also have decentralized manufacturing capabilities. Print-one for books today costs a lot, takes a lot of time, and won’t work at all yet for color or hardcovers or a number of variations in common use. Making a CD takes a $400 machine and a $1 blank.
And the record business is different in another significant way. Tom Clancy and John Grisham don’t have manuscripts sitting in their closets that no publisher will issue for them. Eric Clapton and The Rolling Stones have so much tape you’ve never heard that is just as good as the tape you have heard that you would hardly believe it: every concert they’ve ever done, every second-best take they never released. But the record companies would rather have, say, one album that sells 500,000 than 20 that sell a total of a million. Good for the record companies, perhaps not so good for the artists.
Between now and 2005, we can expect to see the clear beginnings of what will quite obviously be a complete reorganization of the music business. Major artists will abandon their labels and the widest choices of the best new pop music will no longer come from established labels. It will be obvious very soon, perhaps as soon as the end of 1999, that record behemoths are in serious trouble. And terrestrial music retailers will have to scramble to stay in the game; the justification that you have to see it, touch it, or smell it in order to enjoy all the joys of ownership makes NO sense in the music business.
In fact, when broadband delivery of the Internet becomes common, which it will be in much of the US by 2005, you will able to plug your stereo into a library that can deliver anything you want any time you want in the way of sound, so you actually will “have” all the music when you own your connection, and you’ll pay for it in some form of pay-per-use.
So we get to watch them go first, probably a good five or ten years ahead of us. Aren’t you glad you are in the book business?