It is no surprise that the public remarks at Frankfurt by Penguin Random House CEO Markus Dohle and Simon & Schuster CEO Carolyn Reidy contain gems worth pondering. Book publishing has been fortunate to have really smart people leading the biggest companies during our period of digital transition. The apparent collusion over the implementation of agency pricing — which is itself proving to be a mixed blessing — was definitely a collective setback and has to be seen as a very big mistake (that I didn’t see that way at the time.) But, for the most part, book publishers have done very well in a time of great turmoil, certainly better than other publishers of print or any other big media from the 20th century.
Now we have settled into a period of apparent stability. The two big shifts that were big challenges to navigate — from printed books to digital books and from in-store purchase to online purchase of the content — are no longer occurring at a dizzying pace. From the commercial publisher’s perspective, the ebook market is flat or declining and the print book share is holding its own. Bookstores seem to be opening as fast as they are closing. For now, the new opportunities opened up by digital change — much more accessible global markets, a greater ability to capitalize on backlist sales opportunities, and lower returns as a total percentage of sales — are probably more significant than any current erosion.
Dohle’s speech delivered virtually unqualified optimism. He is jubilant about the stability in the market with print holding an 80% share. (He takes a dig at the fact that prognosticators would have predicted that it could be ebooks that would hold the 80% share by now. That’s fair. And I was one of them. On that point, at least for a while, I was wildly wildly wrong.) He celebrates the potential growth in emerging markets outside both the English and German languages. And, in what I’d say is a subtle misinterpretation, he finds optimism in the fact that some of the biggest narrative bestsellers of the past two decades were originally intended for younger readers (which can include the Harry Potter, Twilight, and Hunger Games series, among many others.) It is a stretch to suggest that those sales prove young people will continue to read long form well into the future, which seemed to be his point.
In fact, Dohle points out that his company is now publishing John Green’s follow-up to “The Fault in Our Stars”. I’m sure his marketers will tell him that they’re aiming for lots of adult readers with their efforts, whatever the original intentions of the author were about the audience.
Dohle, of course, runs the biggest and most powerful consumer publishing business in the world.
Carolyn Reidy, on the other hand, runs the most successful consumer publisher in the US at the moment. In a recent week, S&S was able to trumpet holding the number one slot on a dizzying number of bestseller lists. Whether it is because S&S is part of the “striving three” of the US’s “big five” or because she was responding to questions rather than delivering a prepared talk. Reidy saw some difficulties that weren’t featured by Dohle.
(A note about the ranking of the Big Five. PRH is the biggest by far; HarperCollins is clearly second; and Hachette and Macmillan are around the same size as S&S. It seems likely that Ingram’s 600 publishers in distribution would rank them third if we thought of a Big Six.)
Two observations from Reidy seemed extremely important to take on board. One is that self-publishing is taking a growing share of the market. She characterized the self-publishing share in America as “huge, no matter what statistics you use.” And the companion observation should be a wake-up call to publishers. As she was quoted by Michael Cader in Publishers Lunch:
“The romance market, which used to be huge in mass market, has pretty much dried up and gone to digital original. [And] it has put pressure on pricing of all ebooks…. Those are consumers who, if they wanted a book, they used to come to us, and now they go elsewhere.”
Dohle acknowledged that “there were opportunities” for “self-publishing to grow” and that publishers and booksellers were not participating “at scale” in that growth. But he didn’t frame that challenge as any competitive threat. Reidy’s characterization was more compelling: a “huge” market of readers that “used to come to us” and no longer do.
So one cloud around big publishing’s silver lining is that there is a growing competitive set, largely unreported in standard industry measures, that is both stealing consumers and forcing down the prices commercial publishers can charge. And, as Reidy observes, this effect can result in wiping out a whole genre of profitability that publishers used to be able to count on.
Then there are a couple of things that are important but that neither of them really talked about.
Both Dohle and Reidy were clear about the fact that marketing has changed for publishers. They both see that “discoverability” has moved online and that publishers have to appeal directly to consumers. Dohle mentioned that he had talked about “cracking the code of discovery” in a talk at Frankfurt four years ago. And Dohle called out the fact that there are fifty million unique products available at Amazon.
That’s a lot of competition for every new book that is published. Before Amazon, the potential competition for the consumer attention was tens of thousands of titles. Now it is tens of millions.
What I find interesting is how little the big publishers talk about the details of the marketing they do to counteract that, and how much of an edge can be gained with scale. I wrote a post in 2011 when I learned that Tor Books, Macmillan’s sci-fi imprint, had built a mailing list of 600,000 email names. That was six years ago.
Every house has been building its email lists since then. They must all number in the many millions. Every house has alert lists by subject and several offer notifications of ebook discounts being offered. One would assume that internal discussions now include “how many emails can we send to likely readers when we launch this book?” And, if hasn’t happened already, that should be a question editors are asking when they think about acquiring a title.
Aside from acknowledging that marketing directly to consumers is now part of the publishers’ job, there was no further explication.
There are lots of reasons why publishers might not want to spell this stuff out. One reason is competitive advantage. Another, perhaps, is nervousness about how tracking individual consumers, which collecting email addresses inevitably leads to, would be perceived by a public that is instinctively nervous about being “watched” by digital marketers.
The other elephant in the room which got no mention, as near as I can see, from either CEO, is Amazon. That growth in print sales that publishers are so happy about was given a huge boost by Amazon shifting promotional dollars from ebook-discounting to print-discounting when Agency forced them to reconsider their strategy. This was spelled out by Data Guy, the invaluable analyst who teams with Hugh Howey to deliver the Author Earnings website, in a presentation he made last January at Digital Book World.
The growth of sales at Amazon presents a number of potential challenges to the big houses. It means that their biggest trading partner will push them for more margin. It means that the channel with the growth is one where big publishers don’t have an automatic advantage because of size. And, if the print sales being boosted in relation to digital is because Amazon’s pricing strategy can whipsaw the consumer in that way, it can also reverse itself if Amazon decides to change its strategy.
Change is no longer dizzying, but it is still inexorable. Nothing has stopped the growth of Amazon’s share of book sales; they continue to take share from just about every other channel. (The Data Guy numbers presented at DBW 2017 showed a tiny increase for independent bookstores — a segment estimated to be about 6-8 percent of sales by most publishers I’ve talked to — with every other channel losing sales.) The more sales consolidate in a single channel, the easier it is for the upstart indies and not-really-publishers to put out books that take share from commercial publishing enterprises. There is no sword of Damocles, but it is fair to say that the business just keeps getting a little bit harder day by day.
These Frankfurt observations were made from a remove. I haven’t gone the last two years. As some of my readers know, I’ve been working on climate change as well as publishing. I can refer you to two recent Medium posts: one describing two approaches to pricing carbon and the other advocating a very specific political position for Democrats. The Shatzkin Files will remain focused on publishing, digital change, and my personal experiences, as it has since 2009.