The Idea Logical Company

  • Blog
  • Speeches
  • Consulting
  • Clients
  • Media
  • About
  • Contact

Which flies the coop first? the chicken or the egg?

June 19, 2011 by Mike Shatzkin 21 Comments

There are lessons that can be taught or learned in one segment of publishing that can then apply to another. Well over a decade ago, Mark Bide and I were discussing the business model for journals. The way it works is that the university pays the professors a salary and rewards them with promotions and tenure for writing publishable material for the journals. Then the journal publisher pays nothing for the article (although they spend lots of money managing peer review and doing other things associated with editing, curating, and delivering the content.) Then the university pays for the IP all over again by buying (now licensing) the journal.

From our earliest understanding of the Internet and its potential for disintermediation, this seemed like a very vulnerable model. “How will we know when there’s a problem developing with the model?” I asked Mark. “When the publishers are having trouble getting submissions,” he said. “The problem will become obvious on the supply side before it becomes obvious on the demand side.

One of the challenges for a retail player trying to be a publisher is the difficulty of getting other retailers to play along. Even the most dominant US retailers, Amazon in the online world and Barnes & Noble in brick stores, don’t have a total monopoly on the customer base. People buy books online through outlets other than Amazon and people buy books in stores that aren’t owned by Barnes & Noble. And, of course, either of the two delivers grossly incomplete access to the total customer base without the other.

Barnes & Noble has been acquiring content directly for a long time. They’re very aware of the dichotomy between having a monopoly on content for your stores’ benefit versus making it more broadly available in the content’s best interests. Almost from the minute B&N acquired Sterling, Borders stopped stocking Sterling books (a problem that matters much less today than it did a few years ago.) And Sterling had a real sales force, retailer-friendly sales policies, and all of the systems necessary to support moving their books through intermediaries. Amazon does not.

Amazon took the first steps to fill that gap by making a deal with Houghton Mifflin Harcourt a few months ago, giving HMH a right of first refusal (apparently) to purchase paperback rights (excluding Amazon, we’d assume) to the books Amazon was publishing through their proprietary imprints. I have no inside information, but I would assume that one of the things Larry Kirshbaum will figure out early in his new role there will be how to get real print book distribution for the books he will be acquiring.

Amazon’s strategy appears to be that they’ll use their checkbook, the offer of 70% ebook royalties from the most powerful ebook platform, and their close connection to the online consumer, to get the books they want on the terms they want. And what they seem to want most for the books they pay for is “Kindle exclusive”: the ability to build up an inventory of titles available through Kindle but not through Nook, iBookstore, Google, or Kobo, let alone the stores here and abroad served by Ingram and OverDrive.

Barnes & Noble is familiar with that idea. They wouldn’t let other stores sell their Sparknotes study guide line. They never made it generally available through Sterling’s organization because they perceived value in having it be uniquely available through their stores and online channels.

But they didn’t avoid that dichotomy. The value they perceived is to the retailing entity, not to the content holder. Since their retail business was something like 50 times bigger than Sterling, it might not have been seen as a terribly difficult decision even though the content holder is always better off if the book is sold in as many places, online or offline, as possible.

Last week, PW did a story introducing Amazon’s “summer list”: ostensibly the books being published by them in the next few weeks. Obviously, these books were signed up before Kirshbaum’s arrival.

I’m not a bookseller. I have no expertise to apply to look at a list of books and decide what should be in any particular bookstore. But nothing on this list looked like a “must have” for an independent bookseller. To make sure, I reached out to a smart one I know and asked her to look at the PW list. “Would you stock these books?” was my question.

Her answer was interesting. “I don’t know about any of these,” she said. “For the most part, I learn about books by sales reps visiting our store and telling us about them. Nobody has ever told us about these.”

I had my staff do a little bit of searching. We couldn’t find a consolidated list of Amazon’s summer offerings online. What we found was the press release announcing 32 titles that PW referred to, but that release only listed 19 of the 32. We couldn’t find anything on any of these books at the Houghton Harcourt web site. We were able to find 14 more titles by looking under the various Amazon imprints (including Seth Godin’s Domino partnership with them) for a total of 33 coming or having been released from last March through November. Is this the “summer list”? Maybe, with global warming…

We found nothing about any of the titles on the Houghton site. Oddly enough, they did publish a prior title by one of the Amazon authors, Max Allen Collins, but they haven’t listed the current one, a collection of short stories.

(Here’s an ironic thought. You think Amazon will place an ad in the PW Announcement Issue to get this all straight?)

So, as far as we can tell, the Amazon summer list contains very few books that the old publishing guard, publishers or booksellers, will suffer much for having missed.

Except, of course, that maybe Amazon can create demand among the millions of online customers they have for books and ebooks. If they do, and the word of mouth grows to a point that independent booksellers find they must stock these books, Amazon will really have created a new publishing paradigm. That certainly seems to be what Godin is counting on.

Nobody — or at least very few — outside Amazon knows what new capabilities will be put in place to support the publishing programs Kirshbaum will build. Barry Eisler indicated at our Publishers Launch BEA conference that he had received a six figure advance for the book he just signed directly with Amazon to publish. He seemed to expect, or at least had hopes for, a robust bricks-and-print strategy along with his high ebook royalty. But he’ll have the same problem with Barnes & Noble and independents that Sterling had with Borders: it will take the perception of a very high level of demand to compel them to stock a book from a company they think is taking the bread right off their table.

A related development is that Arthur Klebanoff, one of the original ebook publishers founded on the idea that the big publisher standard of 25% ebook royalties creates opportunity for entrepreneurs, told the British AAA (the agents) this past week that he’d be delighted to publish their backlists and pay a 50% royalty. To agents who are already planning to do this themselves (and quite a discussion has broken out in the UK about whether that is a legitimate thing for agents to do; the AAA has decided it is) Klebanoff points out that things can go wrong with ebook publication (it might not sell, for one thing) and agents would be wise not to jeopardize their relationship with an author client when there are alternative ways to get a high royalty.

Klebanoff seems here to be jumping squarely into competition with Jane Friedman’s Open Road, which has been signing up content with very much the same pitch. (Open Road also has other attributes to tout, primarily some very talented digital marketers and a focus on developing tools and techniques to do that work effectively.)

Meanwhile, other agents are setting up their own digital publishing capabilities and service offerings continue to mushroom. Agents tell me — two were in the office this week talking about this — that their authors are frequently asking about self-publishing.

Does the insight Bide offered to me late in the last century about scholarly journals end up applying to trade publishers? Will the most obvious sign of a challenged model become the resistance of authors to their blandishments and their advances? There seem to be a lot of entities betting on the idea that it will.

It is worth noting here that there’s one dog that hasn’t barked. Richard Curtis was the first ebook publishing agent. He set up his E-Reads business over a decade ago. He also pays 50% royalties. Richard did not create E-Reads to compete with publishers on royalties but because when he did publishers just wouldn’t do the ebooks. He has built his enterprise since that time to nearly a $1 million annual business (meaning that he’s delivering half-a-million a year to authors for properties that, at least until very recently and perhaps still, would never have been put into ebooks by a publisher.) But his name is noticeably absent from the chorus using higher ebook royalties as a public prod to bedevil publishers.

Filed Under: Authors, eBooks, General Trade Publishing, Licensing and Rights, New Models, Publishers Launch Conferences, Self-Publishing, Supply-Chain Tagged With: Amazon, Arthur Klebanoff, Barnes & Noble, Barry Eisler, Borders, Ereads, Houghton Mifflin Harcourt, Jane Friedman, Kindle, Larry Kirshbaum, Mark Bide, Open Road, Richard Curtis, SparkNotes, Sterling

Search

Mike Shatzkin

Mike Shatzkin is the Founder & CEO of The Idea Logical Company and a widely-acknowledged thought leader about digital change in the book publishing industry. Read more.

Follow Mike on Twitter @MikeShatzkin.

Interview with Mike Shatzkin

Book Cover: The Book Business: What Everyone Needs to Know

The Book Business: What Everyone Needs to Know

Sign Up

Get The Shatzkin Files posts by email.

Recent Posts

  • Running a big publishing house is not as much fun as it used to be
  • Google knocked us out for a couple of days, but we’re back!
  • When a publisher might not do as good a job as a self-publishing author
  • What the ruling against the PRH-S&S merger means for the publishing business
  • “Automated ebook marketing by Open Road; can anybody else do it?”

Archives

Categories

  • Atomization
  • Authors
  • Autobiographical
  • Baseball
  • Chuckles
  • Climate Change
  • Community
  • Conferences
  • Digital Book World
  • Direct response
  • eBooks
  • Enhanced ebook university
  • General Trade Publishing
  • Global
  • Industry Events
  • libraries
  • Licensing and Rights
  • Marketing
  • New Models
  • Politics
  • Print-On-Demand
  • Publishers Launch Conferences
  • Publishing
  • Publishing History
  • rights
  • Scale
  • Self-Publishing
  • SEO
  • Speeches
  • Subscriptions
  • Supply-Chain
  • Technology
  • Unbundling
  • Uncategorized
  • Vertical

Recent Posts

  • Running a big publishing house is not as much fun as it used to be
  • Google knocked us out for a couple of days, but we’re back!
  • When a publisher might not do as good a job as a self-publishing author

Pages

  • Blog
  • Consulting
  • In the Media
  • Clients
  • About Us

Follow Mike

  • Facebook
  • LinkedIn
  • Twitter

Search

Copyright © 2023 · eleven40 Pro Theme on Genesis Framework · WordPress · Log in