Consumer expectations will rise if prices do

Over the weekend, we rode a rollercoaster as Macmillan laid out its demands for ebook pricing to Amazon, and Amazon responded by pulling (nearly) all Macmillan titles from its store. Late Sunday, Amazon announced they would “capitulate” to Macmillan’s demands on pricing. It almost goes without saying that this will be the go-forward model for all major publishers, and maybe their independent brethren as well.

Publishers have gotten what they want.

Man, it seems like a victory doesn’t it? In a way it is. I’ve been of two minds on this topic since the entire concept of the “Agency Model” was announced (rough definition below). Setting aside the fact that it’s still opaque to parties with a vested interest (authors, agents, even other retailers), I have a natural aversion to wholesalers (book publishers) forcing prices on retailers (Amazon, et al). I believe price is an important tool in the arsenal of retailers. And, as a consumer, I’m not yet willing to pay more for the vast majority of ebooks being released today. More in a few paragraphs.

On the other hand, I love that this approach (finally) levels the playing field for all retailers. Sort of. Some have argued that this battle is not about DRM, but it is all about DRM. DRM is the tool retailers use to lock in consumers. Amazon does it. Sony does it. Barnes & Noble does it. Apple does it (or rather will, in the case of books). Every retailer who has a device has a proprietary DRM scheme. And publishers encourage this. They demand DRM.

These DRM schemes lock other retailers out of the devices. They allow companies to dominate the marketplace. Why would I shop IndieBound when I can’t load the books on my preferred device? Ah, the battles on the horizon! It’s going to be a bumpy year.

And…there is a lot more elasticity in ebook prices than has been acknowledged or realized. Macmillan is talking about pricing books in a (yet-to-be-revealed) dynamic manner, ranging from $14.99 to $5.99. As Macmillan has not previously been a good actor in ebook pricing, this news is heartening. This seems like an attempt to map the existing print marketplace to the digital marketplace, when now is the time for more creativity and thought when it comes to ebooks, content presentation, and pricing — and yeah, that does mean considering higher prices (I am not contradicting what I said about what I will pay).

Publishers have made bad arguments when it comes to ebook pricing. They confuse in-house value (often based on the price paid for the book) with consumer perception of value. Now these publishers who once hid behind Amazon — seriously, I’ve had publishers blame Amazon for crappy formatting when it was clear the underlying file was the problem — will have to stand behind their product. No. They will have to produce better quality books.

This means both from story and production perspectives. It doesn’t appear publishers will make more money from retailers under the proposed Agency Model, but consumer expectations will rise if prices do. There will not be additional margin — at least not significant additional margin — to play with, but publishers will be held to a higher ebook standard.

In my Publishing Perspectives article last week, I discussed the importance of getting basics right (in a “we couldn’t have done better if we’d coordinated it” moment, at Digital Book World, Liza Daly did a live presentation on this at well). During the skirmish between Amazon and Macmillan, I happened to be reading a Macmillan ebook, and the errors were like speed bumps. I cannot tell you how poor formatting pulls me out of a story (this goes for print as well). Quality is going to make a huge difference if publishers want to convince readers to pay more.

And this quality will be even more critical for books purchased via Apple’s bookstore. The display will not be forgiving of books with poor formatting (nor will the customers who buy the books). This is what publishing has been asking for, they have it, what happens next? And will the Agency Model be enough to cover innovation?

For those wondering, the Agency Model, as reported by Publishers Lunch, is roughly (registration required for link):

Though initially resistant to a new paradigm, by multiple accounts Apple has agreed in principal to do business with publishers under what is called the agency model–as opposed to the wholesaling model currently in place for ebook sales and most physical book sales. In the agency model, the publisher is considered as keeping possession of the actual goods (the ebook files) and it pays a commission to its authorized selling partners. So the publisher sets the retail price of the ebooks, and the commissioned agents have no ability to change that price. Ebooks sold under the agency model would be offered to any established trading partners who agree to the commission and other particulars.

I call this scan based trading, publishing style. Certainly, there is far more to this than described. First off, it hews awfully close to the description of direct sales. Then again, it’s hard to imagine major retailers allowing publishers to “keep possession” of files — publishers simply don’t have the fulfillment channels in place, and shouldn’t. I’m not opposed to publishers selling direct from their websites, but that’s a whole different type of infrastructure.

It’s all a bit fuzzy at this point. Agents are still wondering what this means, which means authors are wondering what this means. More specifically, how this new model maps to their existing (and future) contracts. Mike Shatzkin explores this as well in his post about this story.

So what does all this mean? I imagine the next huge debate will be between agents and publishers as the new model is mapped to real money for the people who write books. Other retailers will be demanding similar terms to Amazon (and perhaps breathing a sigh of relief). Consumers will be sniffing at the new pricing model and voting with their dollars (one doesn’t have to read between the lines of Amazon’s statement to know where the retailer hopes this ends). DRM will remain on the horizon.

Oh, and independent publishers and independent booksellers and individuals will be clamoring for equal treatment.

Fasten your seatbelts…

Longer answer: the magic elixir publishers are injecting into ebooks in hopes they will entice people to pay higher prices.

As you might guess, I am a bit of an “enhancement” skeptic. I have a few reasons. First, they feel like an attempt to skip the walking phase. Right now ebooks are crawling, technical quality-wise, and enhanced ebooks will be (theoretically) leaping and pirouetting. Second, what is being proposed in some publisher statements sounds a lot like standard print material (reader guides) and marketing fluff. Finally, I’m not sure readers are clamoring for enhanced ebooks as much as they’d like publishers to rethink what a “book” is.

First, let’s talk about the technical quality. We could debate the quality of content and editing until the cows come home. We could restart the debate when the cows go wherever cows go when they’re not home. And so on. I believe publishers too readily dismiss reader comments about bad books, value, and price; it hurts the publisher argument because it’s not the job of readers to make the right format and pricing decisions. That’s a discussion for another day.

What I’m talking about is the actual ebook. How it looks, how it flows, how it works for readers.

Right now, most commercial ebooks are treated as exact (but not really exact, which is a problem when it comes to value perception) replica of the print version. Right down to nonsensical elements like references to page numbers within the digital text. The process of taking the final print layout and converting it to an ebook ignores the basics of ebook creation. It cheapens the product sold to readers.

It seems that publishers have been seduced by outsourcing and are neglecting the basic production tasks that are required for ebooks to actually become working books. Readers lack the visual clues of print to guide them; it’s the job of publishers to figure out how digital books can be presented, from better, more logical tables of content and indices to content flow that makes sense (we really don’t need all those breathless press clips about how great the author is…since we’ve already bought the book).

Basics. Get those right first.

Then comes the “enhancements” that really aren’t. Way back in December of last year — oh so long ago! — Macmillan announced a genius plan to sell enhanced ebooks. Naturally, being a publishing company, this meant selling ebooks for higher prices than the hardcover print books:

The special editions, which will include author interviews and other material, such as reading guides, will carry a list price slightly higher than the hardcover edition.

Sigh. Big fat sigh. So silly additional materials of questionable value, materials that are commonly included in the trade paperback version of books will now be added to ebooks and the price will go up? I can only imagine the gleeful rubbing of hands and diabolical cackles that accompanied this announcement. “Take that, Amazon! We’ll add crazy value to those ebooks. People will go nuts for…reading guides!”

These are not enhancements. These are marketing materials. If you, the publisher, cannot distinguish between the two, it makes my heart hurt. Remember point one about the basics? Go back, review that, take notes, ask yourself how you can make the actual ebooks you’re publishing today achieve the same level of quality as the print books.

Note: stop pretending print is the “real” version of the book. That kind of thinking doesn’t help you. Especially as we move into point three.

Finally — and setting my overall skepticism aside — we come to Unicorn. Yesterday, the Internets were abuzz with word that HarperCollins was talking to Apple about…something (By the way, if publishers weren’t talking to Apple, that would be news. It’s fracking January 2010.). What were they discussing? Oh right, this:

Brian Murray, the chief executive of HarperCollins, said in December that e-books enhanced with video, author interviews and social-networking applications could command higher retail prices for publishers than current e-books.

What would be more interesting, truly interesting, would be if Murray had said something along the lines of, “We are taking a hard look at how we package and sell our products, and will be rethinking how we publish certain types of books.” Setting aside the fact that we already have the technology to do amazing things with video, author interviews, and social networking applications — it’s called the “web” — there are many books that could easily command higher digital prices by providing more consumer value.

(I am speaking on this very topic at next week’s Digital Book World, with real-world examples!)

Publishers Lunch reports that what is actually emerging from the Big Six negotiations* is an “agency model” which allows publishers to set their own prices while Apple takes a commission (reg. required for link). It sounds a lot like the ebook version of scan based trading, where retailers don’t actually purchase inventory, taking a cut only at point of sale.

(I’m going to say this approach, in theory, is a good thing for all retailers; it makes no sense to “buy” an ebook, hold it in virtual inventory, then “sell” it.)

This may change tomorrow, the situation is apparently very fluid, and it’s not going to significantly impact the market shares of other book retailers, Amazon, Barnes & Noble, and Kobo, unless the publishers offer a superior experience to their customers. The existing retail leaders have the advantage of multiplatform strategies.

Done right, video and other elements can be great complements to books, but it has to be done right. The Publishers Lunch article linked above expands on Brian’s Murray’s comments, suggesting at least one publisher is taking a hard look at the value proposition, using real-time updates and information to expand the work. This would only work for certain books; Murray speculates about the possibilities for a book like Game Change, saying, “In my opinion, this type of consumer experience has value equal to or close to the value of a hardcover book – or more than twice the consumer price of current ebook bestsellers.”

A few months ago, I suggested that had Twelve released a truly enhanced edition of True Compass, taking advantage of a multimedia approach to tell the story of Ted Kennedy, the possibility for charging more than hardcover price existed. Granted, some licensing fees for the media would change the economics, but the idea of making the digital book more than a replica of the print is where the value aspect will take hold. Michael Cairns of Personanondata offers his own take on this concept.

Still the other aspects of the digital book have to be done right. Did I mention the importance of focusing on the basics? I’d feel so much better about these propositions if the foundation of ebooks were more solid.

Bottom line is that we already have the technology to “enhance” books and publishers aren’t using it. I am not sanguine about the idea that millions of people are going to shell out a purported $1,000 merely to read books. They’ll be purchasing a new type of multimedia machine, and reading books will certainly be done on the Unicorn. The device is a tool, not a cure-all. Targeting the, take a breath, iPod/iTouch/iPhone/Unicorn consumer is, well, targeting a niche. Whatever happens in the world of enhanced ebooks, it has to happen in the world of Android. On the real web. In the entire mobile space.

And it has to be truly valuable, not some marketing person’s notion of value.

* – Nice of six companies to try to set the table for everyone else, no?

At this point, there’s not much clarity in the debate. If this is an inflection point, we need data to establish trends. Declaring the answer limits discussion.

• Grounded in reality

It may be the greatest of ironies that the problems facing publishers today have nothing to do with finding people who want to read. People are reading (and writing) like never before. They’re publishing like never before. The pace of publishing innovations tells me this trend will not decline for a long time; not surprisingly, these publishing innovations are not happening in traditional venues. Now, more than ever, publishers need to think about reading, engagement, usability, research, development, experiments.

It turns out that many of publishing visionaries I know today attended the first Tools of Change Conference in San Jose, way back in 2007. I met only a few these people then — if only we’d had Twitter, oh wait, we did! — but we’ve certainly found each other since. These are the people engaged in wild experiments, some highly successful, some noble endeavors. Out of the ashes and all that.

Fast forward. Last spring, I sat through the most disheartening (and disappointing) publishing industry presentation ever. It was during the South by Southwest Interactive Festival, an event that, in the past, has inspired me and let me see germs of the future of publishing (indeed, notions explored at SXSW three years ago are starting to filter through publishing today). At the time, I was appalled that traditional book publishers had nothing to say for themselves; in retrospect, I think the people who represented the establishment truly did not get their audience. Which means they did not get their competition.

You don’t explain how traditional publishing works to a room full of publishers working in the new paradigm. Everyone was a publisher, more than a few were running very successful publishing companies. Every single person in that audience — and audience eager to hear how book publishers were moving forward — was in direct competition with traditional publishing.

I’m a fan of Tools of Change because I know the publishing industry existing within a few buildings of New York (is it six?) is a small fragment of what publishing is and can be. So much is centered around publishing print books to established outlets in the same way it’s always been done, and part of your business isn’t going away tomorrow. You are balancing books as you know them against a rising tide of change — change in purchasing habits, change in reader engagement, change in format, change in competition.

I find the best ideas often come from the least likely places, and what may not seem relevant to your business as it is, well, it might be just the spark you need for tomorrow’s idea. Your competition is not another big publisher, it’s not in the building down the street. Your competition is already doing mobile apps, already telling stories online, already engaged in full-fledged digital publishing. Your competition is a technology company, it’s a start-up in Seattle focused on storytelling for children, it’s a group of laid-off journalists forming their own news syndicate. It’s the author with her own platform, her own social network. It’s the guy whose productivity app replaces a dozen how-to books.

Books aren’t going away. Today’s business is doing…okay…but talk to me about tomorrow. If the Unicorn is announced in two weeks, are you ready? What if it ships on February 1st? Are you ready? People will be clamoring for the new device, they’ll want the best reading experience. What company is best positioned to take advantage of new computing platforms and devices? What about the next Unicorn? What about the device that empowers Africa? Asia? South America?

That’s the future of publishing.

Early registration ends today — use the discount code “toc10bosq” (yep, that’s mine!) and save $250. Join me and others as we explore concepts ranging from the very practical to the visionary. Listen to war stories and grand ideas. Let something spark. Have a glass of wine with someone doing really cool stuff in your industry.

After a few centuries of relative calm, publishing is changing rapidly. We cannot predict the future, and we cannot look to the past for clues. Today’s publishers need to run their businesses and engage in good old-fashioned R&D. It’s scary and it’s thrilling.

Let’s break it down. The first line of the article is “What is an e-book?” This is never answered because Galassi moves on to discuss the decision by William Styron’s heirs to move Styron’s digital rights from Random House, who originally published the author in 1951*, to Open Road Integrated Media, a new digital publishing company headed by Jane Friedman, late of HarperCollins. Friedman’s new company, particularly the desire to reprint classic, in-copyright titles, interestingly, may have sparked what will be the most contentious of all issues facing publishing in the next few years.

(One hopes this was intentional.)

Rights of all sorts are under scrutiny. Just as we settled in for a long winter’s nap, Random House, never one to avoid an aggressive move, said their English-language Kindle titles will be available worldwide. Yay for readers, but you can imagine this didn’t make others happy. And, of course, Random House (again!) has asserted fairly broad digital rights. If you’re not caught in the crossfire, this is exciting stuff.

So, right, Galassi. He provides a little history lesson, talks about the careful attention paid to the editing of Styron’s work, the typesetting, the marketing. Yes! This is good stuff! It shows what a good publisher can be. If Random House actually has digital rights is a question that cannot be answered here. Galassi’s far more interesting point is that another publisher should not have the right to republish the Random House versions of these books. Let us set aside the notion that both the author and the editors (we can also set aside marketing) expected the fruits of their labors to be free to the world by now. It’s a good question: does Random House “own” the version they published?

Well, Styron (or his heirs) owns the copyright, the actual intellectual property. It is not shared with Random House or the editor who guided the work to perfection. Styron licensed certain rights to Random House, and in turn, the publisher performed certain duties. But at no point, did those duties constitute ownership of the actual text being published.

Galassi seems to be arguing that the editorial contribution is of comparable value to the creative contribution. Perhaps in this case, it’s a fair argument to be made. I am not sure it follows for every book published by every publisher. Is the publisher a creative partner or a service provider? Who owns the book at the end of the day?

I am of the mindset that the position advocated by Galassi will lead to deeper questions about the roles of publishers and how they serve authors. For seemingly perpetual rights, there will need to be more consideration. Galassi distinguishes between a publisher and a distributor, but fails to acknowledge that when it comes to digital distribution the playing field is beyond level, and when it comes to backlist titles, traditional publishers need to step up their game.

In fact, these publishers need to understand they’ll be selling themselves to authors, not the other way around.

(This relates to the utterly fascinating — if only to me — assertion by Random House that licensing digital rights to another publisher constitutes a competing version of a book.)

Then there’s the fact that Random House has more than earned back its initial investment in these books. Digital sales, setting aside the cost of conversion (oh, please don’t do a cheap and ugly scan and conversion, it shatters this argument into the tiniest of shards!), will be gravy on Random House’s investment in these titles. One can safely assume that the decisions being made by the heirs has little to do with art and everything to do with money: a digital edition will lead to a decline in print sales, volume unknown, so rights owners will want to maximize their return. Understandable.

If Galassi had stuck to his original thesis — the value of books — this would have been a welcome opening argument. Choosing to fall back on the work of William Styron to prove his point took the discussion in a different direction. One equally compelling, and one that will play out across the industry in loud and contentious ways.

Still, this attempt leaves me more convinced than ever that publishing isn’t really ready to have a public discussion about ebooks and pricing, though it’s long overdue. It won’t be a conversation filled with comfortable silences. And it won’t be a conversation lead by the industry. Which you know, is a shame. It’s not like ebooks are a surprising new product.

* – Note, the Styron book in question was not originally published by Random House, but by Bobbs-Merrill. New York Times Correction.

Writing and reading are about engagement, about participating in a conversation, and inasmuch as technology can play a role in this interaction, it only draws more people in. How does the screen change things? This should have been the question of the last decade, but it appears it will unavoidably be the question of the next. What kind of platforms — social networks, Web, print, multimedia — are we looking at? And how do we move flexibly among them, using each according to its ability and taking from each according to our need?

• After a decade of fear, we’re connected to writing in new ways

Yet, this is the season of giving (and, yes, tax deductions). Every year, we here at Booksquare make a pitch for our favorite causes, hoping some of you, like us, will find a little something extra to give this now and in the future. If you have a favorite cause that relates to literacy, reading, or education, let us know in the comments.

• ProLiteracy — As always, our list is topped by Proliteracy.org. You can contribute either financially or by volunteering as a literacy tutor. When you are a reader, a to-your-soul reader, it’s almost impossible to imagine a world where people can’t read. The reasons vary, and the solution is not simple. Helping others learn to read should be the primary goal of the publishing industry — any way we can.

  If you can’t donate money, can you donate time?

• First Book — Just as teaching the world to read is important, getting books to children is essential. First Book gets books to children who need them. You remember your first book, you remember reading as a child. Help share that joy. Bonus! through December 31, your donation will be matched book-for-book by Random House.
• Girls Write Now: Girls Write Now is a non-profit organization devoted to mentoring the next generation of women writers. Focused on New York’s underserved and at-risk high school girls, this program helps them find their voices through creative writing.
• Donors Choose — The problem with growing up the child of a public school librarian is that you know how completely screwed up our public school financing priorities are. It is appalling that teachers and librarians are forced to finance so many projects (and supplies, essential supplies) out of their own pockets. It’s not like teachers make huge salaries. DonorsChoose.org was founded to bring educators together with people who have money to contribute to specific projects. Look at the list of projects — is there something you can help transform from wish to reality?
• Buy Books — You want to make a serious statement about your commitment to books? Buy everyone on your shopping list a book. Or two. Or three. No need to limit yourself. This isn’t going to turn the industry around, but, c’mon people who get free books, put some money back into the industry that’s been good to you.

For what it’s worth, publishing is alive, well, and bigger than ever! It’s obvious we’re seeing more creativity, more innovation, more ways of connecting people and reading. When we talk about “saving publishing”, we need to be very clear. We are talking about book publishing as we know it, and we are talking about a specific element within the traditional publishing business model.

Things That Will Not Save Publishing

• The Mythical Apple Tablet, aka The Unicorn — So Apple will release a tablet in the coming year. Or not. If said tablet materializes and is priced at the current rumored $1,000, that turns it into a pricey ereader, so the number of hardcore readers who think, “Wow, this is the reading device I’ve been waiting for” will be limited. I’m not discounting the potential for visually beautiful books, but the Unicorn will not save publishing.

  Apple is an aggressive company. Apple is a tech company. And publishing people don’t necessarily get Apple. Last week’s breathless rumor about a 70/30 split (70% to publishers) was the tip-off. 70/30 is the standard Apple split! What is missed in the fine print (what is it about fine print that makes us always overlook it?) is that this split is on sales price, cash receipts, whatever you want to call it. Apple will not (unless I seriously misjudge their business acumen) be less aggressive on pricing than Amazon and likely won’t subsidize prices. I suspect Apple will not get into bed with book publishers unless book publishers play along.

  If anything, the Unicorn will be part of an interesting and diverse digital reading mix. Of course, we already have one of those — you’re using it right now — and very few publishers are exploiting the potential of what already exists. The Unicorn won’t be running an exotic new platform with magical capabilities.

• Ebooks — Even if ebooks become 50% or more of the market, they’re not going to fix the fundamental problems of the publishing industry. If ebooks can somehow increase the number of new-to-books readers by 50%, then we’re talking. I thought there would be potential here, but am not convinced because most publishers seem to see ebooks as the same thing as print books and/or competition for the existing business model. Which they are, sure, but I guess it’s easier to do business as usual.

  So ebook customers are pretty much regular book customers, transitioning to a new format. Some of us are buying more books because of a mix of price and ease-of-purchase. But as long as ebooks are treated the same as every other book out there, I’m not feeling the love.

• Enhanced Ebooks — I’m not convinced the general reading world wants these as much as publishing people do. Some books can and should be enhanced. Others, not so much. I can assure publishers that there’s great potential for enhanced ebooks, but I worry my meaning is lost. Enhanced does no mean making a rough around the edges (and everywhere else) PDF scan of the print book and adding some extra and not really useful text.

  Enhanced ebooks require thought, execution, and a plan. Right book, right audience, right approach. Win!

• Ebook Windows — Withholding ebook releases to protect, to preserve, to illuminate the hardcover window won’t do anything for hardcover sales and it won’t save publishing. It will, however, positively impact the bottom line of those books that are available when the consumer is at the point of sale and can’t get what she wants.
• Vooks — See “Enhanced Ebooks”, but add a twist. I admit, I’ve been hot and cold on Vooks over time, but I’m getting it. Vooks have a place in the publishing ecosystem. Pay attention to them.

• Hardcovers — Unless they are written almost exclusively by Stephenie Meyer and Dan Brown. Together. Wouldn’t that be awesome? I’ve recently concluded that most hardcover books are priced too high for their target readers. Yet because those customers have been purchasing at deepesque discounts, this has been largely invisible to publishers.

  This is not say publishers don’t know this, but they haven’t felt it; I think this is at the core of the unstated-but-obvious desire to punish Amazon via ebook windows. It was like Amazon ripped off the band-aid covering the pricing lie without warning the patient. The truth is hard, it’s messy, and it’s easier to avoid. As a human, I understand this. As a person who loves books, I’m a bit frustrated.

• Ebook Backlist — I originally had this in the “Save Publishing” group, but realized it belonged in the “Not Save” section. In the print world, backlist is bread-and-butter. In the digital world, it’s like magic: people rebuying their print libraries in digital format. Get this right, and you will achieve both your CD moment and your iPod moment. (Hence, the recent aggressive erights posture asserted by Random House.)

  However, this is a one-time offer. Sales will skyrocket for a time, then settle back to dull roar. As with DVDs and CDs (and their precedents and antecedents), consumers are only willing to convert their libraries so often before they get cranky. And since they’ve done a few conversions over the years, they have a good idea of what works, what doesn’t, the positives, and the negatives. To make this work, publishing needs to proceed with street smarts.

  Getting it right is the big stuff, like recognizing that these books cannot be priced like they’re brand new, first-time purchases (though some will be first-time purchases). You’re already profitable. It’s the little stuff, like not throwing a cheap scan conversion on the marketplace and calling it a day (hello, Simon & Schuster: at least update your corporate URL to the current, favored one, though kudos for mapping the abandoned brand!).

• Booksellers — There will be a steady stream of independent bookseller closures in the coming years. Not all of these closures will have to do with the actual profitability of the store. More consumers will rely upon big retailers to feed their book fixes. Big retailers will put the squeeze on publishers when it comes to pricing. I’m not going to say a word about title selection because I think it’s apparent that smarter ways to publish some books will need to be identified.
• Bundling — Bundling is one of those cool ideas that only works for some books. While I might want a digital copy of every print book I buy, I don’t think I want a print copy of every digital book I buy. In fact, I know I don’t.
• Chunking — Selling chunks of books is still a small idea waiting for good execution. It may create a lovely revenue stream related to certain books, but it won’t have huge impact in the long run.
• Sarah Palin — I think she shot the book wad in her first attempt. Unless she writes a kid’s book. Which, you know is possible.

• Me (and People Like Me) — I buy every book I read. New. I don’t buy used books (unless they’re out of print, and even then, I agonize). I buy to the extent my budget allows. I talk about books. I write about books. I recommend books. I give books as gifts. I encourage reading. I support literacy programs. Honestly, as a consumer I’m giving it my all.

  And I’ll keep doing it, but I’ve made my rules clear. I’m too old and lazy to make lists and check retailers like it’s my job. I seriously doubt I’m going to ever run out of stuff to read. If the book isn’t available for sale when I want to buy it, I will buy something else.

Things That Will Save Publishing

• Publishers — Saving publishing is the job of publishers. No one thing will save publishing. Lots of little things will save publishing. I don’t doubt that every publisher great and small is trying to figure out how to run the business of now and the business of the future. Dominique Raccah of Sourcebooks will be talking about this at the Tools of Change Conference to be held in New York in February. I cannot recommend this presentation enough. It may be the most clear-eyed yet optimistic view of the future of publishing I’ve encountered.

  (Note: now is the time to register for Tools of Change. Click on the ad above to get a discount. You know you want to.)

  The challenges facing the publishing industry are myriad. From corporate parents demanding year-over-year improvements to start-ups to the fact that the biggest publishing scheme ever invented — the web — is democratizing processes that formerly depended upon “gatekeepers”. As the reading public transforms and realigns, so must the traditional publishing industry to keep up.

  Nobody knows what the future will bring, but we do know publishing is bigger than ever before. So it really isn’t about saving publishing as much as it is about transforming publishing as we know it.

Gee, that’s a good idea. But not a problem for me. If the book isn’t available, I’ll buy something else. I won’t be checking back in three or four months, because, well, clearly the publishers don’t want my money. And the chances of me remembering? Going with nil to nada. And even if I do, what bright and shiny new books will capture my attention…?

This new delay relates to windowing, the concept of moving a product through specific retail channels for specific periods of time. Windowing is a concept that works really well in the motion picture industry, though studios are trying to compress those windows, while the music industry (another business prone to overpaying advances) works with simultaneous release of formats.

[Part One: Response to Nat Sobel]

The window argument, as practiced by the motion picture industry, is often cited as justification for withholding digital books (and even trade and mass market paperbacks). To me, this represents a flawed understanding of how money flows in the motion picture industry. Books and movies are not comparable.

But first, let’s talk about rebellion. Nat Sobel used the window argument with an unconvincing twist. He chose Cloudy with a Chance of Meatballs as an example. Despite being pulled early by a number of [unnamed] exhibitors, it grossed, am I reading this right?, $30.1 million on 3,119 screens. I haven’t seen this film, so I don’t know if the sub-Pixar numbers are warranted, but I can tell you this: with that many screens reporting for opening week (generally the most lucrative; mama didn’t raise no stupid exhibitors!), the protest was, at best, muted. Like books, movies suffer from the limited marketing attention, though motion picture awareness and dollars are much higher. New titles are constantly displacing old, to the point where a release from a month ago is largely forgotten.

(Engrave that thought on your brain.)

Yes, motion pictures (a category that includes feature films, television series, and made-for-video/DVD) cycle through a series of windows. Those windows are growing ever-tighter, especially the one between theatrical release and home entertainment. It’s a money thing. The difference between books and motion pictures is this: a revenue continuum with direct, indirect, and sometimes repeat consumer sales.

Say that three times fast!

So what do I mean by “revenue continuum with direct, indirect, and sometimes repeat consumer sales”? Good question. Let’s walk through an oversimplified (ha!) feature film lifecycle. I think it’s instructive to dissect if this what publishing thinks it wants. Note: I am purposely leaving out some, mostly ancillary, revenue streams (this is not a master class), and there may be steps skipped in real life. Also, I am leaving out marketing costs associated with trade shows.

• Theatrical: Movie is shown in a theatrical setting. It’s generally the first time people interact with the film, and if it’s good, they might pay two or three (or more) times to watch it again. Popcorn and really huge sodas are often involved. The money split is interesting, with studios getting decreasing returns the longer the film is in the theater (90/10, 80/20, 70/30, and so on; unless it’s an art house film, which plays out differently). Marketing costs are largely borne by studios (big, huge marketing costs) with co-op between studio and theater also in play. Consumer sales: direct.
• Non-Theatrical: This is a pretty big market with not a lot of dollars. It’s all showings outside the traditional theater setting (prisons, schools, boats). Airline sales are generally lumped into this group. Some consumers may be watching the film for the first time; others caught it in the theater. Most marketing costs are borne by the third party, though some co-op comes into play in “theatrical non-theatrical” settings. Consumer sales: direct (ticket, pay-to-view) and indirect (streaming on airplane).
• Pay-Per-View: A television-based market. Consumers pay to access a movie. First-timers and repeat viewers are engaged. New models are emerging. Marketing mostly a function of the third party, though, again, possibility for third party. Consumer sales: generally direct.

• Home Entertainment: Right now, this is mostly DVD, and for a long time, it was the golden egg. Home entertainment covered that awful gap between production, marketing, and print costs and, oh, profitability. People have largely finished with building their libraries, and now purchase more selectively.

  At its most basic, the home entertainment market breaks down into three areas: sell-through (consumer purchases product), rental/premium (Blockbuster, Netflix), and streaming (models emerging all the time). Again, first-timers and repeat customers. Marketing has trended toward the theatrical model. Consumer sales: direct and indirect.

• Pay Television: In this instance, we’re talking about the premium pay channels like HBO and Showtime. Big bucks are paid by premium channels for the privilege of an exclusive television window (U.S. only) starting about 12-13 months after theatrical release. First-timers and repeat customers tune in; people who paid in the theater or own the DVD are funding the license fee if they’re also premium pay subscribers. Marketing mostly borne by the third party. Consumer sales: indirect (money not associated with a specific product).
• Network Television/Basic Cable: Other stuff is happening between Pay and Network, and it’s discussed below. Once upon a time, the network debut of a motion picture was a big deal (and reasonably lucrative). It’s less so now. Basic cable has picked up some of the slack here. First-timers and repeat customers. Marketing largely borne by network/cable channel. Consumer sales: indirect.
• Syndicated Television: This is the never-ending revenue stream (or seemingly never-ending). International sales do kick in earlier in the lifecycle (and are a mix of pay and free, depending on the country), and domestic syndication happens after the network window. Films are syndicated like crazy. In a 24-hour programming world, there is always time to be filled. First-timers and repeat customers. Marketing largely borne by individual stations, though some additional dollars may shake loose, especially if a barter arrangement is employed. Consumer sales: Direct and indirect (mostly indirect, as a lot of this activity is ad supported in free television markets).
• Wash, Rinse, Repeat: In addition to the ongoing television sales, home entertainment sales continue. Sometimes a film will get be reissued theatrically, sometimes an older title will show up on an airplane (crazy, but it happened to me on a flight!). As long as a product can be sold, it will be sold. Marketing: situation dependent. Consumer investment: ditto.

So that’s what I mean about the revenue continuum. So how do books fit into this model? Well, let’s see. Gifts aside, books are generally a one time sale (more if that consumer suffers from my particular form of insanity and poor library management). As you can surmise from above, there is never an actual gap in the windows. Ever. Okay, books can do that.

And, as you can surmise from above, there is a marketing continuum. Studio and theater advertising leads to airline advertising leads to retailer and studio advertising leads to premium pay advertising leads to network advertising leads to endless commercials in the free television space. Well, I guess books can do that. I mean, it’s gonna take some work to keep titles in the minds of readers, but, sure, I’ll play along. The key to success here is constant marketing. Luckily the costs are spread among players. This stuff gets expensive. Trust me. I’ve been there.

Note: without this ongoing effort, all hope is lost.

Differences. “Windows” in books don’t have that lovely mix of direct and indirect money. They don’t have that revenue continuum. Authors only get paid on that first sale. Actors, directors, and other get residuals and participations, whether the sales are direct or indirect. A hardcover window doesn’t protect hardcover sales from anything but people who want to buy the book in another format (the horror, people who want to buy books!).

I’ll be absolutely frank about one thing: publishers have already lost the pricing battle. They’re being subsidized by Amazon and Barnes & Noble now, but if they cannot figure out how to make their business work in a consumer-friendly way, well, we saw how ugly it got for the music business. I love that some publishers argue that it’s for the authors, because we all know how many authors actually earn a living wage from their writing. It’s a business thing, I get that, and there is definitely concern for authors. There’s just as much concern for the bottom line.

No shame there. Truly.

Publishing has, I’d guess, a year, maybe two, to figure this out. I hate to be the bearer of bad news, but protecting the current business model — especially since publishers have done nothing to justify any aspect of their ebook pricing stance — is a zero sum game. You’re losing me and others as customers. How do you recover from that?

Personally, I’d look to another industry for guidance. In music, multiple formats have, with some blips, had simultaneous releases. In some cases, that lead to multiple sales. Yes, consumer behavior has changed, but it’s clear two separate formats can co-exist without diminishing the value of either. Look at how people can — with some teeth-gnashing on the part of the music industry! — move their music from CD to portable audio player of choice back to CD.

I would also look at the motion picture tradition of skipping theatrical releases when it’s clear some films are better as direct-to-video (sadly, a decision sometimes made after expensive production).

I get that this is hard. I’ve watched it happen in other industries. It’s been painful every time, but if you want to succeed, you make it work. If you want to go down with the ship, I have a lovely window seat for you….

While I do not know you, I am impressed by your resume and the portrait of you with what appears to be a brown tabby. I generally cut cat lovers more slack — and brown tabby owners…they get a free pass, as a rule — but I cannot do so in this instance. You are wrong.

You have “challenged” publishers to hold back e-reprints (I presume you are making the case for the ebook as a secondary market of some sort), and you make no bones about, as Richard Curtis states, “giving hardcovers their moment in the sun”. This sounds like fetishism to me. We must worship the all-mighty hardcover, without worrying about the actual impact to overall sales. Without even considering the reader. Of course, why would publishing ever consider the reader?

[Part Two: A Long, Detailed Look At Distribution Windows]

You draw a correlation between the apparent increase of sales of Robert Jordan/Brandon Sanderson’s The Gathering Storm and withholding the ebook, though none exists. Is it possible that sales would be higher if the ebook had been released? Why, yes it is! Consumer awareness and publishing marketing efforts were at their peak in September. This was the rare event book. They don’t come around all that often.

There seems to be an assumption that the ebook customer will shift formats when their preferred format isn’t available. I suppose some will, but most will simply skip the purchase. I am not entirely sure lost sales are good for business, but then publishing does many things that make no sense in the real world.

Let us be frank here: when we talk about “saving” publishing and withholding ebook rights, we are talking about “saving” a subset of books. A way of life. An object of worship, instead of books, things people read. Your hardcover books can have all the moments in the sun they need, but we both know how many hardcover books have failed to truly shine, much less get a hint of a tan. You are trying to protect some books, not all books. You really want to pick and choose what gets “saved.”

There is an element of elitism to this approach: these books are so special they must be kept away from those people who prefer other formats. Nevermind that the book many underperform and never reach the mass market. Nevermind that people want to buy the books right now. Nevermind that the books being protected from consumers who want to read them.

I have read your letter several times, and while I appreciate the concern being expressed, I fail to see how your solution saves publishing, or, frankly, hardcover books. You know. I know it. And every person who reads both your post and mine knows it. Whatever publishing is — and it’s many things — holding back digital rights won’t save anything. It will likely mask the real problem a little bit longer, but it won’t save anything. Most especially not publishing as we know it.

Because publishing as we know it is sick. Very sick. And something’s got to give. You don’t have to like it, you don’t have to read a single ebook, but the truth of the matter is that ebook sales are increasing dramatically, physical retail space is decreasing, there are serious pricing pressures being exerted, and most of the hardcover books you seek to protect don’t really earn their money back, at least not in a way that makes the format, as it’s practiced today, sustainable.

Yet you say, as if this is a bad thing:

In just a few years we have seen electronic sales of bestsellers go from 2% to 12 to 15% of total sales. Next year, they may constitute 20%. Who knows where this will end, once bestsellers are on cell phones, blackberries and the like?

Yes, who knows where this will end? Good lord, man!, people are buying and reading books. We can’t have that. Stop. The. Madness. Now.

Really, the plan is to cut off a rapidly growing market segment? As noted, I’ve read your letter several times. Trying to force a modern sort of mass market on the consumer is not a plan. It is wishful thinking. A plan would involve ways to increase book sales. A plan would involve ways to to connect readers and books in new ways. A plan would acknowledge the changes in how readers learn about, talk about, and buy books.

There are many factors that have changed over the past few decades. Readers around the world are talking about books every day, and international readers are frustrated by their inability to buy those books. Readers are constantly bombarded by non-reading choices (getting back to the inherent elitism in your thinking, what about the working mother? You’re not doing her any favors, and you know the female customer is critical to book publishing). And there are alternate channels for acquiring books. I won’t delve to much into the piracy argument, because you are surely aware that the Jordan book is freely available online.

I admit it: I am baffled by the publishing industry’s stance against piracy. On one hand, despite all the dubious numbers and lack of nuance, there is a desire to “stop” piracy. On the other, publishing refuses to provide legal options for people who prefer ebooks. This is how the pirates win — they build and maintain a marketplace because established businesses cannot be bothered to do it themselves.

While you implore publishers and agents to hold back on ebooks, for reasons that make no sense, I implore those same people to think long and hard about where book publishing is going. I can assure you this: publishing is going strong and getting strong. However, publishing as you know it isn’t.

P.S. — I realize your argument was predicated on a situation that arose with motion picture studios and exhibitors, specifically surrounding the film Cloudy With a Chance of Meatballs. I’ll address that in a separate article. It’s time to put the motion picture comparisons into a little perspectve. Also, $30.1 million on 3,119 screens? That’s some exhibitor boycott.