Top 5 for 2010--Book Publishing Predictions from Tim

1. Continued extinction of the 20th Century book eco-system. More bookstores will close, less "trade" new titles will be published by fewer "acknowledged" trade publishers, less books will sell through traditional channels (whether retail or institutional), less people will be employed by book publishers, and less money will be spent overall by publishers.
2. The existential crisis for traditional publishers will continue. There is no going back to the way it was, and the path forward is unclear at best. More content will be written defending the value of the traditional publisher and their traditional functions, and many still in publishing will be encouraged and share these pieces with colleagues. This will not change the problem. Dualism (e vs. p) in publishers will exacerbate this trend, with the "e" staff seen to be the favorites and sometimes mocking their primitive "p" colleagues.
3. The best publishers will invest in operational improvements, so they can handle their "physical" business more efficiently. Areas like data warehousing/business intelligence and reports, sales forecasting and inventory management, and measuring sales force productivity will see increased focus to drive more ROI. Any savings will then be invested in digital infrastructure needs. The best publishers will create self-funding loops.
4. On-demand print technologies will continue to evolve, particularly for full color, and the most innovative trade publishers will find ways to capitalize on new capabilities. Look for more personalization of book content (with pre-orders) as publishers try to find ways to charge more (for extra value) and build databases of interested readers. The best publishers will make this a long-term strategic priority.
5. On the digital side, now that eBooks are finally hot (after 10 years of anticipation), the growing focus for publishers will be on understanding and managing the digital supply chain. Publishers will need to understand (and spin) the advantages that their digital supply chain brings to the table versus other competitors, whether those are traditional publishers or other players.

More legal problems for the book industry are a precursor to the next suit to come

I'm not surprised by the news that the Justice Department has recommended that the proposed Google settlement be rejected as written. Given the complex issues involved, more work needs to be done to achieve a fair settlement for all parties involved, one that does not lock in an unfair advantage for Google over its competitors. Clearly, this is just the latest example of litigation playing a critical role in shaping the industry's business models.

Recall that in 2001, just 8 years ago, the ABA (American Booksellers Association) settled its antitrust case against Barnes & Noble and Borders for $4.7 million. The 1994 lawsuit and its accompanying evidence exposed many discriminatory deals made by the two bookstore chains with the major publishers. Many commentators at the time noted that the deals helped to financially feed the 1990's superstore expansion, while at the same time crippling the ability of independent bookstores to compete on the same playing field. By the time the lawsuit impacted the industry enough for publishers to offer fairer terms to independent bookstores in the late 90's, the damage had been done. The industry was left with the 2 chains as the increasingly dominant booksellers.

At about the same time, the internet and Google emerged to become the next new challenge for the industry. In this latest case, Google's behavior in digitizing entire library collections, initially without regard to copyright issues, was the core of the problem. While the publishers and the AAP sued to stop the library program, a negotiated settlement became the vehicle to resolve the dispute.

As the industry continues to struggle with digitization in general, the almost arcane focus in the settlement on "orphan works", those out of print or rare works without a clear and identified rights holder currently, can be seen as a microcosm of a larger dispute that will eventually be settled in the courts. Since Google's strategy could be characterized as digitize first, then negotiate, they were able to attain the competitive advantage early on, and have leveraged that to steer the proposed settlement. Their major argument is that digitization is in the public good, giving wide access to these rare works. Of course, that access is through Google's book search. And parties wanting to claim their orphan works and opt out of Google must do so actively, the onus is on them to navigate through the structures defined in the proposal. It will be interesting to see how this all turns out in the end.

But I think this particular legal action is the precursor to another one. It is my guess that the future dispute will be whether the major publishers' individual and confidential agreements with Google, Amazon, etc, violate Robinson Patman, or the Sherman Act, and give those companies an unfair advantage over their competitors. Whether it is about ebook terms, book search terms, or terms about any income derived from scanning and digitization of works, more litigation is the only certainty.

Dan Brown and Publishing Pricing in 2009

http://www.independent.co.uk/opinion/commentators/dj-taylor-dan-brown-is-going-to-be-the-ruin-of-us-all-1786885.html

In the article (see link above) in UK's Independent, DJ Taylor bemoans the fact that Uk retail cutthroat discounting on major bestsellers like "Lost Symbol" and Harry Potter, etc are a lost opportunity for struggling book retailers to realize profitable revenue. With UK chains selling the title at 50% discount or half price, Mr Taylor notes that selling a copy is either a loss leader to drive traffic, or a break even proposition at best. Mr Taylor neglects to note the major cash flow advantage that retailers will see in selling many copies quickly to consumers, collecting that cast, then paying their suppliers with extended dating.
He writes, "All this renders the book's publication horribly symbolic. For all the bright-eyed talk about 'diversity' in the nation's bookshops, the over-riding tendency in publishing is for more discounted copies to be sold of fewer, similar books. Some might argue that putting Dan Brown on sale at half-price is a thoroughly democratic way of making literature more accessible to a mass public. In the end, though, price-cutting simply devalues the allure of what remains. "
Mr Taylor may not have noticed, but a sort of consumer price deflation has hit many physical media products in the last year or so. I would propose that the revenue dampening impact of the global recession, combined with the emergence of digital media, the increased visibility of used products (via eBay and Amazon.com), and the corresponding weakening in physical media product sales and retailer performance has driven this phenomena. Lost in many industry blogs and trade articles about eBook pricing and the $9.99 Kindle consumer price target is the fact that in 2009, the price of physical book product matters much more to publisher's top and bottom line results.
The industry is in an almost existential juggling act, trying to find the balance of consumer value vs publisher profitability while many of the primary factors that influence both are changing. What is indisputable in 2009 is that the industry needs more consumers to buy books, whether in the US or UK, whether in chains or indie bookstores.

BEA and Reed still miss the point.

After reading the "How to fix BEA?" article in the 8/10/09 edition of Publishers Weekly, it struck me again how timid the thought process is of both Reed and the publishers they listen. Once the ABA sold the show to Reed, the original concept (bookseller oriented annual show) should have been reworked. Reed's customer is not the bookseller, but the publisher who pays for space. And publishers have been tolerating the show for years, but only with diminishing investment required of them. This is because the major challenge in the industry is not publishers reaching booksellers with their fall list (the way it used to be). As the role of the bookseller has been reduced (primarily) to ringing up the sale on the cash register (see my previous blog), the new challenge for publishers is to identify and reach the new "influencers" who will recommend their titles and authors.

Since the traditional print media has drastically reduced book review coverage, this influencer role has increasingly shifted to bloggers, twitterers, facebookers, and social networkers in general. Even if a book is featured on TV, the amplifying effect of social networkers noting the appearence is crucial to building popular awareness. While booksellers still need to have product available (whether p or e), influencers are the demand creators of the 21st century.

Again, what is a major challenge facing book publishing? It is to reach the social networkers with appropriate titles and the accompanying information so they can do their magic. What if Reed made the effort to attract the top social networkers who recommend books to the BEA? What if Reed set up a section in the hall for them, documented the topics they were interested in, and then facilitated scheduling meetings and pitch sessions for publishers. What if software players like Net Galley and Bowker, or organizations like BISG helped publishers capture and assimilate the pertinent data on social networkers and tracked their activity, followers, and helped publishers see the relevant data on how consumer sales (Book Scan) moved due to those efforts?

BEA may be irrelevant, but the industry has needs that a major aggregating event can help address. It just happens that need is not about booksellers.

Amazon: Love Them, Hate Them, Let's Follow the Money

by Ted Treanor, publishing consultant, The Consulting Garage

So what’s Amazon up to? Let’s follow the money trail. In 2005 I remember becoming acutely aware of their strategy when they bought BookSurge and Mobipocket in one month. It was a clear message to both the digital and traditional book publishing industry that Amazon was investing in their vision of the future of book publishing. They were putting their money on future growth areas in the book industry by demonstrating a commitment to digital books and print-on-demand technology and services. Here is an awesome link to a visualization of Amazon’s entire history of investments in buying companies across all industries. Many of their acquisitions and investments are in technology infrastructure that supports their book business and other industries as well.

Bookpages (announced April 27, 1998) – Bookpages was one of the largest online bookstores in the United Kingdom. It became Amazon’s online UK store.

Telebook (announced April 27, 1998) Telebook, operating through its ABC Bücherdienst subsidiary, was Germany’s number one online bookstore –It became Amazon’s German online store.

Audible.com (announced Jan. 31, 2000) An investment of millions of dollars, for 5 percent ownership, which featured content from newspapers and magazines, and books on audio. For promoting audio.com, Amazon would receive $ 30 million over three years.

BookSurge LLC (announced April 4, 2005) BookSurge print-on-demand book printing and fulfillment from Charleston, South Carolina with growing global relationships.

Mobipocket.com (acquired April 2005) – Mobipocket, a very popular French ebook company that specialized in ebooks for mobile devices, with both reader and server software.

Brilliance Audio, Inc. (acquired May 23, 2007) –Brilliance Audio is one of the largest audiobook publishers in the USA.

Shelfari (acquired August 25, 2008, Shelfari book based social network site from Seattle. Amazon originally was an investor in Shelfari in February, 2007.

Audible.com (acquired April 2008) Audible is the online audio-book provider was purchased by Amazon in for US$300 million and assumption of liabilities.

AbeBooks (acquired Dec 2008) Purchased for between $110-$120 million. AbeBooks is an online marketplace for books, with over 110 million primarily used, rare and out-of-print books listed for sale by thousands of independent booksellers from around the world.

-Bookfinder.com (subsidiary of AbeBooks, acquired Dec 2008)

-LibraryThing (a 40% share) (subsidiary of AbeBooks, acquired Dec 2008)

-Justbooks (subsidiary of AbeBooks, acquired Dec 2008) -IberLibro.com (subsidiary of AbeBooks, acquired Dec 2008)

-Gojaba.com (subsidiary of AbeBooks, acquired Dec 2008)

- FillZ (listing-management service, subsidiary of AbeBooks, acquired Dec 2008)

Lexcycle Inc. (acquired April 27, 2009) This is the company behind Stanza, an electronic book reading application for the iPhone and iPod.Booktour (Seed capital investment in April, 2009)

The Chairman of Booktour is author and journalist Chris Anderson, who is the editor in chief of Wired Magazine, and the writer of the book The Long Tail and his 2009 book, Free. The company lets authors create profile pages where they can communicate with fans, and provide a schedule of events.
You can bet that there will be more investments to come…

There are many other Amazon investments in customer enabling technologies, and to improve the customer experience for any product or service through the ever reaching and growing Amazon.com. It is not just B2C, but B2B relationships, too, such as hosting and in the cloud computing services. They are building a comprehensive online shopping platform for entire verticals and horizontals and they make money selling directly to the consumer, or helping merchants sell to their customers, and more recently by supporting supply chain relationships. No small vision here.

Whether you see Amazon as a friend or a threat will depend on your market position. It will also depend if you and your company have a strong vision and an ongoing commitment to investment in the future. Where do you weigh-in?

Comic-Con a model for 21st Century BEA?

Calvin Reid has a PW piece about Comic-Con (here in San Diego), and about how it could be a model for what to do with the BEA/ABA. (here is the link) http://www.publishersweekly.com/article/CA6674286.html?nid=2789&source=link&rid=1494249144

Obviously the big difference between the two is that a traditional trade show like the BEA is B2B-oriented, while Comic-Con is a fan-driven show that brings Creators (writers/artists), publishers, studios, distributors, dealers, etc together in one big stew.

However, if book publishers are serious about digital marketing and developing strong vertical categories, then they need to seriously consider fan-friendly shows conceived around strong subject categories. Publishers could collect fan information (to market to them) and gather their feedback about upcoming books. Involving authors, specialty retailers, other publishers in the vertical, other media in the vertical (web, Video, magazines, etc), bloggers, reviewers,etc could give enough scale and attention to make it compelling.

Evolving from the 20th Century Book Publishing Ecosystem, part 1

Evolving from the 20th Century Book Publishing Ecosystem, Part 1 Booksellers
I’d like to add to the growing body of commentary about the way publishing may adapt to the challenges it faces as it evolves from a 20th century ecosystem into the 21st century. First of all, I find that 20th century publishing had 6 major roles that impacted the lion’s share of the business as listed in the table below.
20th Century Book Publishing Ecosystem Roles
ROLE FUNCTION NOTES
Author Write books, promote as needed Success = large royalty advance
Agent Select book/author, sell rights Success= negotiating large advance
Publisher (Trade) Acquire book/author, publish Growth and profit is key
Wholesaler 1 stop shop for retail, selection Same day shipping, high fill rates
Booksellers Merchandise to consumers stocking, word of mouth, hand sell
Consumers Buy from booksellers, read Media influenced (Oprah), wom

As we move deeper into the 21st century, almost every role is in flux, threatened by current developments or undergoing major change due to technology, culture, overall business trends, etc. But the first role I’ll explore in more depth is that of the bookseller.
As the 20th century retail evolved in the 1980’s and 1990’s, so did bookselling. What had been a diverse assortment of independently owned and operated bookstores across the country became a big box chain category. The growth of Barnes and Noble through merger and acquisition, as well as the parallel growth of Borders changed the face of bookselling. The superstore became the ultimate bookselling tool, a vast expanse of tables and shelves for almost all current frontlist and backlist titles from every publisher, and the rapid expansion of the number of superstores across the country fueled demand for category backlist titles to fill those shelves. Publishers and wholesaler benefited enormously from these opening orders, and developed more efficient ways to inventory the necessary titles and handle the order fulfillment challenges.
By the mid 1990’s, during the height of the superstore boom, Amazon.com emerged and created the etail category. In 10 years, Amazon.com has grown to become perhaps the most influential bookseller in the US, with the volume and buyer power that comes with the territory. At the same time, the independent booksellers that dominated the business until the 1980’s declined rapidly. Both the superstores and etail devastated the independents. While some of the best still survive today (Tattered Cover in Denver), their overall number and sales volume has diminished to a rounding error.
One of the consequences is that the role of the “professional” bookseller, a human paid for their knowledge of books and their ability to match books to readers, has been disintermediated. While the chains may claim that they employ many booksellers, staffing cuts have reduced most superstore staffing to levels that provide only the most basic services. And the chains do not typically pay a living wage to their “bookseller” store employees.
But perhaps even more significant in the virtual extinction of the professional bookseller is the emergence of web 2.0 technologies. Look at Amazon as the supreme example. The function of the bookseller has been replaced by a combination of several factors. First, the ability for consumers to rate the items that they’ve bought (books they’ve read) and then store that information in a database. Second, the ability of Amazon to utilize that information, as well as their record of your purchases and browsing path, to provide recommendations to you replaced the most obvious role of the bookselling professional. And third, the enthusiasm of other customers in providing “user generated content”, their ratings and reviews of books, gives the Amazon consumer an amazing amount of supplemental content to validate their choices. Together, these factors provide a consistent customer experience no matter where that consumer is located.
The best 1970’s bookseller understood the tastes of their customers, what they had already read, and which other books might appeal. Their brains were the recommendation engine of the time. Yet that skill was hard to teach and required much time and dedication to acquire. In the virtual world of Amazon, the software that provides the recommendation learns to improve results by closely tracking how the consumer responds. It is a self-improving loop that will continue to evolve as more information is provided to fuel it. And it has rendered the professional bookseller almost extinct.
Next, part 2.