Mike Shatzkin

Getting books more retail shelf space is going to require a new approach

5 December 2014

From veteran publishing consultant Mike Shatzkin:

That bookstore shelf space is disappearing is a reality that nobody denies. It makes sense that there are people trying to figure out how to arrest the decline. There has been some recent cheerleading about the “growth” of indie bookstores, but the hard reality is that they’re expanding shelf space more slowly than chains are shrinking it. No publisher today can make a living selling books just through brick-and-mortar bookstores. For straight text reading, it is rapidly becoming an ancillary channel, a special market. Illustrated book publishers, whose books don’t port so well to ebooks and whose printed books are more likely to be bought if they are seen and touched, are working “special” sales — those not made through outlets that primarily sell books — harder than ever. That means they’re trying to put books into retail stores that aren’t primarily bookstores.

. . . .

One big component of the problem, in a nutshell, is that most books don’t sell enough copies to have a “sales rate” in any one store. Consider a little quick retail math. A store that does $1.2 million in sales a year ($100,000 a month) is selling 5 to 10 thousand books a month. Call it eight thousand. The chances are that store’s eight thousand sales will be more than 7,500 “ones”, with the balance made up mostly of “twos”, with a handful of titles — in the neighborhood of a dozen — that sell three or more. If the store turns its stock 4 times a year (which would be a very good performance), it is sitting on about 25,000 books at a time, also mostly “ones”, so let’s say they have 22,000 titles. So in the average month, 2/3 of their titles sell zero and more than 90 percent sell no more than one.

In the following month, the 7,500 titles that sell one will largely change.

There is no mathematician in the world that can make meaningful predictions for what any particular title will sell in a subsequent month with data like that. And there is no mathematician in the world that can tell you how the hundreds of thousands of titles not in the store would have done if they had been there, based on the store’s data on those titles (which is zilch).

. . . .

And that points to the second, and larger, component of the problem: automating the ordering. The human attention it takes to make the stocking decisions for a bookstore has not really been scaled. B. Dalton Booksellers, which was bought by, absorbed into, and then discarded by Barnes & Noble, pioneered automated models in the 1970s, the first real computer-assisted inventory management in bookstores. A buyer would set an inventory level and reorder point for a book in a store (“setting the model” or “modeling the title”) and the computer would take over from there, automatically reordering when inventory fell to or below the reorder point. This capability made Dalton grow faster than Walden, its chief competitor, which didn’t have this ability to keep backlist in the stores without buyer or store manager intervention. The shortcoming of the model system, of course, is that a buyer has to put it on, take it off, or change it. So we have a manual requirement to manage the automation.

. . . .

Unfortunately, the art or science or technology (or all three) of inventory management for books in stores hasn’t progressed a whole lot since then. Barnes & Noble built a great internal supply chain with warehouses that could resupply its stores very quickly and that improved the efficiency of the models. But an unnoticed and uncommented upon current reality is that internal supply chain will be hard to sustain and increasingly costly as the base of stores and sales it serves diminishes in size.

Link to the rest at The Shatzkin Files and thanks to Dave for the tip.

The implications of the computer moving from the desktop to our hip pocket

5 November 2014

From veteran publishing consultant Mike Shatzkin:

Benedict Evans of Andreessen/Horowitz (an indispensible observer of digital change across media, and an analyst who explains Amazon better than any other I know) did a presentation called “Mobile is Eating the World”. It spells out the fact that just about everybody is going to have smartphones with connectivity very soon. One slide (slide 6) in the deck says that by the end of 2017 — a bit over three years away — fewer than 30 percent of the people on the planet willnot have them. That means that at least 95 percent of the people known to at least 95 percent of the people reading this post will.

Another slide in the deck (slide 28) says that we are already at a point where during the vast majority of every person’s waking hours, they are engaged in media or communications activity between 40 and 70 percent of the time.

. . . .

I think book publishers would be wise to focus on the marketing and consumption opportunities these shifts enable (or require) rather than letting this tech change entice them down the enhanced ebook rabbit hole yet another time. Mobile device usage replacing PC usage actually favors old-time book-reading, since limited screen real estate is not a handicap. But the processes of discovery and the means of purchase could be radically shifted.

. . . .

The screen switch might turn out to be the more minimal disruption. While the growth in mobile is real, so is the ubiquity of screens of many sizes in many places. The tech to allow something brought in on a phone to be “thrown” to another screen is pretty trivial — bluetooth already exists and other new things, like Chromecast enabling mirroring an Internet-enabled device to a TV, keep arriving. It isn’t hard to imagine that larger screens will be available for mobile devices to inform just about anywhere. And while there will always be a natural tendency to prefer viewing on the device you hold in your hand from which you control all your navigation (a big advantage for books), if a larger screen is required, it is increasingly going to be available whenever your need it.

Link to the rest at The Shatzkin Files and thanks to Dave for the tip.

Building a Better Industry

4 October 2014

From David Gaughran:

Mike Shatzkin is confused. He can’t seem to understand why self-publishers spend so much time documenting the ills of the publishing industry.

Or, as Shatzkin puts it in one of his typically snappy headlines, “The motivation of the publisher-bashing commentariat is what I cannot figure out.”

. . .

So, why do we care? Is Jamie Ford correct when he claims that we are motivated by bitterness? Was he right when he said that we’re all “people who’ve been told that their baby is ugly”?

. . .

Here are my motivations, in no particular order:

1. I have several friends who are either hybrid authors or traditionally published. I want publishers to reform so that my friends are treated better.

2. Like many, I have a sense of fellow feeling with my colleagues – possibly because writers have been historically treated so poorly (or maybe because I’m a human being who can occasionally rise above considerations of narrow self-interest) – and I want conditions to improve for all authors, however they decide to publish their work.

. . .

5. Some of the things that publishers get up to are simply unconscionable, from using corporate sleight-of-hand to screw authors out of royalties, to profiting from predatory vanity imprints. It’s certainly not in my self-interest to speak up about this crap, but I hate to see writers suffer and cheats prosper, and I can’t abide the hypocrisy/stupidity of FREAKING OUT about what Amazon might do in the future when publishers are doing this stuff today.

. . .

And if the negative criticism from the “publisher-bashing commentariat” outweighs the positive suggestions, I respectfully suggest that’s because it’s much harder to get people to consider an alternative approach if they don’t accept there is a problem in the first place.

DRM doesn’t “prevent piracy,” it causes it. Higher pricing doesn’t “protect the literary way of life,” it is killing it. Writers aren’t being “treated as true partners in the publishing process,” they are being exploited.

Full article and relevant links here.

Link to David Gaughran’s books

Doin’-my-bit-for-PG guest post by Bridget McKenna

Mike Shatzkin Encounters Socially-Aware Indie Authors, is Confused

2 October 2014

From Nate Hoffelder at The Digital Reader

…A couple days ago Mike posted a new screed in which he questions the motivations of indie authors who bash the legacy publishing industry. While Mike can see how advocates of the legacy industry are fighting for their jobs, he thinks indies are arguing against their own interests:

While there is a symmetry to the two sides’ dismay about what is appreciated or understood, there is a massive asymmetry here that is hardly, if ever, mentioned. And that asymmetry makes the motivation of the legacy defenders very clear — they’re fighting for their lives — but actually suggests that the “side” fighting them (to the extent that it consists of indie authors) is at least sometimes simultaneously fighting against their own interests.

. . .

If publishers accepted the suggestions, of course, perhaps Amazon would be pushed to improve author terms too, but that seems a pretty indirect and distant reward to explain all the time and energy some people expend on this.

I found the entire 2,300 word piece to be immensely frustrating. It’s not that Mike can’t see or connect motivations, actions, and arguments from A to B to C to D; he has all the points to answer his own question in his own post and yet he doesn’t see them.

 

More at The Digital Reader

Posted by Bridget McKenna

The motivation of the publisher-bashing commentariat is what I cannot figure out

30 September 2014

From veteran publishing consultant Mike Shatzkin:

Once again this morning we wake up to a piece by David Streitfeld in The New York Times about Authors United and their ongoing effort to discredit Amazon. The message coming loud and clear from the legacy publishing establishment is that Amazon doesn’t appreciate, and perhaps doesn’t understand, the value that agents, publishers, and chain and independent bookstores bring to authors and readers and, by extension, to society as a whole.

. . . .

Indeed, many authors at legacy houses are not enamored of their publishing experience, but the ones who are defending the publishers are also defending something of their own.

What is equally loud and clear from Amazon’s own statements and those of their supporters (including many authors who would be less well known and less well off today if Amazon hadn’t built the tools and market share they have over the past several years), is that the legacy industry doesn’t appreciate, and perhaps doesn’t understand, that commercial publishing was built on an ecosystem which is rapidly being dismantled and will ultimately be irrelevant. And they point out that what is replacing what came before delivers much lower-priced ebooks (print is another matter) to consumers and a substantially larger portion of the revenue to the authors than published contract splits would give them. (The fact is that those splits are irrelevant more than 80 percent of the time for the most commercial books because big agents get big authors advances larger than what they “earn”, but that’s another story.) The authors that work in the new paradigm also gain unprecedented control of their professional lives: publishing when they want to, pricing and changing prices as they want to, and playing with marketing opportunities (bundling print-and-digital, entering subscription services) or not, as they and they alone decide.

. . . .

While there is a symmetry to the two sides’ dismay about what is appreciated or understood, there is a massive asymmetry here that is hardly, if ever, mentioned. And that asymmetry makes the motivation of the legacy defenders very clear — they’re fighting for their lives — but actually suggests that the “side” fighting them (to the extent that it consists of indie authors) is at least sometimes simultaneously fighting against their own interests.

. . . .

Assuming that the publisher-bashing commentariat, who could also be characterized as the “pro-Amazon” advocates, has a healthy number of authors whose revenue is as largely dependent on Amazon as James Patterson’s is on Hachette, one can see the emotional motivations to fight for the home team could be similar. But the practical side of it is precisely opposite. It is obvious that Amazon getting stronger weakens Hachette’s (or HarperCollins’s or Bloomsbury’s or Cambridge University Press’s) ability to pay advances and publish more books, which directly affects various stakeholders and particularly steadily-working authors. But if Hachette “wins” — or if Amazon’s margins on transactions with publishers are not improved — how does this injure the self-publishing authors who are working successfully that way now? Simple logic says that Amazon will treat them best when the possibilities offered by publishers are the best.

. . . .

In other words, publisher-published authors definitely lose if Amazon gains strength in relation to them. But Amazon-published or KDP authors (and the publisher-bashing seems to come from both flavors) lose nothing if legacy publishing remains strong. They are, allegedly, fighting for the “good” of those authors who are signing “exploitive” publishing contracts, but their own interests are not served.

. . . .

The motivation of the authors who spend a great deal of time and energy bashing big publishers has puzzled me before. Because “price-shoppers” are a core audience for indie ebooks, indies actually got a shot in the arm when the publishers and Apple put in agency pricing, which in its original form prohibited even the retailer from taking a loss to bring branded ebook prices down.

There’s no way for an outsider to compile the data to prove this, but the chances are very good that indie author breakthroughs were easier to achieve during the years when the price gap between the majors and the indies was greatest.

. . . .

Howey is a true believer and a crusader who is sincerely convinced that the standard publisher terms for authors are unfair and need to change. He has occasionally expressed skepticism and concern about some of Amazon’s decisions and behavior, particularly around the complex compensation schemes for Kindle authors with their KOLL (lending library) and Kindle Unlimited (subscription) initiatives which buys him a certain amount of credibility. But I still can’t understand why he’s in KU but not Oyster and Scribd and 24Symbols, a set of decisions that strike me as being in Amazon’s commercial interest but not his own.

. . . .

Trying really hard to understand this and think imaginatively about it, I can only really come up with two “selfish motivations” that make sense. One — and I think this is the one that is claimed — is that the publisher-bashing is designed to improve life for the victimized authors who choose those deals. Indeed, the content of the anti-publisher rants often includes specific suggestions, or demands: raise the digital royalty, make shorter contracts, pay royalties more often, etc. that are, no doubt, author-friendly. But it does seem a bit weird for people committed to demonizing, weakening, and ridiculing the big publishers to be the ones to tell them what they could do to stay competitive. If publishers accepted the suggestions, of course, perhaps Amazon would be pushed to improve author terms too, but that seems a pretty indirect and distant reward to explain all the time and energy some people expend on this. (Or are they promising to sign with the big publishers if they follow these suggestions? I don’t think so!)

Another conceivable legitimate motivation, of course, is ego. These publisher-bashers have managed to “do it” without them, and continuing a high-profile running criticism of the establishment they outdid and outmaneuvered, particularly when you can get a lot of applause, might be alluring. But even that feels weak to me. If self-aggrandizement were what motivated these people, it would be even more impressive if their frame were “this is hard, but I managed to do it” whereas the message feels much more like “anybody can do this and you’re a bit of a dolt if you don’t.”

Link to the rest at The Shatzkin Files and thanks to A.K. for the tip.

Evidently, Mike has never met an author who was not happy with his/her publisher. He leads a sheltered life.

Are Amazon exclusives the next big challenge for everybody else in publishing?

23 September 2014

From veteran publishing consultant Mike Shatzkin:

Somebody smarter (or more patient about wading through data) than I am could probably figure out how far along this bifurcation is already, but Amazon is doing its very best to build a body of content that is desirable and available from nobody else but them.

This is something you can do when you’re in the neighborhood of 70 percent of ebook sales and already more than half the total sales for many works of fiction, which is where the self-publishing world is strongest. It is not an opportunity that is really available to any other retailer. Apple has given it a try for more complex ebooks for which they provide ebook-building tools and, presumably, offer the most productive distribution environment for complex content. But they’re playing on much less fertile ground and they don’t have anything like the audience share necessary to drive this strategy very far.

. . . .

Hugh Howey [is having a] very public rumination about whether to go exclusive with Amazon or not, in which Howey wonders out loud whether he should stay exclusive with Amazon beyond a 90-day trial period based on his calculation that his audience (perhaps counterintuitively) goes up while his revenue takes a small hit. I’ve had an off-line exchange with Hugh in which he emphasizes what his post says: he really can’t decide which way to go on this.

. . . .

His open thought process became the subject of a post by Chris Meadows on Teleread. One thing on Hugh’s mind was whether he needed to help keep alternatives to Amazon viable by contributing his content to their mix. Meadows says “that’s not your problem” and I agree with that. Each writer should be making the publishing decisions that are best for their personal brand and career. The first decision — if a publisher offers them a choice — is whether to take an advance and a deal or whether to self-publish. If they self-publish, they have to decide whether to be exclusively Amazon or go for the widest possible distribution.

. . . .

But with Amazon’s enormous market share, their ability to promote both through normal commerce and special exposure like their subscription service Kindle Unlimited, and their willingness to put a thumb on the financial scales (KDP Select authors get higher royalties; they pay bonuses to top sellers and top titles being seen in KU), they can make up for whatever might be lost by eschewing other channels of distribution.

. . . .

The exclusive-or-not conversation has been mostly (should be: largely) confined to their dialogue with authors. In fact, the rest of the publishing world has nudged them in that direction by being resistant to stocking books from Amazon Publishing. If at one time the author recruitment team at Amazon might have hoped to deliver ubiquitous distribution for their books, the path to bookstores was effectively blocked by their brick-and-mortar competitors’ lack of willingness to support their program.

The self-publishing revolution, despite the enthusiasm of its strongest advocates (which definitely include Hugh Howey), has only made small inroads among authors who have the option of a substantial advance from a traditional publisher. For that reason, the pool of authors exclusive to Amazon contains very few that could change a book consumer’s shop-of-choice (except perhaps one time for a particular book they wanted to get).

But if a big earner like Hugh Howey thinks he might be better off accepting Amazon’s standard terms for exclusivity, that’s a dangerous sign for everybody else in the book ecosystem. A traditional publisher still offers brick-and-mortar visibility and revenue that Amazon and any self-publishing effort will not. The transfer of market share from stores to online and from print to digital hasn’t ended. Every point of market share that shifts strengthens Amazon’s proposition for exclusivity and increases the likelihood that a high-visibility author will make the self-publishing leap. The combination of the two — highly branded authors and Amazon exclusivity — is among the most unwelcome inevitabilities the rest of the industry will probably face in the years, if not months, to come.

Link to the rest at The Shatzkin Files

PG would add that there are a growing number of high-visibility authors who have gained that visibility strictly through self-publishing. The only place where these authors are not high-visibility is on the pages of Publishers Weekly, et al.

What makes books different…

11 September 2014

From veteran publishing consultant Mike Shatzkin:

Before the digital age, retailers that tried to sell across media were pretty rare. Barnes & Noble added music CDs to their product mix when the era of records and cassettes had long passed. Record stores rarely sold books and, if they did, tended to sell books related to an interest in music. For those stores, it wasn’t so much about combining media as it was about offering a defined audience content related to their interest, like Home Depot selling home repair books. For the most part in pre-Internet times, books, music, and video each had its own retail network.

But when media became largely digital in the first decade of the 21st century, the digital companies that decided to establish consumer retail tried to erase the distinction that had grown up dividing reading (books) from listening (music) from watching (movies and TV). The three principal digital giants in the media retailing space — Amazon, Apple, and Google — all sell all these media in their “pure” form and maintain a separate market for “apps” as well that might contain any or all of the legacy media.

The retailing efforts for all of them are divided along legacy media lines, acknowledging the reality that people are usually shopping specifically for a book or music or a cinematic experience. Most are probably not, as some seem to imagine, choosing which they’ll do based on what’s available at what price across the media. (This is a popular meme at the moment: books “competing” with other media because they are consumed on the same devices. Of course, only a minority of books are consumed on devices, unlike the other media. Even though this cross-media competition might be intuitive logic to some people, it has scarcely been “proven” and, while it might be true to a limited extent, it doesn’t look like a big part of the marketing problem to me.)

It seems from here that Amazon and Barnes & Noble have a distinct advantage over all their other competitors in the ebook space because, with books — unlike movies and TV and music — the audience toggles between print and digital.

. . . .

It should be more widely understood that the physical book will not go the way of the Dodo nearly as fast as the shrink-wrapped version has for music or TV/film. It hasn’t and it won’t. There are very good, understandable, and really undeniable reasons for this, even though it seems like many smart people expect all the media to go all-digital in much the same way.

. . . .

First of all, the book — unlike its hard good counterparts the CD (or record or cassette) and DVD (or videotape) — has functionality that the ebook version does not. Quite aside from the fact that you don’t need a powered device (or an Internet connection) to get or consume it, the book allows you to flip through pages, write margin notes, dog-ear pages you want to get back to quickly, and easily navigate around back and forth through the text much more readily than with an ebook. There are no comparable capabilities that come with a CD or DVD.

. . . .

But the differences between printed books and digital books are much more profound and they are not nuanced. In fact, there are categories of books that satisfy audiences very well in digital form and there are whole other categories of books that don’t sell at all well in digital. That is because while the difference between classical music and rock or the difference between a comedy and a thriller isn’t reflected in any difference between a streamed or hard-goods version, the difference between a novel and a travel guide or a book of knitting instruction is enormous when moving from a physical to digital format.

. . . .

So even though fiction reading has largely moved to digital (maybe even more than half), most of the consumer book business, by far, is still print.

Even eye-catching headlines like the one from July when the web site AuthorEarnings (organized and run by indie author Hugh Howey, who is a man with a strong point of view about all this) said “one in three ebooks” sold by Amazon is self-published, might not be as powerful at a second glance.

Although Howey weeds out the ebooks that were given away free, the share of the consumer revenue earned by those indie ebooks would be a much smaller fraction than their unit sales. The new ebooks from big houses, which is a big percentage of the ebook sales they make (and that AuthorEarnings report in July said the Big Five still had an even bigger share of units than the indies), are routinely priced anywhere from 3 to 10 times what indie ebooks normally sell for. So that “share” if expressed as a “share of revenue” might be more like five or ten percent. It really couldn’t be more than 15%.

. . . .

The facts, apparently, are that even heavy ebook readers still buy and consume print. There is not a lot of clear data about whether “hybrid readers” make their print-versus-digital choice categorically or some other way.

Link to the rest at The Shatzkin Files

PG and Mrs. PG are outliers in many ways (each reads for pleasure daily, for example), but they have almost never purchased physical books since shortly after they acquired Kindles.

PG suggests that among readers who purchase one book per week or more, purchases of ebooks will vastly outnumber physical books.

The future of books is digital.

Marketing the author properly is a challenge for the book publishing business

5 September 2014

From veteran publishing consultant Mike Shatzkin:

A few years ago, trying to explain the difference between how books had weathered digital change compared to other media, I formulated the paradigm of the “unit of appreciation” and the “unit of sale”. The music business was roiled when the unit of appreciation (the song) became available unbundled from the prevailing unit of sale (the album). Newspapers and magazines presented individual articles that were appreciated within a total aggregated package that were the unit of sale. The ability of consumers to purchase only what they most appreciated shattered the business models built on bundling things together.

. . . .

This played out in a more complicated way in the book business. For novels and narrative non-fiction, where the unit of sale equaled the unit of appreciation, simple ebooks have worked. That’s been great for publishers, since the ebooks — even at lower retail prices — deliver them margins comparable to, or even better than, what they got from print books.

But there is a big challenge related to this paradigm that the industry hasn’t really tackled yet. The “unit of appreciation” for many books is the author. And the “unit of appreciation” is also the “unit of marketing” and therein lies the problem. Because the industry hasn’t figured out how to bring publishers and authors together around how to maximize the value of the author brand.

Marketing requires investment. For an author, that means a web site that delivers a checklist of functionality and appropriate social media presences, as well as what any competent publisher would do to make the individual book titles discoverable.

But authors inherently do not want publishers to “control” their personal brand, particularly when so many of them have more than one publisher or self-published material in addition to what they’ve sold rights to. And publishers don’t want to invest in marketing that sells books they don’t get revenue from or to build up an author name that could be in some other house’s catalog a year or two from now.

. . . .

Where the solution must start is with authors (which also means agents, but also means all writers with by-lines, whether they’re now writing books or not) recognizing that the author brand is a proprietary asset that, if properly nurtured, can grow in value over time. The value is reflected in email subscribers (to newsletters or notifications or whatever an author cares to offer that fans will sign up for), social media followings, and web site traffic. When it becomes large enough, the following becomes monetizable.

. . . .

But we’ve also found flaws in the web presences of authors that publishers asked us to evaluate. When that happens, we — actually they — often hit a brick wall. The marketing people don’t have access to the authors; those are relationships handled by the editors, often through agents. Editors don’t have the same understanding of web site flaws that marketers do, even after we explain them, and the agent-author relationships have other elements that are more important to the editor to manage. It is difficult for a publisher, with whom an author signed so they would market the book, to spell out a list of tasks the author should do to market their books (or themselves). It opens what can be a difficult conversation about who should do what and who should pay for what.

. . . .

Perhaps there will never be an “industry answer” to maximizing the marketing clout of our core “unit of appreciation”: the author. But we know that every author who has more than one published piece (book or article) on the Web under their name and who has the intention of publishing more should have the following built into a web presence they control and manage:

* a list of all their books making clear the chronological order of publication (organized by series, if applicable)
* a landing page for each book with cover, description, publisher information (including link to publisher book page), reviews, excerpts, and easy to find retail links for different formats, channels, and territories
* a clear and easy way for readers and fans to send an email and get a response
* a clear and easy way for readers and fans to sign up for email notifications
* a clear and easy way for readers and fans to connect and share via social media
* a calendar that shows any public appearances
* links to articles about or references to the author

They must have an active and up-to-date Amazon author page and Google Plus page; that’s critical for SEO. Twitter and Facebook promotional activity might be optional, none of the rest of this is if an author is serious about pursuing a commercially successful career.

. . . .

My marketing whiz partner Pete McCarthy’s recommendation is that the authors own their websites but that the publisher run a parent Google Analytics account across author sites. That would enable them to monitor across authors, use tools like Moz to improve search (that would be beyond most authors’ abilities to manage and understand), and provide real support to authors optimizing their own web presence. This kind of collaboration is particularly appealing because it is reversible; the author can at any point install their own Google Analytics and remove the site from the publisher’s visibility. What this takes is for a publisher to set up the “parent” Google Analytics account and make a clear offer to authors of the support they can provide. As far as we know, only Penguin Random House — using an analytics tool called Omniture subsequently acquired by Adobe — offers this capability.

Link to the rest at The Shatzkin Files and thanks to Loretta for the tip.

PG says publishers might provide a value-add for an author if the publisher covered the expense of creating, maintaining and updating a web and social media presence for the author. After all, the publisher receives the large majority of the income from the author’s books.

But Mike’s approach mirrors the typical publisher’s attitude – the author should do all the online marketing and promotion. We might call it self-marketing.

The question that immediately comes to mind is, if the author is doing self-marketing, why doesn’t it make sense for the author to do self-publishing?

The list of tasks that publishers ask authors to perform continues to grow and the list of things that authors can’t do for themselves pretty much boils down to getting print distribution through physical bookstores.

As is usually the case after reading about publishers and marketing, PG wonders if there is any other industry that is as far behind the curve and clueless about the online world as traditional publishing is.

Amazon channels Orwell in its latest blast

16 August 2014

From veteran publishing consultant Mike Shatzkin:

Anybody who reads Amazon’s latest volley in the Amazon-Hachette war and then David Streitfeld’s takedown of it on the New York Times’s web site will know that Amazon — either deliberately or with striking ignorance — distorted a George Orwell quote to make it appear that he was against low-priced paperbacks when he was actually for them.

. . . .

This argument against Hachette, using authors as proxies and lower-prices-for-consumers as the indisputable public good, once again employs two logical fallacies that are central to their argument that Hachette (and its parent company, invoked to give the appearance of relative equality of size between the combatants, which is still nowhere near the case) is craven and muleheaded and that Amazon is merely engaged in a fight for right.

1. Amazon’s logic is entirely internal to Amazon. It does not attempt to take into account, or even acknowledge, that publishers and their authors are dependent on other channels besides Amazon. And, in fact, the publishers and authors know for sure that the more the sales do concentrate within Amazon, the more their margins will be reduced.

2. The price elasticity statistics they invoke (for the second time in as many public statements), which are also entirely internal to Amazon, are averages. They don’t even offer us a standard deviation so we can get a sense of what share of the measured titles are near the average, let alone a genre- and topic-specific breakdown which would show, beyond the shadow of a doubt, that many Hachette books would not achieve the average elasticity rate. See if you can find anybody with an ounce of statistical sophistication who thinks a book by Malcolm Gladwell has the same price elasticity as a romance or sci-fi novel by a relatively unknown author.

Link to the rest at The Shatzkin Files

Amazon’s clarifications always come when I’m on the road

2 August 2014

From veteran publishing consultant Mike Shatzkin:

[Amazon]: A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. With an e-book, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market — e-books cannot be resold as used books. E-books can be and should be less expensive.

[MS] “Unjustifiably high” is an opinion, not a fact. Everyone is welcome to their opinion, but everyone is welcome to not share it as well. Publishers pay money for the right to exploit copyrights andtheir “opinion” on pricing should be at least as important as anybody else’s. Agency publishers had a lot of experience with higher ebook prices that couldn’t be discounted before the DoJ stepped in and they apparently disagree.

[Amazon] It’s also important to understand that e-books are highly price-elastic. This means that when the price goes up, customers buy much less. We’ve quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000.

[MS] This elasticity measurement considers only sales of ebooks at Amazon. What is the impact on print book sales when the ebook price goes up and ebook sales go down? What is the impact on the bookstore distribution network when ebook prices go up and ebook sales go down? It would be commercially irresponsible of publishers not to consider those effects as well.

. . . .

[Amazon] So, at $9.99, the total pie is bigger – how does Amazon propose to share that revenue pie? We believe 35% should go to the author, 35% to the publisher and 30% to Amazon. Is 30% reasonable? Yes. In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% — we did have a big problem with the price increases.

[MS] It is good to hear that Amazon accepts a 30% share for retailers as reasonable. Will they now extend terms reflecting that to all the non Big-Five publishers who are trapped in “hybrid” terms, giving 50% or more in wholesale discounts to Amazon for ebooks? Of all the points raised by Amazon in this document, this is the most consequential in terms of commercial impact.

Link to the rest at The Shatzkin Files and thanks to Toby for the tip.

Once again, it’s all about keeping ebook prices high to preserve print sales through traditional bookstores – the one place those nasty self-published authors can’t go.

This is typical of the short-term thinking that characterizes industries being rendered noncompetitive via technology disruption.

The formerly dominant players in the legacy business believe they have the power to hold back the new technology and its consequences. That never works and has the perverse effect of impairing such organizations’ chances of successfully evolving with the new technology.

Amazon justifiably receives credit for making indie publishing possible and profitable via KDP. However, Big Publishing has also made a significant contribution to the growth of indieworld.

By setting high prices for ebooks in order to prop up physical bookstores and defending quarterly revenues and profits for the media coglomerates that own them, Big Publishing has left the fastest-growing portion of the market – ebooks selling for $4.99 and below – wide open for indie authors to exploit.

Big Publishing simply will not compete against indies with pricing and has the hubris to believe that it can shape consumer preferences for high-priced ebooks.

Where does this all end?

Smart money won’t invest in traditional publishing’s present model nor will anyone with financial sense come to the rescue of Barnes & Noble or other bricks-and-mortar bookstores.

PG suggests that smart money will start acquiring struggling publishers exclusively for their backlists – built on life-of-copyright publishing contracts.

The first thing the new owners of publishers will do is to fire everyone other than a tiny accounting staff, sell off physical inventory and sublease expensive office space. If you’re not going to publish new money-losing books, you don’t need most of the people in a legacy publisher.

The second action of the new owners of the publishers will be to lower the price of all ebooks to directly compete against indies.

Thereafter, the owners will collect payments from Amazon, iBooks, etc., and (possibly) remit a portion of that money to the authors who wrote the books in the first place.

In PG’s supernally humble opinion, that’s the only way to make money from a traditional publisher for more than a few years – treat the backlist as a wasting asset.

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