Mike Shatzkin

Publishers need to rethink their marketing deployments and tactics in the digital age to take advantage of their backlists

29 July 2014

From veteran publishing consultant Mike Shatzkin:

Well-articulated complaints about the way traditional publishing compares to self-publishing have recently been posted by two accomplished authors, one who writes fiction and one who writes non-fiction.

These point to what most publishers really should already know. Some fundamental and time-honored truths about publishing need to be reexaminedas we continue the digital transition. And one of the things that really needs to change is the distinction between backlist and frontlist.

There is a real baked-in logic to how publishers see their responsibilities and effort allocation across their list. Books have always been launched like rockets. The publisher commits maximum firepower to getting them off the ground. Most crash to earth. Some go into orbit. The ones that go into orbit have “backlisted” and, like satellites, it takes no power or effort to keep them in orbit for a long time if the initial blast-off gets them there.
In fact, a virtuous characteristic publishers have always recognized about backlist stands in the way of developing the right 21st century approach: backlist books sell without the marketing effort that it takes to introduce a new book.

. . . .

My Logical Marketing partner, Pete McCarthy, who worked for both Penguin and Random House in his corporate career, points out that titles in the backlist make can make up more than half the profits for a Big Five house in a given year.

. . . .

Experienced publishers learned over the years that it didn’t matter what promotion you did for a book not fully distributed. If it wasn’t available in stores, promotion and advertising wouldn’t make it sell. Savvy publishers would ignore news breaks or marketing opportunities for books that had gone through their peak bookstore distribution cycle — which can be as short as a few months or even less if a book doesn’t gain initial traction — because chasing them was wasted effort.

None of this is true anymore. Any break can get around quickly, or even “go viral”. And there don’t need to be books in any stores for a break to move print and digital copies. For many categories of books, most copies are already bought online. It’s probably the case for the majority of titles published and it is true for periods of time for just about any title, particularly an older one past its bookstore peak that has a sudden moment of relevance or fame.

. . . .

The common experience of the two authors who have switched from traditionally published to self-published and written about it is that some marketing effort, including price-fiddling, applied to long-ago backlist can resuscitate a dormant book and that fact, combined with the higher share of revenues self-publishing brings, can make the effort of managing their own publishing business well worth the effort to them. Another component is that both authors want to work on making their books sell.

Of course, this constitutes a loss to the publishers whose initial efforts helped create both the product and the platform that the self-publisher and the self-publishing infrastructure (most prominently Amazon, but there are plenty of players there) then capitalizes on.

. . . .

There is a critical strategic question here that the industry has not resolved. Authors really need to control and manage their own personal web presences and decide on how to best leverage those presences — in conjunction with their publisher(s) or not. But managing a personal web presence is knowledge-, cost-, and labor-intensive and there is no great correlation between how well a person can write and how well they can manage their online opportunities. Still, an author can’t really totally entrust that work to any one publisher, because each is only really interested in the books they publish.

. . . .

[T]he fact is that it is easier to do intelligent and targeted marketing for a book that is a year old than for one that hasn’t been published yet.

But publishing organizations are not structured to take advantage of that fact. In the past ten years, the ratio of marketing personnel to sales personnel has changed in every house: more marketers and fewer sales people. But there has not been a comparable shift in marketing deployment between new titles and backlist. If publishers want to stop losing their most marketing-savvy multi-book authors to self-publishing, that’s something that urgently needs to change.

. . . .

Publishers need to recognize that if authors can sell their backlist more effectively than their publisher(s) did, the publisher was doing something wrong — or failing to do some things right. Authors are right to leave and take matters into their own hands when that happens. Publishers further need to recognize that the authors who can effectively market themselves are the very authors they most want, and that figuring out how to create an environment of collaborative synergy with them is what the successful publisher of ten years from now will have done. 

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

It’s painful to see an industry that has the well-being of so many talented authors under its control demonstrate that it is clueless about marketing books outside of traditional bookstores.

As PG has said before, he regards Mike’s thinking as representative of some of the ideas floating around the best minds in New York publishing. Unfortunately, calling the ideas discussed in this article Online Marketing 101 would be defamatory to Marketing 101.

Again, the thought that authors’ financial welfare is in the hands of such tradpub marketing morons is depressing.

New data on the Long Tail impact suggests rethinking history and ideas about the future of publishing

29 June 2014

From long-time publishing consultant Mike Shatzkin:

For most of my lifetime, the principal challenge a publisher faced to get a book noticed by a consumer and sold was to get it on the shelves in bookstores. Data was always scarce (I combed for it for years) but everything I ever saw reported confirmed that customers generally chose from what was made available through their retailers. Special orders — when a store ordered a particular book for a particular customer on demand, which meant the customer had to endure a gap between the visit when they ordered the book and one to pick it up — were a feature of the best stores and the subject of mechanisms (one called STOP in the 1970s and 1980s) that made it easier. But they constituted a very small percentage of any store’s sales, even when the wholesalers Ingram and Baker & Taylor made a vast number of books available to most stores within a day or two.

It was an article of faith, and one I accepted, that if you could expose most books to a broad public, they would “find their audience”.

. . . .

There was also ample evidence over time that a large selection of books in a store acted as a magnet to draw customers. That fact was noted by my father, Leonard Shatzkin, in the early 1960s, when they doubled the inventory at the Short Hills, NJ, Brentano’s store (the chain reported to my father, who was a Vice-President of Crowell-Collier, the company that owned Brentano’s, Collier’s Encyclopedia, and Macmillan Publishers, among other things) and it went from the worst-performing store in the chain to the best. In the 1970s, BP Reports published a survey that said that nearly half of bookstore customers chose the store they were in on the basis of the selection they’d find and more than half reported their particular purchase decision was made in the store.

By the late 1980s, both of the big national bookstore chains — Barnes & Noble and Borders — were undergoing a massive expansion of “superstores”. Whereas chain bookstores (B&N’s B. Dalton and Borders’s Walden) carried 20,000 or 30,000 titles, and large independents carried as many as twice that, now the new superstores would carry 100,000 titles or more! Customers flocked to the massive bookstores and the ever-expanding chains ordered lots of the publishers’ backlists and everybody celebrated a new era, except the independent bookstores who were increasingly squeezed by their new large competitors. The era was less than 10 years old when it got disrupted.

. . . .

Remember, in physical retail, selection was the magnet. The books that didn’t sell were helping to pull in the customers for the books that did sell. Stores knew that too. Later work I did demonstrated that there were whole store sections that turned at half or less of the rate of the store as a whole. But if you want, say, a philosophy section that “turns”, it would only have about ten titles in it. If you want a philosophy section people will browse and shop from, you have to carry a lot of slow-moving titles.

. . . .

The challenges for conventional publishers got steeper again when ebooks became mainstream, pioneered by Amazon’s Kindle in late 2007. There had been a modest ebook business building for about a decade, but until Amazon committed its resources to creating a dedicated device, a repository of content, and audience awareness, it had a trivial impact. But a full-fledged ebook business unleashed a new wave of competition from self-publishing authors. Amazon fostered growth by creating an easy on-ramp for self-publishing, a move quickly copied by B&N, Apple, and Kobo. In the several years that ebooks have been commercially important, many — certainly hundreds and perhaps thousands — of authors have achieved meaningful sales. Many of those have been of backlist books originally published conventionally but there have also been thousands of successful original ebooks. Whether revived formerly-dead backlist or new titles, these are books that are competing with the output of the conventional publishers and wouldn’t have been a decade or two ago.

So the Long Tail for books has been a topic of conversation for most of the past 20 years. Amazon’s limitless shelves and Ingram’s Lightning contributed heavily to this before the turn of the century; self-publishing has accelerated it dramatically. The early expectations, including mine, were that the Long Tail would take sales from all the books being “currently” published. But it became evident pretty early that the big books were just getting bigger: the head of the sales curve wasn’t diminishing. In fact, both the head and the Long Tail took sales from the middle of the curve. This was particularly challenging for publishers because publishing mid-list, those books they do that aren’t bestsellers, became much more challenging.

. . . .

The implications of this in the discussion of how the publishing industry might be affected by self-publishing disruption are interesting. It would suggest to me that the boosts publishers can give a book — even their catalogs provide more marketing lift than most self-published books start with — will become increasingly important as the market becomes increasingly flooded. If the data Vena has presented turns out to be the future trend, the increase in self-published titles will drive more and more sales to a smaller number of winners, and my hunch would be that the winners will most likely be from publishers.

. . . .

So far, the commercially successful self-published authors overwhelmingly, if not entirely, fall into two categories. There are authors who have reclaimed a backlist of previously published titles and self-published them. And there are authors of original genre fiction who write prolifically, putting many titles into the marketplace quickly. Successful self-publishing authors are often in both categories but very few are in neither. Those two categories are nearly 100% of the self-publishing success stories but a minority of the books from publishers. So, even before Vena published his White Paper, the idea that self-publishing would upset the commercial establishment was way overblown. If Vena’s data turns out to be prophetic, the road is going to get harder and harder for all books, but especially the self-published.

Link to the rest at Mike Shatzkin

Much as I like Hugh Howey, I disagree with just about all of this recent post of his

17 June 2014

From veteran publishing consultant Mike Shatzkin, a response to a post by Hugh Howey discussed here:

I need to say couple of things at the outset here. The first is that I really like and admire Hugh Howey and the fact that I disagree with almost every paragraph of this post of his shouldn’t suggest that I don’t. That’s not snark or irony; it is sincere. I think it is both noble and natural for people to defend the entities and circumstances that make possible their commercial success and it is just human nature that those who have benefited from a paradigm reflexively want to defend it. I only wish that Hugh would exhibit the same respect for that tendency when it is exhibited by authors who have done well with publishers.

. . . .

The other is that I don’t see the “Amazon versus the publishing establishment” battle as a moral choice, just a tug of war between competing business interests.
. . . .

I continue to believe that self-publishing is a useful tool that most authors should employ at one time or another but that, still almost all of the time, an author who is offered a publishing deal from a major house willing to pay an aggressive advance is better off to take it than go it alone. (If you’re not offered a substantial advance, the calculus shifts, but there is a lot of work involved in self-publishing that is not described in much detail in this post, even though Hugh Howey knows much better than I do how much work it is!) And I think that generalized advice to authors to eschew publishers in a world where print still matters and stores still matter remains, as of today, unwise. That may well change in the future, but it hasn’t changed yet.
. . . .

Publishers are trying to keep a print book physical distribution infrastructure alive. That’s not irrational. It is rational. And it is the crux of the difference in objectives between a publisher’s strategy and Amazon’s strategy. The more bookstores fade, the better it is for Amazon and the worse it is for publishers. This is a problem you could have read about on this blog a long time ago.
. . . .

I agree that ebook royalties should be higher. But, in fact, only authors who sell their books to publishers without competitive bids (which indicates either “no agent” or “limited appeal generated by the proposal”) are living on that 25% royalty. The others negotiated an advance that effectively paid them far more than that. And guaranteed it before the book hit the marketplace. Publishers are making a massive PR error not raising the “standard” royalty since they effectively pay much more than that now, but the authors signing contracts with them know the truth.

Link to the rest at Mike Shatzkin

PG has the impression that Mike and Hugh are looking at two different worlds.

PG’s experience, through people who email him and leave comments on The Passive Voice, as well as via his clients, is a lot closer to Hugh’s world than Mike’s.

If Mike’s world is the one that the management of Big Publishing sees (and PG suspects it is), then, with respect, they really don’t understand the talent drain that’s siphoning off their future income.

Look at Author Earnings which, despite all the rocks that legacy publishing throws at it, is the best picture available (outside of the inner sanctums of Amazon) of  ebook sales on the only ebook market that really counts.

PG suspects that Big Publishing is heavily focused on its own Amazon numbers and the reports that the AAP, Bowker, etc., produce. Those numbers miss the indie ebook sales that AE is able to highlight.

Indie authors are making serious inroads into the ebook fiction bestseller lists. Not only does every indie bestseller bump a tradpub bestseller down lower on the list, every indie bestseller is an author that tradpub missed and (50 Shades notwithstanding) is not likely to get. Ever.

The fantasy that a publisher can always snag a bestselling indie author with a big advance is simply not true any more and becoming more untrue with every passing month.

EL James and Amanda Hocking are old, old news. Perhaps he’s forgetting someone, but PG can’t think of a top-selling indie who has gone exclusive with a trade publisher during the last twelve months. And there have been more than a few gonzo-selling indie authors who have been selling at a seven-figure-per-year pace during the last twelve months. Indie bestsellers are turning down seven figure advances these days.

Many industry publications have promoted the hybrid author – someone who has both indie books and a publishing contract – as evidence that tradpub still has its attractions even for authors who don’t want to go steady.

The unfortunate reality is that a whole lot of hybrid authors are telling their friends that they’re only with their publishers to help build their personal brands with short-term publicity and book store exposure and are still making more money from their indie titles. These authors are also calculating how much more money they would be making if they had self-pubbed the books they sold to publishers and vowing never to make that mistake again.

But that’s the way it looks in PG’s world. Obviously, Mike doesn’t live here.

All the Amazon-Hachette coverage doesn’t seem to cover some important causes and implications

4 June 2014

From veteran publishing consultant Mike Shatzkin:

My “position” on all this is that it reveals an imbalance that only the government can fix.

. . . .

Even when I’m credited by somebody else with coming up with a suggestion —raising the author split of ebook revenues so that the publishers don’t wave fat ebook margins in front of observant and powerful retailers — that would have made Hachette’s position stronger had they accepted it, I am dubious that the publishers can do much about this. Nothing publishers can do — or could have done in the past — would change the fact that Amazon controls anywhere from 35 to 75 percent of the sales for most trade books. Anybody with that much market inside its corral can charge a considerable toll for getting inside its gates.

. . . .

Amazon used the book business to build an enterprise no longer dependent on books. Although the executives at Amazon I know maintain that they have always had a “profitable” book business (and I don’t doubt them), the company has famously been willing to live with less margin than its retailing competitors. That takes the oxygen out of the room for any retailer competing with them within the four walls of the book business. Amazon has skillfully used books as a customer acquisition tool and focused on the lifetime customer value across product types, not the margin that could be earned from the book business alone. There’s nothing morally, ethically, or legally wrong with that, but it has been steadily demonstrated for the past two decades (and acknowledged on this blog years ago) that it makes it very hard, perhaps impossible, for somebody retailing books alone to compete with them.

. . . .

Amazon, at great expense and with great vision, made the ebook business happen. Before the Kindle, the ebook marketplace was small and unambitious. The biggest player in terms of sales was Palm, which wasn’t really interested. The most interested party was Sony, which repeatedly tried over more than a decade to establish some sort of ebook device and ecosystem. But Amazon made a significant corporate commitment — creating the Kindle device, pressuring the publishers to make much more of their catalog available as ebooks, and investing heavily in discounted sales and screen real estate to build the consumer market. When B&N with Nook in late 2009 and Apple with iPad and iBookstore in early 2010 entered the market, they were attempting to capitalize on a product class that Amazon had pretty much single-handledly created.

. . . .

Amazon is just about every trade publisher’s largest and most profitable account.

. . . .

Because they don’t have to stock tens or hundreds of far-flung stores, their efficiency of sales, as measured by their very low returns, is almost certainly the highest among retailers and probably the highest of all accounts.

. . . .

Amazon has no interest in being anybody’s most profitable account; what the publisher profitability suggests to them is that their efficiencies are responsible for a lot of margin generation and they are inclined to want more of it. From Amazon’s perspective, being equivalently profitable to other large accounts is “generous” enough. From many publishers’ perspective, the enormous marketplace control Amazon has was built on the back of the publishers’ and authors’ intellectual property.

. . . .

Amazon wants lower prices for consumers — at least right now. (They’d say it is a core value and they’ll want it forever; there is room for an honest difference of opinion about how they’ll feel about it when their market share rises further.) Everybody else in the book business (authors, agents, publishers, other retailers) want prices at the very least maintained and probably would prefer they rise. This is the crux of the publishers’ problem with the government and with some quarters of public perception. Lower prices for consumers is catnip for politicians. They simply can’t resist it.

. . . .

Amazon pays amateur authors, often unedited, who upload files not yet ebook-ready to them and don’t know anything about marketing or metadata, as much as 70 percent of retail if they meet certain exclusivity and price stipulations. (Obviously, there are great gems among those, but they are still mostly unproven, unknown, and unsuccessful.) They are apparently fighting hard to avoid giving Hachette — which invests substantially to be consistently superior to a fledgling author on all these counts — the same cut.

. . . .

Amazon has plenty of internal justification for believing that their investment and risk-taking has been a huge benefit to publishers for most of the 20 years of their existence. But that doesn’t change the fact that an imbalance exists that will feed on itself. Amazon will grow at the expense of all other book and ebook retailers and Penguin Random House will grow at the expense of all other trade publishers.

Link to the rest at The Shatzkin Files

Any industry that relies on the government to fix problems with its biggest customer is in perilous shape.

Passive Guy does credit Mike with avoiding the extreme displays of Amazon Derangement Syndrome that have characterized so much of the commentary about Amazon/Hachette.

It’s interesting that a generous right of physical bookstores to return unsold printed books to publishers is one reason that Amazon is the most profitable customer for Big Publishing’s offerings, both print and ebook.

Return rights are one of the many archaic practices that make both publishing and bookselling markets ripe for technology disruption by more efficient competitors.

One of the reasons publishers pay a substantial amount of money to Ingram and Baker & Taylor to distribute print books is the right to return. Essentially, publishing has outsourced the logistics of handling returns to these distributors. An enormous weight of dead trees moves in and out of book distributors’ warehouses every day in support of returns from bookstores.

PG remembers reading a former bookstore employee’s account of a Barnes & Noble store that was moving from one location to another location about a block away. Instead of moving its stock, this store simply returned all its books to the distributor, simultaneously ordering an entire new stock, including many of the books just returned, to be shipped to the new location.

As with almost everyone involved in Big Publishing, Mike has a huge blind spot when it comes to indie authors, or “amateur authors” as he calls them.

Author Earnings and reams of other information clearly demonstrate that indie authors sell a lot of books. A small minority of indie authors sell a majority of indie books, but that is exactly the same phenomenon traditional publisher experience - most new authors don’t earn out their advances and the financial success of a traditional publisher rests upon big sales from a small portion of the books it publishes.

Perhaps it’s because so many in tradpub have looked down on romance (and, to a lesser extent, other genres) for such a long time that they don’t see it, but indies and non-traditional publishers that pay higher royalties are taking over a larger and larger share of big-selling genre markets. PG just checked and only four of the top-ten Kindle romance bestsellers were published by traditional publishers.

Regardless of how Amazon/Hachette resolves, Big Publishing is being crowded into a smaller and smaller portion of the total ebook market. As its authors either leak away into self-publishing or never show up in the first place, tradpub faces increasing pressure to put out at least one huge book every quarter.

Without home runs, it’s going to fail because the players that reliably hit singles and doubles, including some that would have developed into home run hitters, aren’t on the team any more.

Inevitable consequences follow from the new hierarchy of power among publishers

22 May 2014

From veteran publishing consultant Mike Shatzkin:

The current very public battle over trading terms taking place between Hachette Book Group and Amazon has brought forth surprisingly few recollections by those reporting it (an exception here) of a similar fight last summer between Simon & Schuster and Barnes & Noble.

This is publishing’s near-term future. The two most powerful channels that deliver books to consumers — one dominant in online transactions and one dominant in physical store presence — are determined to wrest more margin, which ultimately also means more pricing control, from their publisher trading partners.

The B&N dispute becoming public was a first for them. The only prior disputes between a publisher and a trading partner that had ever leaked beyond the buyer-and-seller that I can recall involved Amazon, and they were rare. The first was when Amazon took the buy buttons off Macmillan books in 2010. That was a vain attempt to stop the industry from going to agency pricing and it lasted only a few days. They pulled back so quickly from that effort that I concluded that their famous customer-centricity made punishing publishers in ways that were evident to their shoppers (which this one, which also became public, really was not) something they’d decided was not in their best interests.

Drawing that conclusion was apparently a mistake.

What B&N did with S&S, apparently, was simply to stock less of what the publisher was selling and to deny them promotional opportunities. That’s not obvious in a retail store. Books that aren’t there, or which aren’t there in quantity, are not apparent. Bookstores can be out of any particular book at any time without surprising anybody and it would take a uniquely aware book consumer to notice that something new and hot wasn’t displayed as prominently as would be expected.

But Amazon’s action against Hachette was much more visible.

. . . .

I had thought the immediate catalyst for this conflict was that Hachette was the first publisher negotiating a new deal to replace the court-imposed agreements following the agency collusion case. Apparently that is not the case. Nobody is telling me what Hachette is trying to achieve in these negotiations. One would expect that print book margin, ebook margin (often affected by various co-op fees), and ebook pricing flexibility are probably the key moving parts in the negotiation.

But the details don’t really matter. What is important to understand is how, with one exception, the power has passed from the publishers who control the distribution of copyrighted material to the retailers who control the customers. In the past, the pain for the retailer living without ready access to the most commercial books was much greater than the pain for the publisher without ready access to one retailer’s customers. Not any more.

But there is that one exception: Penguin Random House.

One former executive from a big house in a private conversation attributed the fact that PRH doesn’t ever seem to be subject to Amazon’s bullying to the fact that PRH’s second-ranking executive, Madeline McIntosh, had a brief interlude as an Amazon executive between her former and present tenures at PRH.

But I doubt that’s the answer. There’s a simpler one. PRH is too big to bully and nobody else is.

. . . .

Of course, both Amazon and B&N have plenty of reasons to feel justified in pressing for more margin. Amazon, with its low returns, has historically been many publishers’ most profitable account. B&N knows that their stores are “showrooms”, driving sales at Amazon as well as in their own stores. Amazon has no reason to want to be the most profitable account for publishers on the back of their own investments, efficiency, and customer loyalty. B&N wants the publishers to pay for the value they reap from being on B&N shelves that is not resulting in B&N sales.

Link to the rest at The Shatzkin Files

PG proposes that one contributing factor to pricing disagreements between Big Publishing on the one hand and Amazon and Barnes & Noble on the other is that Big Publishing hasn’t the foggiest idea about what works and what doesn’t in retail.

Wondering whether printed books will outlast printed money, or football

12 May 2014

From veteran publishing consultant Mike Shatzkin:

When you’re trying to figure out what will happen in the book publishing business in the years to come, any prediction depends on how things work out that are beyond the control of the business, and sometimes well outside it. This will be increasingly the case if the book business, in what has remained a fairly lonely expectation of mine, is increasingly the domain of people who aren’t publishing or selling books as a primary commercial activity, but as an adjunct or complement to some other principal objective.

. . . .

There are things we simply can’t know for sure, subjects about which a range of outcomes over the next ten years is certainly possible, that will have a profound effect on what book publishing will look like — as an industry and more broadly as an activity — in ten years.

Here are some of the key questions, to which I’m quite convinced nobody can be sure of the answers, that will affect what publishing will look like ten years from now.

How persistent an activity is immersive long-form reading? There are all sorts of threats to it. Perhaps it is needed more than ever as an escape from the ever-more-intrusive demands of connected daily life, but it is also undermined by the accelerating pace of everything else. It is hard to discern this because each person’s personal reading patterns change over a lifetime. We’ve always sold more books to older people than younger ones, with exceptions for cultural phenomena that sweep through the young (Harry Potter, Hunger Games, Twilight). Long-form reading has always been required in schools, but as humanities increasingly take a back seat to more “practical” education, can we count on that continuing? It seems hard to build a case that long-form reading won’t be reduced per capita because of the ready availability of so much else and an increasing societal tendency toward short attention spans. (And that last is my impression, not one I can defend with data.)

As my generation is replaced with digital natives, a decline in the market for novels would seem to be a very likely consequence. Or, at least, novels as we know them now.

. . . .

My hunch, again offered without the support of meaningful data (because there would be none), is that ebooks will continue to take share from print for long-form reading, in fits and starts, but inexorably. The logic behind that conjecture is simple and two-fold. One side of it is that the print book experience won’t improve and the ebook experience will. With the first blush of fascination with “enhancing” ebooks by the insertion of distractions passing and real enhancements (the static dictionaries improved into author-built glossaries, improved bookmarking and page-flipping navigation, excerpt-sharing enabled) bound to become more common, there will become more and more reasons to prefer the digital version. (Even the killer app of print — the ability to write notes or underline — will ultimately be digitally-enabled in a ubiquitous way.) The other reason is that the proliferation of (mostly ebook) titles in the marketplace, hand in hand with diminishing shelf space for (mostly printed) books in stores, will increasingly drive online purchasing, which favors ebooks over print.

It wouldn’t take a big change year-to-year for the numbers of exclusive print readers and exclusive ebook readers to be reversed over the next decade with half continuing to do some of each. Since each reader shifting her preference from print to digital further undercuts the support for shelf space, you have (depending on your point of view) a virtuous circle driving ebook growth or a vicious cycle working against print. And against stores.

. . . .

One of the leading Anglo-American CEOs pointed out to me many years ago that the day had passed when he could just call the CEO of his biggest accounts to discuss a problem. Retailing of print books requires Amazon, for whom it might be 10% of their total business and Walmart (is it 1% of theirs?) in the US, supermarkets in the UK. Global retailing of ebooks, with everybody in the publishing business rooting for Barnes & Noble to crack this, is in the hands of four companies — Amazon, Apple, Kobo, and Google — all of which employ book retailing as a strategic component of a larger endeavor.

So far, the publisher side of the value chain has not been affected by the same phenomenon, but I think it will be, in a very different and more disparate way.

Link to the rest at The Shatzkin Files

The disruption of the disruption is temporary

3 May 2014

From Mike Shatzkin:

There’s little doubt that the digital (r)evolution, to the degree it is measured by the shift by consumers from reading on paper to reading on a screen, has plateaued, at least temporarily. The most recent article in PW on the subjectspells out that some publishers have even seen their digital sales decline, although always with an explanation. (Houghton Harcourt had strong Hobbitsales the prior year they couldn’t match, just as Random House did with 50 Shades.)

Last week I spent a very pleasant hour reviewing the state of the industry with one of the big company CEOs. This executive seemed to be enjoying the opportunity to take a breath. For several years, s/he reported (no gender hints here; I’m preserving anonymity), there were regular “all hands on deck” conversations about policies that needed to be set. These were very large decisions as rapid shifts in sales took place from the well-understood economics of print to the developing economics of digital: the agency model was put in and then modified by court fiat, new methods of marketing needed to be employed, and the decisions about what to pay for new title acquisitions had to be made within a rapidly-changing revenue context.

I think the notion that the dizzying change we saw take place for several years, starting with the introduction of the Kindle and accelerated by the introduction of iPads and other tablets, is now behind us is probably accurate. Both the CEO I was talking with and PW are right. But that doesn’t mean change is over and it doesn’t mean all of today’s incumbents, many of which among the publishers and indie retailers seem to be riding a rising tide of profitability, can assume stability going forward.

Even though the biggest disruptor of the digital era — the shift of reading from paper to screens — has slowed down to a slow walk (at least temporarily), all of the players in the book business are still dealing with disruptive forces that won’t be as dramatic, but which will continue to be inexorable.

. . . .

1. Even if the shift away from reading on paper has slowed down, the shift to buying print online probably has not. Since the number of titles continues to grow rapidly and bookstore shelf space has still declined (yes, there are reportedly some thriving independents but Barnes & Noble devotes less and less space to books in each store and closes stores slowly but steadily), the increase in the percentage of books purchased online will continue to rise. That undercuts the power of the big publishers relative to competitors, increases the clout of both Amazon and Barnes & Noble, and ratchets up the importance of digital marketing.

2. The margins for big publishers have appeared to improve in the past few years, probably because they retain a bigger share of their revenue from ebooks than they did for print books.

. . . .

3. Publishing will continue to favor scale. The Big Five houses will monopolize the big authors and the bestseller lists, as they have, and the lion’s share of authors who are predictably headed for the list will be signed with one of them. But this is not a battle among equals: Penguin Random House is as big as the other four combined. As each author becomes a “free agent” on the expiration of current contracts, PRH will be in a position to use its (already) deeper pockets and its (expected, by me) superior distribution capability to take authors away from the other four. This is a battle in which it is hard to see what weapons the other four have. One of their CEOs pins hopes on authors being more inclined to be number one or two with another house than number 20 with PRH.

. . . .

5. We have seen a sea change in author options. Most of the big houses have ridden that out very well. Although many authors in a position to do so reclaimed digital rights to their backlist and self-published those titles, authors by and large have not deserted major houses (and big advances) for alternative publishing means, even when Amazon hired a big publishing CEO to manage their checkbook.

Link to the rest at The Shatzkin Files

When an author should self-publish and how that might change

30 April 2014

From veteran publishing consultant Mike Shatzkin:

There is a question that every agent and publisher is dealing with, because authors surely are. And that’s this: when should an author self- (or indie-) publish?

The answer is certainly not “never”, and if there is anybody left in a publishing house who thinks it is, they should think a little harder.

For a number of reasons, the belief here is that most of the time for most authors who can get a deal with an established and competent house, their best choice is to take it. It’s good to get an advance that is partially in your pocket before the manuscript is even finished and assured once it is. It’s good to have a team of capable professionals doing marketing work that authors are seldom equipped to do well themselves and which can be expensive to buy freelance, particularly if you don’t know how. It’s good to have a coordinated effort to sell print and ebooks, online and offline, and it’s good to have the supply chain ready for your book, with inventory in place where it can help stimulate sales, when you fire the starting gun for publicity and marketing. And it’s great to have an organization turning your present book into more dollars while you as an author focus on generating the next one, and start pocketing the next advance.

Publishers have heretofore really had only one model for working with authors. They acquire the rights, usually paying an advance-against-royalties, and own and control the entire process of publishing. It is generally understood that all efforts to make the book known can show benefits in all the commercial channels it exploits. So publishers have generally insisted on, and authors have generally accepted, controlling all the rights to a book when they pay that advance.

. . . .

 Since publishers until very recently effectively monopolized the path to market, they could effectively make the rules about what an author could publish. That usually has meant no more than a book a year. It has also usually eliminated anything that isn’t “book-length” or that needed to reach the market very quickly upon completion of the writing. And in a practice that ultimately has had painful consequences for publishers, it meant backlists went out of circulation when a title wasn’t worth printing in bulk.

. . . .

 Although most of the Strum and Drang around how digital changes the publisher-author relationship have been about the royalty rate — publishers tend to want contracts that specify a royalty of 25 percent of revenue on ebook sales, various upstarts and digital-first publishers pay 50 percent and an author going directly to the retailers can get even more — that is, for most authors, less of a problem than it might first appear.

. . . .

 Where royalty rate is most consequential is for authors with a substantial reverted backlist. Since they begin their self-publishing efforts with equity built at least partly on a publisher’s back, they have a decided advantage over a fledgling self-publisher. Several authors have done very well for themselves building out from the platform of personal name recognition and titles somewhat established in the marketplace. The first of the obviously successful self-publishing authors was Joe Konrath several years ago and that’s how he started. Others have followed in his wake. And although the work required to self-publish and market yourself effectively is not trivial even if some readers know you and some of your work, it is also considerably more likely to result in a useful financial reward than trying to self-publish from a standing start. And certain chores, like editorial development and copy-editing, are eliminated by starting with already-published material.

. . . .

 All of these motivations — monetizing previously dead backlist and getting to the public with material even a successful author would have difficulty getting a publisher to do — are behind the fact that the big literary agencies are staffing themselves to help authors navigate the digital world. In different ways, we have seen this emerge at Writers House, Trident, and Curtis Brown, among others.

. . . .

 In other words, the gap between pure self-publishing and traditional publisher-author deals grew wide enough that the agents saw the need to fill it.

. . . .

 It will compound the pressure on the alternative players if Amazon continues to grow its global market share for ebooks. The bigger the percentage of the market that can be reached by self-publishers with one stop at Amazon, the less interest they’ll have in picking up smaller chunks of the market with additional deals.

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

As PG has mentioned before, he generally regards Mike’s thoughts as representative of the more advanced executives in Big Publishing. If this theory is correct, Big Publishing appears to be moving beyond denial when it comes to the future of physical bookstores and the reality of successful indie authors.

However, grabbing all rights to a book forever in exchange for an advance is just not a very attractive publishing offer for a rising indie author any more. Especially if the contract includes a non-compete clause.

If an indie author has 3-5 self-pubbed books that are selling well enough to quit the day job, that author has probably cracked the code for reaching a group of readers that will buy more books that he/she writes in the future. This author has a reasonable idea of how much three more books written for the same audience will generate in royalties.

A $150K 3-book deal spread over three years that would have formerly looked wonderful isn’t that impressive for an indie author who is already earning $50K per year with no limitations on how fast he/she can publish new books and no agent to pay. Particularly if such a deal comes wrapped in a Paleolithic publishing contract that is impossible to understand. (Hint from PG: The parts of a contract that are difficult to understand are prime locations to hide nasty terms.)

Aside from the unimpressive money, there’s the whole complex process of dealing with a traditional publisher.

Having a publisher and an agent and telling all your friends you have a publisher sounds really cool to an author who hasn’t done it before. However, if you gather a group of traditionally-published authors for frank discussions, you’ll often hear experiences ranging from aggravating (nobody ever responds to emails) to horrifying (totally screwed-up royalty statements) arising from their relationships with publishers.

For a traditional publisher, the customer is always the book buyer and never the author. Once the publishing contract is signed, the honeymoon can end in a hurry.

Some things I will be looking to learn more about at London Book Fair

3 April 2014

From veteran publishing consultant Mike Shatzkin:

The London Book Fair is an every-second-or-third-year thing for me, going back many decades. From an English-centric perspective, it is like a mini-Frankfurt. All the UK players are there and a lot of US senior executives. But because it is so accessible to the Continent, you can get a taste of how things look to the rest of the world.

In the US, we look to me to be in a period when two dominant giants — Amazon for online bookselling and Penguin Random House for general trade publishing — are consolidating their positions. Amazon’s enormous market share is growing, both for print and ebooks. It is too early to draw the same conclusion about PRH, but my guess is that a year or two from now we’ll have seen them taking share from their biggest competitors just like Amazon is from theirs.

. . . .

In a recent conversation, an executive at a Big Five company told me of a recent development. His company had licensed a few titles for Russian language rights to a publisher in Moscow. But by which retailers would most of those ebooks be sold? The answer is Amazon, Apple, Google, Kobo and Barnes & Noble! And the Russian publisher, really just breaking into the ebook business, has far more limited access to these retailing giants than the US publisher which had licensed them the rights.

So the US publisher, in a suggestion that seemed in everybody’s interests, offered to be the “distributor” of those Russian ebooks to the major accounts. The deal was made and it worked. I said to the executive who explained this to me, “You could be helpful in distributing all their books, not just the ones you licensed them.” “Exactly,” he said.

But then we took the conversation a little further. This house is wondering whether, in an ebook-dominant world, it wouldn’t make more sense for them to publish books themselves in Spanish, Mandarin, and French (the first three languages they are thinking about). After all, the translations are done by freelancers. Anybody can hire them no matter where they are. And if most of the books sold are ebooks, and if the publishers of English, especially those in the US, have multiple daily contacts with the big ebook retailers and others don’t, then what is the point to licensing away those rights?

Link to the rest at The Shatzkin Files

Even the biggest and smartest publishers still have a lot to learn about digital marketing

26 March 2014

From veteran publishing consultant Mike Shatzkin:

We recently had three examples from three different Very Big Publishers with Very Smart People of mistakes, or misunderstandings, or structural paralysis, that seem almost generic. All of them involve challenges that every publisher faces on a daily basis.

The first is from a publisher which is among the first to take a step that all publishers must take eventually: optimizing the metadata for their backlist. (Backlist is a topic that has interested us for a long time.) This is a mammoth challenge for every publisher of considerable size. They have tens of thousands of titles and, often, many of the ones selling best will have been published years — or even decades — ago so that nobody among the editors or imprint marketers have read it or thought through the markets for it, except when traditional reissuing activities have occurred or an exceptionally sharp marketer saw an opportunity.

There really are two distinctly separate problems inherent if you want to maximize backlist sales in the digital age. One is the one they are tackling: to get the foundational metadata — the book descriptions and their placement in the information chain — solid so that the titles are called up in response to the searches suggesting a possible customer for them. The other is to build a mechanism to observe the news and social graph each day and to identify the titles that can benefit from new developments. And then, of course, to couple the two in order to optimize a given title or series for the most appropriate semantics to drive both discoverability and conversion in different environments. SEO, yes. But really nuanced and real-time SEO which accounts for fundamental changes in how all the engines work and subtle differences inherent in each. We have our ideas about that engine (and have developed a proposal to address it) but, for now, like that publisher, let’s just worry about the first challenge: getting the backlist metadata foundations right.

The pioneering publisher we encountered is addressing the question across the many imprints in their large organization by asking each one to work on the metadata for their top-selling backlist. What this means, in practice, is that fuzzy-cheeked editorial or marketing assistants — most operating with little direction from senior people and, frankly, mostly working with senior people who wouldn’t really know exactly what to tell them to do (this stuff has gotten very technical in nature) — are the ones looking at what is there now (if anything) and fixing or updating it. This house will inevitably find that they get very uneven results and, because most of the work will be done by low-level people who turn over (or get promoted) quickly, it will be hard to generate training or processes that will show steady improvement of this work in the future.

Unless some great care is being exercised to introduce procedures most of these people would be unlikely to know about, this also runs afoul of Pete’s repeated mandate that research must be done for each and every title before a marketer can create optimized metadata. For backlist, in Pete’s methodology, this starts with finding out who the people are who have already read the book and commented on it and what words they use when they describe it.

. . . .

So, aside from the massive distraction created by asking each imprint to take on such a substantial additional chore, the chances are good, actually overwhelming, that the results — the new metadata foundations that will be created — will not be thoroughly applied and optimal in the best cases and that most imprints won’t be as good as the best. And, in a problem that repeatedly bedevils publishers in the age of digital media (as we will see again below), the staff time to do this exercise is not readily available. Everybody doing this work already has a fulltime job, largely jobs managing author talent and frontlist, jobs which must be done.

. . . .

We did an online audit for an author who is in the news. We found some circumstances which seemed to call for “paid media”: the purchase of search terms and phrases (ones on which major retailers had not bid and for which the book was not surfacing organically) or contextual display ads around news breaks to call attention to this author and his book in particular cases where we (really, Pete) believed it would do some real good.

So we made the suggestion to the top digital marketing thinker at this big publisher. He reported back that this kind of campaign had never worked for them, even tried on a big scale. Once again, Pete’s experience suggested to him possible reasons why it hadn’t worked for them and how it might. Pete told me:

The houses (almost to a one) do not know how to run these promotions, track their efficacy properly (they do broad “last-click” attribution, which is likely to capture a third of the actual effect, or so), and they make them amazingly expensive for themselves by not optimizing for the goals or for the platform, which at once benefits the platform and them.

Despite nearly infinite inventory, these places (the online venues) prefer that users click on ads when they see them. The better you are at it the cheaper those clicks are. Then you track the clicks and augment your attribution model with the known amplification effect (conservatively apply a % applied across outlets and formats per studies or in-house knowledge).

Drive a nice conversion percentage at Amazon and the book begins to rise. By rising, it gets better “placement” on Amazon via algorithmic store optimization (e.g. merchandised in the cart). That’s a virtuous circle that has momentum of its own.

Link to the rest at The Shazkin Files

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