Big Publishing

Smorgasbords Don’t Have Bottoms

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From N+1 Magazine:

For the first time since 2011, when Borders shut down, or 2007, when Amazon launched the Kindle, or maybe 1455, when Johannes Gutenberg went bankrupt immediately upon printing his game-changing best seller The Bible, the news about book publishing has seemed less than dire. A June 2019 New York Times article captured the mood: “Independent bookstores are thriving again, and print sales are rising while e-book sales are declining. Even Amazon is investing in physical bookstores across the country.”

A decade ago, few in the industry anticipated the comeback of indie bookstores. But the numbers are unambiguous: between 2009 and 2018, the number of indies in the US grew by nearly 40 percent. Ninety-nine stores opened in 2018, up from seventy-five in 2017. The indie model depends on expertise and endless hustle — as well as the active participation of consumers who have been galvanized by buy-local campaigns. The new independents host constant readings and book groups, and many also offer subscription programs and curated perks, like signed first editions, for their regular customers. Increasingly, the owners of these stores see their purpose in more ambitious terms: as rising rents threaten third places everywhere, indies’ physical locations become as valuable as their inventory. The stores are sleek and splashy and well-lighted places, their vision of reading centered on enthusiasm and edification. Their employees may be no less adventurous or snobby in their tastes than bookstore employees used to be, but now they hand-sell on social media, not just IRL. On the stores’ Instagrams, copies of Ducks, Newburyport and the latest Krasznahorkai pose on park benches next to scattered autumn leaves, or on beautifully pockmarked desks, latte adjacent. The bookstores have cats, and the cats, too, have Instagrams.

Meanwhile, up in the cloud, things look even brighter. As digital audio attains complete domination over CDs, audiobook sales keep rising, reaching nearly $1 billion in 2018, the seventh year in a row of double-digit revenue growth. Helped along by our smartphone addiction, the podcast boom, and the unending American commute, audiobooks have become the industry’s most durably growing sector and, though they have been around for nearly a century, its zeitgeist, with publishers happily experimenting in formats and release strategies. Audiobooks have gone where no physical books could — namely, into readers’ ears. There is every indication that they will remain there.

There are even encouraging signs at Barnes & Noble, the largest and most important bookstore chain in America, the last remaining obstacle to Amazon’s complete control of the sector, and, until recently, an ongoing source of gloom and worry for the publishing industry. It feels like B&N has been perpetually in decline, making poor decisions, and on the verge of utter collapse. But hope that this might change arose last summer, when Elliott Management, the hedge fund of the Republican megadonor and “vulture capitalist” Paul Singer, bought B&N for $683 million and brought in James Daunt to run the chain.

. . . .

Every article about [new Barnes & Noble President James] Daunt mentions the fact that Waterstones looks a lot cooler since he brought it back from the brink. B&N stores do not, at present, look cool; the caption of one photo in the New York Times’s glowingprofile of Daunt, published the same day as a glowing Wall Street Journal profile, read: “The homogeneous table legs at the Barnes & Noble in New York. At Waterstones, the look is varied.” Those of us whose primal bookstore memories include browsing Adbusters at the Borders next door to Circuit City, the smell of burnt milk wafting from Starbucks over B&N’s art history shelf, and the seemingly random stacks of hardcover frontlist fiction at the always empty Media Play never noticed homogeneous table legs. Homogeneity was the water we swam in. We are the children of Marx and Coca-Cola, but we bought both at big-box stores.

. . . .

Though he did recently describe the vibe at B&N as “crucifyingly boring,” Daunt has more than aesthetics on his mind. When he arrived at Waterstones, Daunt decreed that store managers would take back control of their own stock: in the Guardian’s words,“What sold in Hampstead might not go down well in the Highlands.” He also abandoned co-op, the somewhat crooked practice of publishers paying for display space and the reason why every B&N feels the same. British publishers grumbled, but they also realized they finally had a serious retail partner. Customers, meanwhile, were pleased to discover that there was more to British book production than memoirs by footballers or the Gallagher brothers. A similar change in direction at B&N, accompanied by even a modest uptick in market share, would mean a more diverse bookselling landscape. For a reading and buying public accustomed to bespoke retail, exhausted by the strip mall experience, and far from the closest independent bookstore, more attractive and autonomous Barnes & Nobles would be an improvement over the homogeneous table legs of the status quo.

. . . .

Unlike Waterstones, Barnes & Noble stores are enormous, their decadent square footage an artifact of the supersize 1980s and ’90s, the apex of the exurban dream. Too many of these giant stores are located in places frequented by dead-mall enthusiasts with drones and GoPros. In the short term, Daunt’s revival efforts are likely to lead to an even more accelerated schedule of store closures than B&N has experienced in the past decade. The parent company, too, seems cause for concern. Hedge funds have a gruesome, destructive record in retail. Along with private equity, they have fueled the retail apocalypse to a far greater extent than Amazon. How long will Daunt’s leash be? And how much time can he spend letting it out?

As consequential as it is, the indie resurgence is modest when weighed against the shelf space lost to the closure of Borders, or to the B&Ns that have reliably shuttered every year. Indies have benefited from the patterns of gentrification that have proved so punishing to other kinds of small businesses, and future growth may be inhibited by those same forces. (Bookstore owners’ public opposition to minimum-wage increases and unionization in New York, San Francisco, and elsewhere suggests other tensions in the ecosystem.) Daunt has called the US “extraordinarily underbookshopped,” but it isn’t clear that either he or independent bookstore owners can do much more than stanch the bleeding.

On closer inspection, the news of decreased ebook sales, like that of B&N’s revival, is more complicated than the publishing press’s cheerful headlines suggest. When ebooks first emerged on the scene, the response from publishers (and, by extension, authors) veered from anguish to jubilation. Ebooks were going to destroy traditional publishing, as Amazon tightened its stranglehold — but they also, in the short run, expanded total revenues, as popular products tend to do. In the early 2010s, publishers enjoyed strong years of sales growth, driven in large part by ebook sales. Ebooks weren’t bad for writers, either — amid the byzantine royalty structure, in which it has been written in stone that authors should earn different and seemingly random amounts depending on the format their book is being conveyed in, it’s far better, for no discernible reason, to sell an ebook than a paperback.

The fear, though, was for the future. Would readers abandon print books for ebooks? If they did, would that leave publishers at the mercy of Amazon — which had cornered a market it helped create, via the Kindle — and its aggressive loss-leading discounts? 

. . . .

The real omission from the good-news stories is any honest acknowledgment of Amazon. The company sits comfortably at the peak of its influence, its supply chain built on the back of tax evasion, labor exploitation, corporate lobbying, massive profits from its web-server business, and federal antitrust enforcement that has hovered between lax and corrupt. Amazon’s power has been vast and growing for so long that it’s no longer new or noteworthy in the publishing press, except for the occasional article about its depressing brick-and-mortar bookstores, where endcap displays say things like “Books Most Frequently Highlighted by Kindle Customers.”

. . . .

Sadly, publishing will never be as interesting as the complete and total restructuring of society. But with a market share of 45 percent of print books and 83 percent of ebooks, Amazon remains capable of crippling the industry and upending its practices with little more than an algorithmic tweak.

. . . .

With the launch of the Kindle in 2007, Amazon helped reach the most “underbookshopped” readers of all — those without easy access to a bookstore or a library. The device remains a utopian innovation, a smartphone without most of the smartphone’s oppressive qualities. For all its disruptive impact on the industry and the environment, the Kindle has given readers a profound degree of choice and flexibility in their reading habits. Its accessibility features represent a true advance on the print book for the visually impaired and physically disabled. Amazon and its hardworking subsidiary, Audible, are making similar progress in audio.

In the past decade, Bezos’s early, antagonistic mentality has been diffused across a massive platform with limited oversight and the default ability to make life hell for publishers. 

. . . .

These days the buttons don’t have to vanish for publishers and authors to get screwed. Since 2017, third-party sellers are no longer relegated to links in small type: now they can compete for orders directly through the buttons. When you click buy now or add to cart, you might be purchasing a book — even a new book — from a reseller, even when you intend to do no such thing. You might end up with a foreign-market edition, or a secondhand edition at such a steep discount that the brand-new paperback seems like a bad deal. Or you might forget about the book altogether, because throughout the shopping process Amazon has been encouraging you to choose one of its own titles instead. Imagine an independent bookstore whose employees are always interrupting your browsing to offer a cheaper, bootlegged copy of the book you’re holding, and to point you to an array of even cheaper books they wrote themselves. Now imagine that process weaponized with vast amounts of information about your browsing and purchase history — and that of millions of other consumers.

. . . .

In a 1980 Senate hearing dedicated to conglomeration in the publishing industry, E. L. Doctorow warned that “when the publishing and distributing of books is finally in the hands of five or seven giant corporations, we will have a condition equivalent to that of the broadcast industry — network publishing and network bookselling.” The point wasn’t that he objected to commerce or making money, he said elsewhere in his testimony:

Publishers have always wanted to make money. . . . The point is that [the] delicate balance of pressures within a publishing firm is upset by the conglomerate values. The need for greater and greater profits and the expectation of them overloads the scale in favor of commerce — depending on the particular house and its editorial resources, faster or more slowly: the crossword-puzzle books and cookbooks and sexual-position books and how-to books and movie-tie-in books and television-celebrity books gradually occupy more of the publishers’ time and investment .

With the Penguin Random House merger, book publishing is down to the lower end of Doctorow’s estimate. The Big Five are increasingly at the mercy of a monopsonist that also serves as the digital storefront for self-published writers hoping to disrupt the big publishers. The publishers now earn over 10 percent of their annual revenue from ebooks they sell through the monopsonist, which, in return, withholds all the sales data from them, with the paltry exception of units moved. Publishing-friendly media — book reviews, and also newspapers more generally — has meanwhile been hollowed out.

Link to the rest at N+1 Magazine

PG had never heard of N+1 Magazine before stumbling across the OP.

He’s not certain whether he will hear of it again or not.

PG is regularly struck by how often the undoubtedly young writers for various online startups with pretensions toward literary commentary and reporting about contemporary book culture sound like a collection of old geezers dreaming about the good old days when Meg Ryan ran their local bookstore and Tom Hanks quit Amazon to join her there.

The rocket league

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From The Bookseller:

Between 1950 and 1970s, the US and the Soviet Union (USSR) spent millions in an attempt to beat each other into space. The activity, known as the Space Race, led to a technological leap, paving the way for many of the things we take for granted today, including GPS, powdered milk and the PC mouse. Publishing has never quite made it into orbit, but just as the world changed once the US landed Apollo 11 on the Moon, so publishing was irrevocably altered by its own celestial eclipse: the 2013 merger of Penguin with Random House.

In the run-up to the mega-coupling, Random House and Hachette had long duked it out to be top dog in the UK, with Hachette ahead at the turn of the last decade thanks, in large part, to the runaway success of Stephenie Meyer’s Twilight series. With digital just beginning to make its mark, it was a period when print success made the difference to the publisher rankings, with Random House only leaping over Hachette again in 2012, thanks to E L James’ own leftfield take on Meyer’s chaste vampires.

The rest is, um, history. As this week’s publisher league table shows (see p06), PRH has an unassailable lead over the rest—a gigantic market share of 21%, making it bigger now than the next two, Hachette and HarperCollins, combined.

. . . .

The curiosity is Hachette, for so long—and, for the purposes of this analogy—the USSR to RH’s US. In 2019 its sales fell 2.7%, with a market share of 12.2%, way off its 2009 high of 16%. While much has remained the same since P joined RH, Hachette has not, consolidating its divisions within one building, and broadening its business with smart acquisitions, such as Bookouture, Quercus, JKP and Short Books. What it has not done is chase the market. If there was an element of vanity about the Space Race, it is hard not to read Hachette’s settling into second as an effort to put profit before growth, to focus on maintaining its bloc, rather than re-engaging in a disorderly hustle for the top.

Link to the rest at The Bookseller

What Are the Top Strategic Issues Facing the Book Value Chain?

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From Book Business:

As we head into the middle of the year it is time to reflect on the state of our business and what might lie ahead. We have seen some significant changes in the past year as it relates to the Book MFG platform in the U.S.

I will not go through the litany of changes, but the end result is going to be a significantly consolidated platform of book printers with the bulk of the traditional offset capacity, production inkjet capacity, and book finishing solutions for mainstream book publishers being at Quad/LSC, or in one of the many plants that are now part of the CJK Group.

As the various mergers, tuck-ins, and acquisitions are integrated into their new companies, we will see ongoing consolidation of capacity and rationalization of the overall number of available press hours for one and four-color book work. For the first time in decades, book publishers are going to have to think and work on their manufacturing plans for the year, especially as they relate to work on the offset platforms during peak demand seasons.

. . . .

Supplies of book papers will continue to decline as mills close or redirect capacity to more profitable grades. Again, more planning is now going to be required by publishers and printers.

The health of book publishers is a mixed bag. The trade book folks continue to see stability and some growth of their printed products along with significant ongoing growth of downloaded audio books. K-12 publishers struggle for profitability as they are all focused on moving the revenue model from printed books to a stronger digital curriculum platform that can either supplement or even replace print. In either event, print — which in this segment is primarily four-color text books — continues to decline.

In higher education, the print decline continues in what many are experiencing as a double-digit rate. The issues for this segment are more dire than K-12. Here the publishers are dealing with a complete repudiation of their product model because of pricing issues by a significant number of their primary adopters, the professors and universities. This is a segment whose current business model may be stuck in a doom loop and, again, here we see four-color printing as one of the area’s of manufacturing that will feel the decline, which is why you may see some significant capacity rationalization in the four-color area from all the merger and acquisition activity among printers in the past 12 months.

. . . .

The retail distribution model is already changing in a dramatic fashion. Brick and mortar is in decline, especially in the big box store model. We see this in trade with Barnes and Noble as well as education with the college book store models. Amazon continues to grow its presence in both trade and higher education. Publishers and printers both need to be planning for the possibility that big box book brick and mortar might fail. How will publishers replace those sales and the bandwidth of all that shelf space? How will printers plan for the reduction in print demand when all the books sitting in stores and warehouses come back to the publishers through the return channel?

Paper continues to be an issue and it is not going to go away. There is no new domestic capacity coming online for uncoated book free sheet or groundwood for the mono books. Coated graphic arts papers of all grades are in short supply for the same reasons. Mills are closing or switching capacity to more profitable and easier to manufacture packaging grades.

. . . .

As publishers work toward reducing turnaround times with tighter SLA’s, the printers will need a distribution system that can move product quickly and effectively. The primary method for moving books is by truck. There is a critical shortage of over-the-road truck drivers in the U.S. and the shortage is growing as baby boomers leave the workforce and trucking companies struggle to attract good candidates into the jobs. How will publishers plan for this emerging problem?

Offset print plants require skilled craftsman to run one and four color offset presses, as well as high speed soft cover and case binding lines. There is a significant amount of labor required in a medium size and large book plant, especially in the bindery. Many of the markets where these book plants exist today have a shortage of the skills and labor required for these plants to run at full capacity. This is an ongoing issue, which was experienced by many mainstream book printers this past year and will continue as the talent pool who used to fill these jobs find better paying and less demanding jobs. This issue has a compounding effect. It creates capacity shortages caused not by lack of equipment, but rather by the inability to utilize all the theoretically available time on that equipment for lack of operators. This then reduces the potential ROI on those expensive investments in web presses and new and more automated binding lines.

. . . .

We have some really tough issues facing the book business and the structure of the future book value chain. This is a very conservative industry and the nature and past behavior of the industry as a whole would suggest that movement and change will not take place until crisis is upon us. We should all be learning from what is happening in the higher education business.

Link to the rest at Book Business

PG suspects that most people in the traditional publishing world take printing capacity for granted. He hasn’t seen a potential printing capacity problem discussed in any publication that the managers of traditional publishers are likely to read.

Obviously, POD doesn’t work if there isn’t enough P.

2020: Zero year thoughts about the changes in book publishing

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From veteran publishing consultant, Mike Shatzkin:

In 1990, three zero years and three decades ago, the universe of books available for a person to buy or for a store to carry was pretty much defined by “Books in Print”. This annual compilation, at that time primarily delivered as a book itself, passes along the aggregate of what publishers say is available. At that time, the total was in the mid six figures, not more than 500,000 titles. BIP contains duplicates, so the number of available titles was probably less than that, but that’s a reasonable working number.

That means each new book brought out by a publisher was competing against a universe of half-a-million other books.

As we begin 2020, Ingram’s Lightning Source has about 18 million titles in its Lightning print-on-demand database, ready to be printed and delivered to you tomorrow. Of course, there are duplicates to consider and some junk in there too, so let’s say that there are actually 15 million discrete titles. There are also more than 750,000 titles in stock in Ingram’s warehouses, most of which are not reflected in the POD database, which tends to collect titles after their prime sales life has passed.

So each new book brought out by a publisher today may be competing against 15 million other possible titles. The competitive set has grown by as much as 30 times.

When substantial commercial publishers or university or academic presses with real sales organizations published new titles 30 years ago, they routinely sold at least a couple thousand copies of almost every title. Stores that carried 125,000 titles were proliferating at that time, which was about a quarter of the theoretical possibilities and well over half of the titles that had any real commercial appeal. That meant both that the consumer was likely to find what s/he was looking for in one of those giant stores and that the publishers with real access to the retail network could count on a measurable sales result for everything they did.

This is no longer true in the 15+ million title and heavily online retail world we now live in. There just aren’t as many bookstores as there were back then and the ones we have are much smaller. Today it is not uncommon for titles on a major publisher’s list to sell almost nothing, low hundreds of copies or even less.

The difference is critical. Sales of, let’s say, 2000 copies of a hardcover book will deliver about $25,000 or more in sales revenue for the publisher. If the advance was modest and the publisher didn’t wildly overprint, that would probably cover the out-of-pocket expense of delivering the books required to produce that revenue. In other words, most books published by most substantial publishers in those days didn’t cost the publisher out-of-pocket cash.

. . . .

When Thomas McCormack was CEO of St. Martin’s Press, which he was for about the last three decades of the 20th century, he exploited that understanding to the max. McCormack saw that the true revenue picture meant that the more titles he published with the same corporate overhead, the more money his company would make. St. Martin’s relentlessly expanded their title count year after year. And they grew consistently.

The key insight was that overhead is mostly fixed, not variable. And calculations that pretend that it is variable lead you to very erroneous conclusions.

Another important reality of the new title economics that existed then was that the backlist grew steadily. Not every title that recovered its costs would sell for a long period of time, but many of them did. Others produced additional revenue from rights sales: foreign, paperback, book clubs. So the short-run economics that encouraged title count growth also created companies that were constantly expanding their asset base to produce future revenues.

The predictability of a substantial minimum sale from established publishers back then was the result of two things that have since changed. One is the number of titles effectively competing for sales all the time, the explosion from half-a-million choices to 15 million. But the other is that the sales base shifted. Thirty years ago, the sales came mostly from a highly disparate retail network, which did have some big customers but also had hundreds of smaller ones that had to be addressed individually, preferably by a human being who showed up to “present” the title choices. Big publishers had tactical advantages to employ for both the chains and the individual accounts.

The major accounts naturally gravitate to the major suppliers. They are important to each other. The big publishers have the biggest books, the biggest budgets to spend on marketing and promotion, and the authors whose store appearances will pull in the most customers. But everybody, large or small, put their books in front of the big chain accounts. Thirty years ago that meant both the mall chains, Walden and Dalton, and the expanding superstore networks of Borders and Barnes & Noble.

But the vast array of independents, several times larger than it is now in numbers of stores and even more dramatically larger than today in shelf space, depended on visits from local reps to know what to stock. And there the smaller publishers were much more variable. Many didn’t cover individual bookstores effectively.

So with bigger stores, a smaller number of titles, and filters that favored placement of the larger publishers’ books, the net result was that big publishers achieved a pretty high minimum sale right to the bottom of their list. And the ultimate consumers chose from the books that were in stores, not the entire universe, and publishers with real sales organizations had a significant advantage.

All of this began to change with Amazon’s arrival in 1995. Online sales grew relentlessly, but slowly at first. Twenty years ago Amazon was still a single-digit percentage of the total book business in the US. Today it is probably more than half.

. . . .

[F]rom the consumer perspective, shopping at Amazon (or any online retailer working with the Ingram database, which includes other big brand merchants) gives them the choice of any book, whether the publisher has a good sales force or not.

With more titles competing for sales and the advantage of blanket coverage by the big publishers diluted, it is no longer true that every title on a big list achieves a substantial minimum sale. Big publishers are having the experience of three-figure unit sales — and sometimes even less — on books they issue, and not infrequently.

The net result is that new title publishing has become much riskier and more expensive for all publishers. They naturally react to that by publishing fewer new titles, and that describes the tactics of just about every publisher in the business over the past decade. And a smaller percentage of those titles go on to become enduring backlist.

. . . .

If this analysis is right, the inevitable result is that commercial trade publishing will (continue to) shrink. (And it will also consolidate. The big publishers today substitute for new title production by buying other people’s backlists.) The number of titles entering the marketplace might not shrink, because self-publishing authors and other entities that see benefit to putting out books will continue to add titles. Those publishers are not primarily motivated by profit. But publishers who are primarily motivated by profit will keep seeing, as they have, that the financial risk of putting out a new title keeps growing.

Publishers have found ways to turn the new world into an advantage for their backlist (which is why they find acquiring others so attractive). They can capitalize on a break more readily than they used to because an increasingly-online marketplace does not require inventory to be “in place” for sale. 

. . . .

What could be deceptive is that the new world of less new title production and the shift to online sales is making profit growth attainable, almost routine. Cash investments go down and overheads go down (less shipping and billing and warehousing). Returns, which are expensive, also go down.

But, unlike the growth that came from an expanding title base 30 and 40 years ago, today’s growth can not be sustained on the present course. (In fact, the new audio growth is itself a delayed benefit from the old title base expansion!) Backlist title decay — lower sales in each format for most titles year after year — is still a fact of life; a backlist beating last year’s sales is only an occasional event. There will be an end to audio sales growth for publishers as the available backlist is exploited and those available to be acquired also are diminished in number.

And the non-commercial portions of the business will continue to churn out new titles to compete with the output of publishers. The growth of the competing title base will not stop.

Link to the rest at Mike Shatzkin

PG has always been interested in Mike’s discussions of the inner world of publishing, in part because of his perspective arising from decades in the business. The role of backlist in the long-term profitability of a publisher, as described in the OP was interesting and reflects the thoughts and experiences of indie authors with large backlists. It also explains why, although the author is receiving a pittance in royalty payments, some publishers are so resistant to reverting rights to the authors (which behavior helps the parts of PG’s business involving “persuading” publishers that it’s a good idea to revert rights instead of having the existence of some very poorly-drafted boilerplate in the client’s publishing agreements as well as every other author’s publishing agreements signed during the same period of time).

(It will shock many of you that publishers sometimes publish editions of books for which they hold no rights under the terms of the contracts they drafted and signed. And sometimes, publishers get mixed up about how royalties should be paid to the author according to the publishing contracts. PG has never seen a publisher which paid more royalties than the author was entitled to, however.)

Back to Mike’s thoughts. Perhaps he is wrong, but, to PG, it appears that, since his retirement several months, Mike’s posts have become more pessimistic (realistic?) about the future of the traditional book business.

With respect to relying on backlist titles for a significant and predictable portion of a publisher’s income as described in the OP, PG will note that many indie authors experience the same thing. Also, each successful new book an author publishes reaches new readers who then explore the author’s backlist for other books they will enjoy.

For authors who are seeking to pursue the traditional route to publication of their books, there is a credible alternative to mourning over rejection slips. The stories from earlier decades about a talented author who was rejected by 30 publishers before finally finding one who would publish the book will, in PG’s superabundantly humble opinion, become more and more rare.

Even if indie publishing is not her/his first choice (as it is for a growing number of savvy younger authors), the existence of remunerative indie publishing as an alternative to dealing with the flavor of the month attitude in New York City and London is going to attract more and more authors with important/entertaining stories to tell.

One lovely thing about writing and reading is that we’ll never run out of stories.

OverDrive Reports Record Digital Borrowing in 2019

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From Publishers Weekly:

Public libraries around the world generated a record level of digital content circulation in 2019, providing patrons access to more than 326 million e-books, audiobooks and digital magazines, a 20% increase over the previous year, according to a report by Rakuten OverDrive, a digital distribution vendor for libraries

According to the report, 73 public library systems in five countries each loaned over 1 million digital books over the past year, including eight systems that hit the million loans mark for the first time. Among the top digital library lending systems are the Toronto Public Library (6.6 million digital loans), Los Angeles Public Library (the top U.S. library with 5.9 million digital loans); and the National Library Board of Singapore (the top lender outside of North America with 4.2 million loans).

According to the OverDrive report, the increase in digital borrowing represents the “library’s role as a valued discovery channel” for publishers and authors. Nevertheless, the OverDrive report on digital lending comes in the wake of continuing concerns by publishers that digital borrowing may undermine book sales. These concerns have led to a continuing dispute between publishers and libraries over efforts by some publishers to restrict the ability of libraries to offer digital access to their titles.

According to the OverDrive data, the number of e-books borrowed rose 15% in the year to 211 million; digital audiobooks borrowed jumped 30%, to 114 million, and 59 million children’s/young adult checkouts took place, a gain of 27% over 2018.

Link to the rest at Publishers Weekly

PG thought publishers’ concerns about consumers borrowing physical titles from the library instead of buying them at bookstores had been resolved a long time ago. If lending libraries and the consumer behavior they enable were dangerous or fatal to publishers and physical bookstores, such damage would have manifested itself long ago.

If it makes sense for publishers to sell physical books to libraries with the understanding that the library is going to lend the book and the publisher will receive no incremental income from such loans, nothing about ebooks should really change the underlying business considerations. With the specialized software the library uses to lend a copy of an ebook and delete it from the reader’s device at the end of the loan, the likelihood that ebooks lent through the library are going to be pirated is lower than those sold (licensed) through Amazon where no such automatic deletion function is built into the ebook management system (at least to PG’s knowledge).

Here’s an excerpt from the help file of Libby, a popular (the most popular?) lending software used in the United States:

Books are automatically returned to the library on their due date. When they’re returned, they’re also removed from your Loans and deleted from your device (if downloaded).

PG has noted before that on a scale of most to least sophisticated marketers and advertisers, traditional publishers are at the bottom, just below used car lots and payday lenders.

Why?

Free samples are a long-time staple of advertising and promotion campaigns for a variety of products.

Perhaps there are physical bookstores that do not allow visitors to leaf through and read parts of books as part of the shopping process, but PG is not aware of their existence. Such consumer behavior is sampling. Amazon permits the same behavior in its bookstore. No one expects that everyone who samples a product will purchase it.

If sampling was not a reliable method of increasing sales, PG expects retail establishments would end the practice.

If a reader borrows an ebook from a library by an author she hasn’t read before, from the reader’s perspective, that’s another form of sampling. (In this case, the publisher receives some compensation from the library for licensing the book in the first place.)

If this instance of book sampling is successful and the reader enjoys the book, then returns it to the library and looks for the next book in the series or another book by the same author and finds a two-month waiting list to borrow that next book, the reader is only a few clicks away from buying the next ebook by that author on Amazon and starting to read it in a couple of minutes. The reader may even purchase a printed version of the book she has borrowed and enjoyed for her own physical library, sign up for the author’s and/or publisher’s email list, etc.

Discovering a great new author and buying other books written by that author is a far more frictionless process with ebooks than it is with physical books. Going to a physical bookstore to buy that book requires transporting oneself to that store, hoping the store stocks the book, etc., etc. Buying a physical copy of the book from Amazon involves a wait of at least one or two days.

The incremental cost of goods for the publisher in creating, storing, transporting, etc., a copy of the second ebook is probably zero. The same costs for a physical book are definitely more than zero.

A sophisticated seller would be overjoyed to sell products with no incremental costs of producing and transporting those products instead of dealing with the costs and friction involved in selling physical products. Bill Gates, Microsoft and a lot of other people and business organizations have become extremely wealthy from selling organized collections of electrons.

The 2010s were supposed to bring the ebook revolution. It never quite came.

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PG’s last post on December 24 was about the following Vox article that purported to talk about what a bust ebooks have turned out to be.

If you missed it in the holiday rush, there were some good comments and, yes, it is a Vox article, so you can assume the author was born yesterday.

From Vox:

At the beginning of the 2010s, the world seemed to be poised for an ebook revolution.

The Amazon Kindle, which was introduced in 2007, effectively mainstreamed ebooks. By 2010, it was clear that ebooks weren’t just a passing fad, but were here to stay. They appeared poised to disrupt the publishing industry on a fundamental level. Analysts confidently predicted that millennials would embrace ebooks with open arms and abandon print books, that ebook sales would keep rising to take up more and more market share, that the price of ebooks would continue to fall, and that publishing would be forever changed.

Instead, at the other end of the decade, ebook sales seem to have stabilized at around 20 percent of total book sales, with print sales making up the remaining 80 percent. “Five or 10 years ago,” says Andrew Albanese, a senior writer at trade magazine Publishers Weekly and the author of The Battle of $9.99, “you would have thought those numbers would have been reversed.”

And in part, Albanese tells Vox in a phone interview, that’s because the digital natives of Gen Z and the millennial generation have very little interest in buying ebooks. “They’re glued to their phones, they love social media, but when it comes to reading a book, they want John Green in print,” he says. The people who are actually buying ebooks? Mostly boomers. “Older readers are glued to their e-readers,” says Albanese. “They don’t have to go to the bookstore. They can make the font bigger. It’s convenient.”

Ebooks aren’t only selling less than everyone predicted they would at the beginning of the decade. They also cost more than everyone predicted they would — and consistently, they cost more than their print equivalents.

. . . .

When the Kindle entered the marketplace in 2007, Amazon had a simple sales pitch: Anyone with a Kindle could buy all the ebooks they wanted through the online marketplace, and many of those ebooks — in fact, all New York Times best-sellers — would cost no more than $9.99.

$9.99 is a steal for a new book. At the time, most hardcovers were averaging a list price of about $26, and many cost more. But for Amazon, this price point was an apparent no-brainer. The first generation Kindle was expensive, and value conscious customers needed some incentive to buy into it. Why would anyone spend $399 on an e-reader if they couldn’t expect to make up at least part of the cost in a discount on ebooks?

And while this point is often glossed over, Amazon was actually following a precedent set by publishers in its pricing model. In her opinion for US v. Apple, Judge Denise Cote noted that before 2009, most publishers discounted ebooks by 20 percent from the price of a hardcover, which often led to a suggested list price of around $9.99.

But by 2009, publishers had changed their minds. Now they considered the idea of $9.99 ebooks to be an existential threat. Printing and binding and shipping — the costs that ebooks eliminated — accounted for only two dollars of the cost of a hardcover, publishers argued. So the ebook for a $20 hardcover book should cost no less than $18. And according to publishers, by setting the price of an ebook at $9.99, Amazon was training readers to undervalue books.

. . . .

Before we delve further into the weeds here, a quick primer on how book prices are set. Print books are generally sold under a wholesale model, which works like this: First, the publisher will set a suggested list price for a book; say, $20. Then it will sell the book to resellers and distributors for a discount off that suggested list price. So if Simon & Schuster wants to sell a $20 book to Amazon, Amazon might negotiate a discount of 40 percent for itself and end up paying Simon & Schuster only $12 for that book.

But once Amazon owns the book, it has the right to set whatever price it would like for consumers. The $20 list price that Simon & Schuster set was just a suggestion. Under the wholesale model, Amazon is free to decide to sell the book to readers for as little as a single dollar if it chooses to.

Until 2010, ebooks were sold through the wholesale model too. So if Simon & Schuster was publishing a $20 hardcover, they could choose to set a suggested list price of $18 for the ebook — two dollars less than the hardcover — and then sell that ebook to Amazon at a 40 percent discount for $10.80. And Amazon could, in turn, feel free to sell that ebook for $9.99 and swallow a loss of 81 cents.

To be clear, the numbers we’re using here to get a handle on how pricing works are imaginary. (Amazon negotiates different discounts for itself at different times from different publishers, sometimes around 40 percent, but at other times higher and at other times lower.) But we do know that Amazon was making very, very little money off ebook sales in 2010, and was in fact probably losing money on most of them.

. . . .

“Amazon can still discount whatever they like on the print side,” explains Jane Friedman, a publishing consultant and the author of The Business of Being a Writer. On the ebook side, however, Amazon now lists publisher-mandated prices, often with the petulant italic addition “Price set by seller.” “So the market is very weird, and often the ebook costs more than the print,” Friedman says. “Sometimes it feels like Amazon is trying to make the publishers look ridiculous.”

And because ebooks are often more expensive than Amazon’s heavily discounted print books, traditional publishing’s ebook sales seem to have fallen off — and Amazon is more dominant than ever in the print book market. “It’s so much cheaper,” says Friedman.

In this new market, high ebook prices make it harder than ever for young authors in particular to survive. “The split has really hurt debut novelists,” says Friedman. “It’s hard to ask readers to take a chance on someone unproven at that high price point, and since the ebook market does lean towards fiction, it’s hurting the new people.”

Self-published authors, meanwhile, are flourishing. They’re allowed to set their own ebook prices just like publishers are — and consistently, they set their prices very, very low. “It’s a shadow market,” Friedman says. “Novelists with huge backlists go and put them out as ebooks independently. And if a reader has a choice between reading this great series at $2.99 a pop or a $12 novel, what are they going to pick?”

Antitrust law professor Christopher Sagers argues that the outcome of the DOJ’sebooks case shows that the real problem with the industry is not just that Amazon has a monopoly. The big trade publishers, he says, have a monopoly too.

“There used to be hundreds of publishing companies. They’re now mostly owned by five,” Sagers says. (After that Department of Justice lawsuit, Penguin merged with Random House, and the Big Six became the Big Five.) “Why are ebooks expensive? It’s not because Amazon is vicious. It’s because there’s no competition at the wholesale level.”

. . . .

The Big Five publishers “are huge, and they have been able to put in place practices that are kind of unfair and that authors have to put up with,” Friedman allows. “That said, they need that kind of size to be able to effectively deal with something like Amazon. If you look at an indie publisher, I wouldn’t want to be one of them.”

Link to the rest at Vox and thanks to DM for the tip.

PG notes that the OP devotes one paragraph to independent authors and that paragraph implies that indie authors are primarily publishing their revered backlist titles.

Unlike Big Publishing, nobody is really beating any publicity drums for indie authors.

One other point the OP doesn’t discuss is that Barnes & Noble is still cratering and, when it finally goes down the drain, retail bookselling via physical bookstores will take a huge hit and publishers who have failed to develop their chops selling ebooks and encouraging readers to buy them will regret that their profitability will take an enormous hit.

How the decade in books changed what and how we read

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From Our Windsor.ca:

In 2010 or so I bought my first e-reader. A Kobo. I was intrigued by the idea of an e-reader; I thought it might be convenient. But I equivocated — should I buy a Kobo? Or a Kindle?

Kindle was associated with the growing bookseller Amazon, the Kobo with the Canadian company Chapters/Indigo. Which company would have more books available? Apple released the first iPad at the beginning of the year and sales took off immediately. Technology was changing so quickly I wasn’t sure what to buy. Would it all be obsolete a year from now?

Little did I know then that the questions I was asking would form the crux of what occurred in books over the ensuing decade, in which what we read, how we read and who we read have created industry-wide changes.

Bookstores aren’t dead

One of the hallmarks of the decade before the 2010s was the death of the bookstore, thanks to the proliferation of big box stores selling books plus online retailers, Amazon in particular.

A recent headline in the American newspaper the Grand Haven Tribune asked: “Are bookstores back?” The piece quotes the American Booksellers Association, which says between 2009 and 2019 the number of new shops owned by members increased by 53 per cent. They might not be big, but they are there.

New bookstores have been opening in Toronto and across the country, too. A bookshop can’t live by selling books alone — but they can when the community gets involved. Stores such as Another Story Bookshop in Toronto have increasingly organized author readings; some organize writers’ workshops, book clubs. In other words, bookstores and books do what they’ve always done: contribute to a community of ideas and storytelling.

Print’s not dead, either

The total volume of print units sold in 2018, as tracked by BookNet Canada SalesData, is 54.7 million at a value of $1.13 billion. BookNet’s State of Digital Publishing in Canada survey showed that 18.6 per cent of books purchased in 2017 were ebooks. That was up just slightly from 2016.

But when it comes to Canadian books, the picture looks bleaker. According to the More Canada Report, published in December 2018, only 15 per cent of books purchased were written by Canadians. Part of the problem is that it’s difficult for readers to identify Canadian books. That’s in great part due to the way they are bought: through Amazon. Amazon’s algorithm recommends books to you — but not necessarily Canadian books, leaving Canadian publishing houses and Canadian authors at the mercy of an algorithm that isn’t interested in promoting them.

. . . .

The report also found that independent publishers’ sales were down 44 per cent over the past 10 years.

That’s happened as big publishers are getting bigger. The publishing giant Penguin Random House didn’t quite exist at the beginning of this decade — the takeover of the two companies Penguin and Random House by the German multinational Bertelsmann wouldn’t take effect until 2012.

. . . .

Self-publishing has also become a way to, sometimes, make a living as a writer and publish books that mainstream publishers might not have picked up. It also allows mainstream writers to capture income in different ways — they become hybrid writers, publishing some of their work in the traditional way under one name and self-publishing under another.

Some, such as the science fiction writer Robert J. Sawyer, have launched Patreon accounts so that readers can basically become “patrons of the arts and of individual creators,” he told the Star in a 2018 interview. Even bestselling authors find the freedom of non-traditional publishing a positive thing. They get to keep a bigger cut of the books they sell and they get the creative freedom to do what they want.

Does all this access to potential audiences work? It depends. Overall, writers are earning less money than they ever have. A Writers’ Union of Canada survey in 2018 found a 27 per cent decrease in writers’ income over the previous three years. Part of the reason for that was copyright legislation in Canada. In the U.K., authors reported in 2018 that their incomes had declined 15 per cent over the previous three years.

. . . .

Marketing books changed as publishers embraced online advertising through Facebook, finding the ability to directly target a specific audience and, as the algorithms got even better, specific readers, was attractive. “Influencers” also became a key part of targeting book buyers. With the increasing closure of traditional media outlets came the withering of books sections and an erosion of readily accessible reviews. Instead, reader-generated review sites such as Goodreads proliferated. Some mainstream news outlets, including the Star, kept their books sections going, and many smaller literary magazines began publishing more reviews and stand-alone review sections.

Link to the rest at Our Windsor.ca

As PG and others have pointed out before, stories about the book industry that cite legacy publishing and traditional book store industry statistics are always wrong because Amazon doesn’t break out sales figures for books, including books from traditional publishers, self-published books and print on demand books and, with no denigration of Kobo intended, Amazon sells the large majority of English-language ebooks.

Amazon created the market for ebooks, at least in the English-speaking world, by offering ebooks at attractive prices, building and selling ebook readers at attractive prices, creating the software and commercial infrastructure to build, distribute and sell ebooks efficiently around the world and putting a lot of brains and money into the task of introducing and attracting readers to ebooks. Because old-line traditional publishing promotional tools like book reviews in newspapers and magazines (yet another sinking ship and no friend to Amazon or other online competitors), Amazon acquired and built Goodreads up into a leading (the leading?) online book review site.

Could anyone else have accomplished this task as quickly and effectively and at the scale Amazon did? A hypothetical competitor might have done so, but real-world competitors have not. See, for example, Nook.

PG is not certain whether the Writers Union of Canada welcomes indie authors or not, but most traditional authors organizations are of little interest to indie authors because these organizations focus on topics like improving the standard contract terms that old-line publishers offer authors and flagging the latest fly-by-night publishing scam that comes floating up from the sewers.

PG is not familiar enough with the details of the Canadian bookstore market to know whether a retail disaster on the order of Barnes & Noble has occurred or is threatened, but as he has mentioned before, if Barnes & Noble can’t be saved, a huge part of the world of traditional publishing and bookselling will simply disappear.

If you were counseling a college student nearing graduation about career choices, would you recommend that they go to work for Barnes & Noble? Penguin Random House?

As far as a writing career is concerned, if this hypothetical college student wanted to earn a living by writing, would you suggest s/he complete a quality manuscript, then start sending it to agents or publishers and wait for a response? While working at Starbucks? Instead of signing up for campus interviews with companies who want to hire graduates right away?

 

 

The Long Tail of ‘Where the Crawdads Sing’

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From The New York Times:

In the summer of 2018, Putnam published an unusual debut novel by a retired wildlife biologist named Delia Owens. The book, which had an odd title and didn’t fit neatly into any genre, hardly seemed destined to be a blockbuster, so Putnam printed about 28,000 copies.

It wasn’t nearly enough.

A year and a half later, the novel, “Where the Crawdads Sing,” an absorbing, atmospheric tale about a lonely girl’s coming-of-age in the marshes of North Carolina, has sold more than four and a half million copies. It’s an astonishing trajectory for any debut novelist, much less for a reclusive, 70-year-old scientist, whose previous published works chronicled the decades she spent in the deserts and valleys of Botswana and Zambia, where she studied hyenas, lions and elephants.

As the end of 2019 approaches, “Crawdads” has sold more print copies than any other adult title this year — fiction or nonfiction — according to NPD BookScan, blowing away the combined print sales of new novels by John Grisham, Margaret Atwood and Stephen King. Putnam has returned to the printers nearly 40 times to feed a seemingly bottomless demand for the book. Foreign rights have sold in 41 countries.

. . . .

Industry analysts have struggled to explain the novel’s staying power, particularly at a moment when fiction sales over all are flagging, and most blockbuster novels drop off the best-seller list after a few weeks.

. . . .

For the past several years, adult fiction sales have steadily fallen — in 2019, adult fiction sales through early December totaled around 116 million units, down from nearly 144 million in 2015, according to NPD BookScan. In a tough retail environment for fiction, publishers and agents frequently complain that it has become harder and harder for even established novelists to break through the noise of the news cycle.

“Crawdads” seems to be the lone exception. After a burst of holiday sales, it landed back at No. 1 on The Times’s latest fiction best-seller list, where it has held a spot for 67 weeks, with 30 weeks at No. 1.

“This book has defied the new laws of gravity,” said Peter Hildick-Smith, the president of the Codex Group, which analyzes the book industry. “It’s managed to hold its position in a much more consistent way than just about anything.”

Link to the rest at The New York Times