What is causing the uptick in independent bookstores?

From veteran publishing consultant, Mike Shatzkin:

My first real job was in a bookstore, on the sales floor of the brand new paperback department in Brentano’s on 5th Avenue in the summer of 1962. I loved that place; I loved that job; and I’ve always had a soft spot for bookstores. But, romanticism aside, the truth is that books are just about the single best consumer product to buy online rather than in a store. For many reasons.

First of all, there’s finding what you want. An online bookseller will be able to offer you 15 million titles or so. A bookstore will offer no more than half-a-percent of the universe (which would be 75,000 titles) and most have far fewer than that. When Amazon began, there were more like half-a-million possible titles and many super bookstores carried 20-30 percent of them (more than 100,000 titles). And even then, before the numbers had shifted so massively, Jeff Bezos saw that books were the best place to start for an internet retailer.

Thus, the odds of finding any particular book in a store have moved from reasonable to minuscule. But on top of that, books are heavy, so if you are going anywhere after the bookstore, carrying a purchase around can be a nuisance. And how often do you “need” that next book right now, rather than it being just as good to get it in a day or two? (If you need it right now, you’d better be really lucky in what you’re looking for and the store you’re going to.)

The point is that book purchases, at least for personal reading (books for gifts and heavily-illustrated books are different, but are a smaller slice of the total sales) have moved from stores to online for compelling reasons, and there is no reason to think they won’t continue to. It is hard to see physical retail bookselling as a growth business.

But, in fact, the number of independent bookstores has been growing for the last decade. This has been a real cause for celebration in many quarters. Publishers are certainly glad to be seeing some additional inventory-stocking outlets springing up.

Why is this? Harvard Business School professor Ryan Raffaelli has formulated an answer based on his “3 Cs”. They are community, curation, and convening. By this he means that bookstores provide a “community” function, their owners perform a “curation” service by winnowing down the book selection, and they offer the opportunity for like-minded people to “convene” around an information quest or a purpose. He alliteratively wraps this all up with “collective identity”. And he discourages us from looking at the profitability of those stores; just the fact that they are there in recently-increasing numbers, he believes, constitutes the important indicator.

Does anybody else see a remarkable congruence between this vision of bookstores and what has always been the function of libraries?

. . . .

I can agree that community, curation, and convening are good touchstones for any bookstore owner to keep in mind to build their business. But I can’t agree that these are the explanation for why bookstores have been growing in number.

My nominee for “most important reason for indie bookstores growing in number” is also a “c”, but one that wasn’t mentioned. It is “closing”. By that I mean the “closing” of the Borders chain in 2011, almost precisely the date when the indie resurgence, tracked by number of active stores, began.

When several hundred Borders stores closed at one time, it moved the reduction of shelf space ahead of the declining demand for retail bookstores. Even in the bookstore market of 2010, reduced as it was from two decades before by Amazon and ebooks, there were a lot of people served by those closed Borders stores who hadn’t yet completely made the switch to buying all their books online. That could have been 30 percent or more of existing retail bookstore shelf space that was closed. (Borders was not 30 percent of the stores, but all of their stores were very big ones.)

So independents have seized an opportunity. Somebody smarter than I am ought to look at where the indies are and where the Borders were and I’d bet they’ll see a correlation. If they could also overlay the closed Barnes & Noble stores and the ones that have had their book inventory drastically reduced, they’d likely find more examples of substitution. Independent bookstores are substituting for the remaining portion of the demand that used to be supplied from the big store chains.

There is likely also one other factor at play — not a new one — behind the recent increase in the number of independents. To be consistent, let’s label this one “compromise”. All these independent bookstores are started and run by entrepreneurs who, most likely, had a career doing something else before they started their bookstore. I’m going to guess, without supporting data, that many of those bookstore owners could be making more money doing something else. But the psychic rewards of owning and running a bookstore, including the attraction of managing the first 3 “c”s , are sufficient to attract capable people to compromise by owning and running one rather than spending their time doing something where they might make more money.

Link to the rest at Mike Shatzkin

Mike certainly has more insider knowledge about all facets of Big Publishing and the traditional bookstore experience than PG does, but regular visitors to TPV will remember that PG has often harped on the overlooked effects arising from the disappearance of Borders, the second-largest bookstore chain in the US when it suddenly collapsed and disappeared into the bankruptcy court.

Literally overnight (it’s not unusual in bankruptcies likely to result in liquidation instead of a plan to continue the business entity’s operations after rearranging a variety of debts and blasting others into tiny pieces for a business to close all its doors at once) a huge amount of traditional publishing’s retail distribution network disappeared. Not only were publishers stuck with unpaid bills for unsold physical books, but large orders for future releases went up in smoke.

Some of Borders’ customers went to Barnes & Noble if there was one nearby, others tried Amazon and liked it and a few went to local independent bookstores (if there were any of those in the vicinity). Of those who went to indies, some liked the experience and continued as patrons but a lot missed the large selection of books on offer at the dead and departed Borders or were less than entranced by a down-market feel of their local independent and ended up going to Amazon or perhaps just stopped buying quite so many books.

The disappearance of Borders certainly helped Barnes & Noble postpone its decline for several years and removed competitive pressure to change how it did business on the meatspace side of things.

PG suspects the demise of Borders and the business benefits that accrued to Barnes & Noble may also have caused BN to feel less pressure to accelerate into ebooks (the first Nook was introduced in late 2009) than it would have felt if its largest competitor in the physical bookstore space had still been around.

At Casa PG, the closest Borders was about five minutes away and the closest Barnes & Noble was and is about 15 minutes away.

For whatever reason, when Borders died, about 95% of the book shopping at Casa PG almost immediately went online and, at the present time, the only occasions for visits to Barnes & Noble are when young offspring (who like books as objects) are in town. PG typically spends his time during such offspring-powered visits looking at non-fiction sections of interest to him and being disappointed at the small number of interesting books which are stocked.

2020: Zero year thoughts about the changes in book publishing

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.

Should Barnes & Noble rethink its supply chain?

From Mike Shatzkin:

About 25 years ago, Ingram was benefiting from a big buildout of America’s bookstore network. Borders and Barnes & Noble were both opening new stores — big stores — at a rapid rate. Ingram hit a mother lode delivering “store opening assortments” and then, at least in some cases, doing the stock replenishment for the first 90 days.

The stock for the store opening cost the retailer more that way because Ingram couldn’t offer the discounts that publishers would give the stores for direct orders. But getting the opening stock delivered by store section, ready for shelving, and then covering the entire breadth of inventory for reorders across publishers that would also arrive consolidated rather than piecemeal, was worth a couple of points of margin.

Around this same time — 25 years ago — Jeff Bezos was using Ingram’s superior service to build Amazon.com in an industrial building in Seattle, in the same-day service zone for Ingram’s Roseburg, Oregon, warehouse.

Consolidation was the order of the day. Borders and Barnes & Noble were building out store networks that clearly threatened smaller chains and independents. (They would all also be hurt by Amazon, but that would take a few years to become obvious.) Publishers were also consolidating. (Random House and Bantam Doubleday Dell were the big merger of the late 1990s.) All of this threatened Ingram’s basic business model, which was built on being an efficiency-creator between many publishers selling to many bookstore customers.

But the efficiency of centralized supply was also clearly demonstrated to the chains, so B&N saw value in acquiring Ingram to own their own supply chain, presumably opening up the possibility of buying from publishers at the higher discounts normally afforded to wholesalers. It took two years for the deal to fall through because of federal government concern about “monopoly”. That meant Ingram had to start rethinking the future of their company.

And it meant Barnes & Noble would build its own warehouse network to provide more efficient resupply to its own stores that would give them a competitive advantage over Borders, their primary competitor. Borders, of course, was thinking along similar lines.

. . . .

And now things have changed again. B&N’s viability is threatened by the movement of book sales from physical retail to online retail. New ownership is now challenged to find new paths to commercial viability. The biggest opportunity may be a return to the past, once again turning over the supply chain to Ingram.

As sales of books in the retail channel decline, as they have and will continue to, the per-unit cost of maintaining a proprietary supply infrastructure just keeps rising.

. . . .

On top of that, the “job” of the resupply infrastructure for a retail chain has become much more challenging. When B&N was building out its capabilities at the turn of this century, the number of possible titles was probably not even a million and many of their stores carried over 100,000. Now there well over 10 million titles available through Ingram’s print-on-demand database plus nearly a million more in warehouse stock (which includes most of what is new and sells the fastest), and the retail stores carry a third or less than they did back then. The more that ratio shifts, as what each store carries is a smaller and smaller fraction of the possible universe, the more expensive it is to maintain your own supply chain.

. . . .

James Daunt, the new head of B&N, had no such option when he was rebuilding Waterstones, the UK chain he previously managed. There is no wholesaling operation in the UK with comparable ability to supply the breadth of titles Ingram does. But one imagines that Daunt sees every day what it is costing him to keep operating his distribution centers. One also imagines he also feels a need to free up capital on a daily basis.

Link to the rest at Mike Shatzkin

PG suggests that Mike’s post highlights just one of Barnes & Noble’s many problems.

The continued growth of Amazon and other online retailers (Walmart has been spending a lot of money on its online operations for several years and may have finally figured it out) is a huge indication that US consumers are perfectly happy with buying a lot of things online.

Large and small grocery chains have started services that allow online shopping with the bags of bananas, Doritos and Coke delivered to their car trunk or home. If there was ever a commodity that a great many observers thought would never go online, it was produce sales where shoppers have traditionally eyed and squeezed the fresh fruits and veggies before they selected the perfect cucumber.

Of course, each copy of a book is the same (down to the electron level for ebooks) and online information and opinions about various books on offer is enormous. Plus text messages and email make it effortless for Bev to share her book raves and rants to her friends who like to read the same sort of things she does.

PG contends that fewer and fewer feel they will understand any more about whether a book is right for them by leafing through a hardcover at a physical bookstore. They can look inside on Amazon, find out all far more about whether they’re likely to enjoy it online than they’ll ever get from an underpaid Barnes & Noble clerk (if they can find one when they need one).

Again, there is so much more detailed and reliable information about a new book online than in the bookstore, what does anyone really learn from picking it up and looking at the back cover?

In past decades, PG would sometimes visit a bookstore to kill some time in a pleasant manner. The electronic devices in his pocket or on his desk provide a much better time-killing service than any bookstore he has ever visited.

One big change in book publishing is that it does not require you to have much of an organization to play anymore

From veteran publishing consultant, Mike Shatzkin:

More than two decades into its digital transition, book publishing has evolved so that a capital-intensive infrastructure is no longer a requirement to successfully develop a book, or a list of books, and bring the books to market. This has resulted in a self-publishing segment, so far almost entirely author-driven, that is substantial in reach and readership and which offers ongoing competition to the commercial publishing business largely because of its ability to price its ebooks below what would be survival levels for commercial publishers.

. . . .

What publishers do, over and over again, is the business of “content” and “markets”. Each book is unique content and is individually delivered to its own unique market. So publishers need to stick to content and markets that they understand in a contextual way. That is usually done by sticking to genres in fiction and topics or “audiences” for non-fiction. But people who live in any of many non-fiction “worlds” could well be as well-equipped as any publisher to grasp the content-and-market equations in those environments.

The discrete tasks are:

1. Creating the content, which requires domain knowledge (the world of the content) and, of course, the ability to discern good and effective writing and presentation. And a knowledge of the content world implies a sense of any particular project’s uniqueness and timeliness.

2. “Packaging” the content in a form that is reproducible. That means different things for print and for digital. And it is more complicated for books that are illustrated or annotated with charts or graphs.

3. “Marketing”, or making potential readers aware of the book. This takes in what we used to think of as publicity and advertising, which in the “old days” largely centered around book reviews and the sections in newspapers that carried them, but which is now much more about search engine optimization and social network marketing.

4. Connecting with the avenues of distribution: reaching the sources of printed books their customers might use — bookstores, other retailers, or online merchants for consumers and wholesalers or distributors for those intermediaries, print and e. You have to sell to them and serve them: persuade them to carry or list the book and then deliver, bill, and collect so they can.

5. Selling rights where you can’t sell books. Because many books, no matter their origin, have the potential to gain additional revenue and exposure through licensing for other languages or placing chunks of the book’s content in other venues (what was very simply “serialization” in the all-print days), rights sales and mangement is another activity that a book publisher has to cover.

How have the avenues for sale to end users changed in the past two decades?

Before digital change arrived, which for trade publishers we could say began when Amazon opened in 1995, publishers sold most of their books in stores. The books got there because their sales reps persuaded the stores to stock them. Reps and stores are still a part of the delivery system, but they are no longer the only path to an audience that can deliver a book’s author substantial revenue.

In the past 20 years, online sales of print have moved from under 5% of the total units to certainly 40% of units, perhaps 50%. And it can be much more for some titles.

In addition to print, publishers sell ebooks and those are exclusively online. Twenty years ago, sales were zero. Now they appear to be 20% or more of the sales for big publishers. Once again, there is a range across titles and types of titles and there is a whole new segment of digital-first publishers for which the percentage of ebook sales is much higher, sometimes approaching 100%.

. . . .

Twenty years ago was probably the peak of the big bookstore chains — Borders and Barnes & Noble. Two decades ago, those two retail behemoths were more than 30% of many publishers’ sales. Today, Borders is gone, Barnes & Noble has shrunk, and their sales are less than 10% for most publishers. The number of chain stores is fewer than half of what it was, but shelf space for books has shrunk even more.

As a result of the diminishing bookstore space — shrinking and disappearing chains and despite a recent resurgence of independents the growth from them hasn’t nearly replaced what’s been lost — the opportunities to put printed books in front of consumers have shrunk. So the shelf space in mass merchants, like Walmart and Costco, is especially important for the big books.

. . . .

At the same time, the general interest book clubs have pretty much disappeared. Publishers used to be able to move thousands of copies of big books through those direct mail channels. They’re effectively gone.

And all of the above is really attributable to the fact that the sales have moved to Amazon. Twenty years ago they were probably not as much as 2 percent of book sales. Now, if you include Kindle sales, they are almost certainly 50 percent of the sales. For printed books alone, they are over 40 percent for most publishers.

. . . .

Amazon sales reached a tipping point about ten years ago. Kindle, launched in 2007, grew fast, as the first “direct download” ebook system. (Before Kindle, the ebooks had to be downloaded into a computer and then “synched” to a device.) So when Amazon first offered the self-publishing opportunity through Kindle, they were able to “reach” an audience of sufficient size to enable aspiring authors to actually make some money. When they added their “Create Space” capability for print-on-demand, an author could readily reach half the book-buying audience with one stop.

That was really the catalyst for what has become a tsunami of self-publishing.

. . . .

The much-cheaper [indie ebooks on Amazon] were most compelling for the audiences that consumed many titles: readers of romance, sci-fi, thrillers, and mysteries. It didn’t take long — maybe a couple of years — for a very robust title selection in those genres to become available from many previously-unknown authors.

Whether it was intentional or not, Amazon’s flipping of the time-honored “razors and blades” pricing strategy contributed to their rounding up all those multiple-book readers.

. . . .

[F]rom day one, the tiny-but-growing community of Kindle readers bought an outsized number of books.

For those authors who captured readers through the combination of low-pricing and the appeal of the free book “samples” that digital enabled, the Amazon self-publishing ecosystem could be very remuerative.

. . . .

Regular publishing required an agent most of the time but it required a lot of patience all of the time. Finding an agent took effort and could take months. The publishers’ decision-making process to buy also took a long time, often months. The act of publishing took a long time, also often months. It quite often added up to years. And then the share the author got was a fraction of what Kindle would pay them.

. . . .

So by 2010, we had a very different profile of intermediaries between publishers and their readers than we had a decade or so before.

And in the decade since, the total retail shelf space dedicated to books, across chains, independents, mass merchants, and specialty merchants, has continued to decline. The share of sales being taken by online has continued to grow to the level we cited: 50 percent for most titles. All publishers, but particularly big publishers, have taken to heart that they have to market direct to consumers . . . .

. . . .

If you go back to the top to look at the requirements to publish a book, numbers one and two are the creation and designing of a book, and most publishers use freelance capabilities for that which are available to anybody, including individual authors. Number three (marketing) has many components, but there are a plethora of independent services available to deliver most of the capabilities. Number four (connecting with the avenues of distribution) is delivered by Amazon to their customers and by Ingram to the world. And number five (licensing, particularly foreign rights) can be done by a vast network of agents and digital marketing consultants that already exists. You don’t need to own any of it to play.

And, as a result of all of that, many of the structural advantages a being a book publisher have faded in importance. A person with a manuscript, a computer, and a bit of a budget has been able to publish effectively, and sometimes profitably, for the past ten years. That has spawned the current infrastructure of capabilities and services that might suddenly be discovered as a key tool by entities bigger than individual authors. On another day, we’ll explore that might mean to publishing’s future.

Link to the rest at The Shatzkin Files

PG has been hard on Mr. Shatzkin on many occasions in the past. However, over the past several months, Shatzkin has come around nicely (in PG’s occasionally meek and deferential opinion).

If PG were to date this change, he thinks it may have begun when Shatzkin retired (or mostly-retired, PG has no familiarity with anything other than what The Shatzkin Files have disclosed) from his work as a long-time and well-respected publishing consultant based in New York City.

As PG considered this apparent change, he was reminded of Miles’ Law, reputedly named for Rufus E. Miles, Jr., a supervisor in the Bureau of the Budget in the 1940s who told a group of subordinates that, in government agencies, “Where you stand depends on where you sit.”

PG has never been in the traditional publishing business (although he has been exposed to traditional publishers via helping Mrs. PG by reviewing the publishing contracts from the traditional publishers with which she formerly did business).

PG was not alone in recognizing the potential for Amazon and its general pricing practices, but particularly for its aggressive move into ebooks, to completely upend traditional publishing. He had witnessed and participated in the revolution that had significantly impacted the legal profession with the birth of computer-based word-processing and its ability to turn out perfect, custom-fitted documents of all sorts very quickly and inexpensively. When he was still practicing retail law, PG made a lot of money by building software programs that could start printing out sophisticated wills and trusts or divorce petitions and related documents while the client was still in the process of writing a check and handing it to one of his legal assistants.

Even more importantly, PG had absorbed significant amounts of the thinking and writing of Clayton M. Christensen, Harvard Business School professor and well-known author of The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, a book that Jeff Bezos and Steve Jobs have each said had a major impact on how they built Amazon and Apple.

The early moves of Bezos into providing self-publishing tools for the masses were extraordinarily disruptive, especially for ebooks, putting Amazon’s promotional power behind making some of those indie ebooks into big sellers and, even more important, on a per-ebook basis, paying authors far more than they would receive from the sale of an ebook via a traditional publisher through Amazon.

When you add the tools Amazon has provided for author to exercise broad control over ebook pricing plus author access to the Amazon-based advertising and marketing tools for selling books, Amazon has effectively set up an online laboratory that permits authors to experiment with all sorts of marketing/pricing strategies in an ongoing search for the best way to sell a lot of ebooks. Perhaps more important even than the money Amazon earns from selling indie ebooks, it is in a position impossible for any traditional publisher to equal, where it can watch and learn from all the various pricing/marketing/product design experimentation going on among thousands of individual authors, including some who are selling a huge number of ebooks.

PG suggests that, while good editors, nicely-formatted books and skilled cover designers are very important for most indie authors, paying for those services separately (or doing them yourself, particularly in the case of book formatting), instead of offloading those jobs to publishers and giving up far more income than even the most expensive editor or designer would charge just doesn’t make sense.

If you’re writing in a niche that benefits from quick-to-market strategies to take advantage of something that’s happening right now or soon will happen, a traditional publisher is most definitely not a smart strategy. You can make it all happen much faster (and probably  much better – most publishers’ employees are generalists, not specialists in particular market segments or sub-segments, plus everything at a publisher is subject to bureaucratic time lags) by doing it (or hiring specialists to do it) yourself.

The discovery of truth is prevented more effectively, not by the false appearance things present and which mislead into error, not directly by weakness of the reasoning powers, but by preconceived opinion, by prejudice.

~ Arthur Schopenhauer

Bureaucracy defends the status quo long past the time when the quo has lost its status.

~ Laurence J. Peter

In any bureaucracy, there’s a natural tendency to let the system become an excuse for inaction.

~  Chris Fussell

Bureaucracy is a giant mechanism operated by pygmies.

~  Honore de Balzac

A lot has changed in book publishing in the last ten years

From veteran publishing consultant Mike Shatzkin:

I am returning this September to speak at Digital Book World.

. . . .

The new DBW is well aware of “corporate” publishing, a term they use to describe the increasingly frequent occurrence of non-publishing companies and entities issuing their own books (and not necessarily with the primary objective being to make money doing so).

This inspired me to make a list of Big Changes since 2009. It did not take long to come up with quite a few.

The arrival of the IPad and ubiquitous smartphones and tablets
Pretty universal broadband
Apple iBookstore
Nook: big arrival on the market, large uptake, fairly rapid sunset
Successful, as in producing dollars and reaching readers, self-publishing
Disappearance of Borders
“Resurgence” of independents (and its limits)
Diminishing of B&N
Growth of Amazon from less than a fifth of sales for most publishers to over half
Through Ingram, a full POD and distribution infrastructure available to anybody
Audio has become ubiquitous (fastest-growing segment; smartphones; Audible)

. . . .

Ten years ago: Pub date was the key organizing point for the assignment of a publisher’s budgeted and conscious efforts on a book. Generally, publishers marketed six months around pub date.
Today: Any book can pop at any time. This has had a very visible impact on budgeting and marketing resource allocation, but it also adds a new challenge: monitoring the world to make the best decisions about what books to put effort into right now.

TYA: “Direct marketing” to consumers was the work of specialists.
TOD: Every publisher builds and maintains email lists, with widely varying degrees of expertise applied to using them.

. . . .

TYA: Popular reference books were enduring backlist for book publishers. I know, because in the 1980s I created a compendium of baseball biographies called “The Ballplayers”, trying to appeal to the same audience of the perennial bestseller, Macmillan’s “Baseball Encyclopedia”.
TOD: You wouldn’t think of going to a book for either of these things. “The Ballplayers” had a life online as BaseballLibrary.com before Wikipedia mooted it. And the encyclopedia was effectively replaced long ago by baseballreference.com.

. . . .

TYA: In order for a book to sell, it really needed to be distributed by a “legitimate” publisher, because it was a requirement to be on sale in bookstores to move the needle and only a publisher could get books stocked across a wide range of outlets.
TOD: There are big categories of books (mostly genre fiction) that have a vast number of crowd-curated self-published titles that are available at prices no commercial enterprise can consistently match. And anybody with a worthy title can buy their way into full distribution without having to persuade a publisher to give them a contract.

Link to the rest at The Shatzkin Files

The Sale of B&N Again Calls the Question of the Future of America’s Bookstores

From veteran publishing consultant Mike Shatzkin:

The most important question in the world of trade publishing is “what will happen to the book trade”, meaning, primarily, the bookstores (but also the other retailers that sell books, the libraries and the wholesalers that supply them).

. . . .

[I]t was announced that Barnes & Noble was being sold to Elliott Management, which also owns and has reconditioned the Waterstones chain in the UK. That acquisition caught everybody’s attention and made two reporters call me as part of the research for their stories. (ReaderLink emerged as a late possible alternative acquirer of B&N, but that did not come to fruition.)

They wanted to know, “will Elliott save B&N?” The announced strategy, by James Daunt who will run both chains and who engineered the changes at Waterstone’s, is to repeat what appears to have worked in Britain. Diversify the stores from each other. Give more local autonomy for title selection and merchandising. Make them as different from each other as independents are different from each other.

My hunch is that it will take much more profound change to make the “big chain bookstore” model commercially viable in the US anytime in the future. What surprises me a bit is that this conversation about the future of bookstores, and just about every one I’ve seen, just doesn’t acknowledge the history of how we got to where we are.

The Barnes & Noble store network that exists today was spawned by investor enthusiasm in the late 1980s, which also financed the growth of B&N’s longtime competitors, Borders, which closed in 2009. When the book consumer of that time either wanted a specific book, particularly one that was not a current bestseller, or wanted to “shop” a category or topic to see what was available, it was a natural instinct to go to the store with the biggest selection, the most titles.

The fact that selection was a magnet became the driving reality the superstores were built on. The biggest independents had long carried a very large number of titles and now the chains, which had previously specialized in 20-25,000-title stores in malls, started building freestanding destination stores that carried 100-125,000 titles. The national wholesaler Ingram also kept expanding their title base, so both the chain stores and the independents could get rapid resupply support for most of what they carried.

The situation started to change when Amazon arrived in 1995 with the ability to deliver just any available book to any customer in as much time “as it took” (varied by the book and publisher, of course), with a “promise date” to tell the customer when to expect it. Since most needs for most books by most people are not immediate, over time online shopping, rather than looking for the biggest in-store selection, became the logical default for anything you weren’t sure you’d find. And in a multi-million title world of books (to which we have evolved over the past 20 years from the quarter-million title world we lived in before Amazon), that’s by far most of the shopping and has become most of the purchasing.

In addition to the shopping reality, the marketing reality has also changed. It used to be that word of mouth was a slow thing, taking the time it did to travel from person to person through conversation and personal interaction. The internet changed that; social media changed it on steroids. Now word of mouth can spread like lightning, and stop nearly as quickly as it starts. Social media can make a book, or a meme, very ubiquitous for a week or a month, and then disappear.

That means that there is a high premium on having a book available in as many places as possible for the period of its great fame, but it also means those books need to be rotated quickly. To maximize sales, they need to show up right away when they’re hot, and they have to relinquish their place of prominence to make room for the next thing that comes along.

What that all added up to is that the retail sector that is needed in the area of rising online sales is very different from the one we needed before. A massive selection is not an effective magnet anymore.

. . . .

[I]t will take more than diversification of the title selections and merchandising emphases to make the pretty large B&N stores thrive again. They need more smaller stores, not so many very large ones. Making the title selections more local is well and good, but the information that drives that has to be deep, sophisticated, digital, and reacted to very quickly.

. . . .

Britain is culturally and physically different enough from the States that it is hard to know whether a strategy that worked for Waterstones there can work for Barnes & Noble here.

Link to the rest at The Shatzkin Files

PG is familiar with the incoming CEO of Barnes & Noble, James Daunt, only through a variety of articles written about him that include quotes from Daunt.

PG’s general impression is that Daunt is British in a way that can lead to parochial views of the world and the United States in particular. From a brief scan of biographical information, Daunt’s father was a British diplomat and Daunt was educated at a 1300-year-old private (in the US sense) boarding school prior to completing his education at Cambridge. One profile mentioned that he presently owns three different homes.

Daunt’s only extended exposure to the United States that PG could discover was when he worked as an investment banker in New York City for four years in the 1980’s right after he graduated from college.

PG has no doubts that Daunt’s business instincts are well-attuned to the sensibilities of a typical British book purchaser, particularly in the upscale locations where he sited Daunt Books stores prior to being named CEO of Waterstones.

PG has his doubts about whether Daunt’s instincts will work as well for a Barnes & Noble in Omaha or Mobile as they do for a Daunt Books in Marylebone however.

At present and in most locations, working in a Barnes & Noble store is pretty close to a dead-end job. It’s a half-step above flipping hamburgers for working conditions, but Shake Shack isn’t on anyone’s list of public companies most likely to show up in bankruptcy court either. PG suggests that a Shake Shack manager is more likely to have his/her job five years from now than a manager of a Barnes & Noble is. And a Shake Shack manager may be earning more money as well.

PG suggests Daunt’s most important task will be to make the employees of Barnes & Noble’s retail stores feel like they are part of a business that is worth caring about and isn’t likely to lead to unemployment during the next few years.

Customers sense when the store staff feels like they’re in dead-end jobs.

The best ways to use Lightning are not widely employed yet 20 years in

From The Shatzkin Files:

The 20th anniversary of Lightning Source, the digital service provided by Ingram that supplies both printed-on-demand books and ebook file distribution services for publishers, was recently noted in a tribute piece in Publishers Weekly. The growth of the file repository at Lightning was reported to have reached 15 million titles.

Those represent books that might not have copies for sale in anybody’s inventory but which can be delivered in the next 24-48 hours by Ingram to any bookstore, library, or consumer in the country (and many more around the world).

John Ingram was quoted suggesting that publishers would only get the full benefits that Lightning has to offer them if they have every title they own archived with the service and ready for delivery. The story doesn’t unpack that idea, but it is a very powerful one.

The value that almost all publishers now recognize in Lightning was summed up very well by Steve Zacharius of Kensington Books.

“We use it for short runs to cover books temporarily out of stock or to keep the book available when there’s not enough demand to do a full offset printing. We also, of course, use it for ARCs.” (ARCs are “advance reader copies”, sometimes called “bound galleys”, which are usually pre-publication samples of a printed book.)

But there is another way to use Lightning which only a few publishers have employed so far but which could become one of its most valuable capabilities in these times. Ingram now has what they estimate is “several tens of thousands” of titles within the catalog that sell thousands a year, so they wouldn’t be obvious candidates. But they are set up “Just in Case” (as opposed to for “Just in Time”) and they make use of Lightning in ways most publishers still don’t.

Because, more than ever before the Internet changed communication, our collective attention is briefly grabbed and we see a “spike”. A sudden and unpredicted surge in interest in a topic (which often means a book) is suddenly driven by an event in the news or public sphere. These surges can be extremely brief but the boost in demand they can deliver for any book can also be extremely powerful. And, of course, the body of thought contained in a book could actually further sustain the interest, if the book is available for media exposure and public consumption at the moment of opportunity.

. . . .

Because if there’s a news break on a Monday morning that could promote interest in a book, even a publisher with ample inventory in its own warehouse is unlikely to be able to get copies to Ingram to place on sale any earlier than Wednesday. Those two days could be two major days for sales, perpetuating a chain of interest into the book-buying public.

Turning on Lightning printing for that book could mean thousands of copies in stores and libraries by Wednesday. This is the potential magic of the Lightning-Ingram connection. Ingram is shipping books to just about every bookstore and library that matters just about every single day. The newly hot book could be in all the shipments to stores that want it almost from the moment of the news break by employing Lightning. In our times, delaying the book’s real distribution into the marketplace by even 48 hours could be the difference between a book that catches fire and one that misses its opportunity.

Link to the rest at The Shatzkin Files

PG will note that an agreement between a publisher and Ingram for Lightning service could arguably provide a basis for the publisher to claim none of its books would never go out of print. Under language commonly used in publishing contracts all rights revert to an author if the author’s book goes out of print, but most publishers don’t do much to clarify when a book will go out of print.

For those authors who wish to enter into publishing contracts with traditional publishers, PG suggests that out-of-print provisions be triggered at the author’s election whenever royalties paid to the author for a particular book drop below a specified dollar amount. For example, if the publisher fails to pay the author at least $1,000 in royalties for a book during any royalty reporting period, the author can cause rights to the book to be reverted because the book is selling so few copies, it is effectively out of print.

As far as the OP is concerned, it’s hard to believe that anyone with an internet connection will be interested in waiting two days to go to a bookstore to buy a hardcopy book instead of reviewing all the online information on the topic that would appear much sooner  (which online info could easily include excerpts from the book).

Much of the value of Lightning also assumes that the publisher doesn’t already have an ebook for sale on Amazon.

Imprint consolidation at big houses is a sign of changed times

From veteran publishing consultant, Mike Shatzkin:

I had reason to learn recently that Ingram has 16 million individual titles loaded in their Lightning Source database ready to be delivered as a bound book to you within 24 hours, if not sooner. So every book coming into the world today is competing against 16 million other books that you might buy.

That number — the number of individual book titles available to any consumer, bookstore, or library — has exploded in my working lifetime. As recently as 25 years ago, the potential titles  available — in print and on a warehouse shelf ready to be ordered, or even to be backordered until a next printing — was numbered in the hundreds of thousands. So it has grown by 20 or 30 or 40 times. That’s between 2000 percent and 4000 percent in the last quarter century.

This has, like the Internet or CO2 in the atmosphere, changed everything. And it seems like the organizing structure of the major publishers is also changing in response.

On Monday morning, Simon & Schuster became the second major house in a week to announce that it was consolidating two imprints, effectively reducing by one the number of discrete publishing units within the conglomerate empowered to decide what to publish and how to promote it. They folded the Touchstone imprint into Atria and Gallery; last week Penguin Random House collapsed their Crown imprint into Random House (sometimes referred to as “Little Random”.)

The title explosion is part of a sea change in the world of book publishing that has taken place over the past quarter century. At the same time, sales have shifted in two dimensions: a big chunk of the books now bought and consumed are digital, not printed, and more than half the books consumers buy are not bought in brick-and-mortar stores. And the share for physical stores continues to shrink. Indeed, these trends are linked. The fact that books can now be delivered without inventory, without a sales force, and without a warehouse has made it possible for just about anybody to publish a book.

. . . .

Commercial publishers bring books to market to make money for themselves and their authors. But today, book publishing is a idea-dissemination or brand-extension tool for many originators, and making money on the publication is a secondary consideration.

That means that commercial viability is no longer an effective check on the number of titles. One wealthy and digitally-smart author we know is reluctant to engage with a publisher because he wants to be free to give away his content. And in another case we found and discussed in a recent post, because the originator was so enamored of the idea of giving it away through web streaming, they ignored the opportunities through commercial ebooks that would have required setting some price a bit higher than zero to work in that channel. Anybody doing this more than once will figure out ways to increase their distribution.

It wasn’t very long ago that nobody would think seriously about publishing a book unless they had the infrastructure — a sales force, a warehouse, a way to process shipments and returns — to put books on many bookstore shelves. Now those services are ubiquitously available for variable, not fixed, costs (you can reach the whole world through Ingram Spark or a big chunk of the world through Amazon Kindle and CreateSpace).

. . . .

In the new marketplace, where most of the sales don’t require the expensive-to-engage distributed bookstore infrastructure, established publishers no longer automatically dominate. So we’ve gone from a marketplace where only truly professional publishers could effectively get books to customers to one where their size, their lists, their sales forces, and their operational efficiencies give them much less competitive advantage. That new marketplace and the competitive set means that publishers can no longer count on a reasonably substantial minimum sale for every title they publish.

. . . .

For as long as I’ve been in the industry, I have heard publishers complain “there are too many titles” while the smartest ones also saw that their own profitability was improved by increasing their own company’s title output. But over the past two decades, the title glut has hit home and even the biggest and most powerful publishers need to exercise restraint about what they try to publish profitably. Because they really can lose money publishing a book, which two decades ago was actually a rare occurrence in a major house unless they had wildly overpaid for the rights.

Publishers have also found it sensible to redeploy resources from “sales” — working with intermediaries to reach a book’s customers — to “digital marketing”, which often leads to a direct sales appeal from the publisher to the consumer. (Although the sales themselves might be executed through Amazon or another retailer, the publisher’s effort is driving the specific sale to the specific customer.)

This has, inevitably, made publishers more “audience centric”. They build topic- or genre-specific websites, apps, and — critically — email lists. The email lists of book purchasers are of increasing value, if the publisher can continue to feed it choices from which it will find things to buy.

Link to the rest at The Shatzkin Files and thanks to Nate at The Digital Reader for the tip.

PG suggests that, not long ago, publishers would not have considered direct sales efforts to readers via mailing lists, etc., because bookstore owners would have objected. The OP suggests to PG that publishers have mentally written off Leonard Riggio/Barnes & Noble and no other bookstore chain is big enough to intimidate them.

At a time when real digital marketing talent is widely recognized as a valuable skill, PG also wonders what sorts of digital marketers are willing to go to work for a publisher instead of a tech startup or digital marketing agency with potential for some real upside.

For authors, signing a standard contract with a traditional publisher looks like something akin to an extraordinarily expensive exclusive contract with a digital marketing agency which you can’t fire for incompetence or failure to respond to your emails.

And where’s the nurturing in that sort of relationship?