This post is in response to a recent series of Huffington Post editorials about the future of publishing. Each voice in these editorials, like each voice in the larger ongoing conversation, has a valid point of view. Ignoring how we got where we are, however, or the realities of this moment, fails to address the future that is hurtling toward us.
On Thursday, October 7, Mark Coker, CEO of Smashwords, posted an editorial titled, Why We Need $4.00 Books. As the head of a company devoted to servicing the e-book market, it’s not surprising that Coker touted the functional and distribution advantages of e-books over published texts, or that he focused on the crushing costs associated with maintaining the traditional publishing model while ignoring e-book costs and the threat of digital piracy. Coker also took notice of the publishing industry’s recent decision to withhold e-book versions of frontlist titles as a defense against cannibalizing book sales:
Many publishers view ebooks with a skeptical eye. After all, won’t cheap ebooks cannibalize expensive print books?
This is the wrong way to examine the situation. Lower cost ebooks help publishers retain customers who might otherwise abandon books altogether in favor of lower cost alternative media options.
Ebooks also hold the promise to expand the worldwide market for books. Hundreds of millions of new middle class and literate consumers have come online outside the US, especially in developing countries.
In Coker’s view e-books equal a larger market share for an industry facing intense competition for eyeballs. This larger market share would in turn compensate authors and publishers for a lower per-copy price.
On the same day, Friday, October 7, Chip O’Brien, Director of Customer Relations for BookSwim.com and Editor of Thorn Magazine, posted an editorial on The Huffington Post titled, Why New Books Don’t Sell on the Kindle: The Price of the Intangible. O’Brien’s article took a much narrower view of the issues facing publishing by focusing on a single e-reader and comparing it to the traditional book publishing market:
According to publishers, the majority of a book’s ultimate sales price pays for intangible costs as well: preproduction (editing, graphic design, etc.), marketing, and author royalties and advances. Money Magazine found that these three made up about 77% of a hardcover’s production costs. By these numbers, a publisher doesn’t save much on an e-book over a paper book: about 23% of existing costs. So maintaining the same profit means a fair price for a $27.95 hardcover in an e-book format would amount to $21.50.
Taking these numbers at face value, it’s clear there is a significant disparity between Coker’s call for a $4.00 book and the E-book pricing suggested by O’Brien’s calculations. Even if the publishing industry wanted to make a $4.00 book available, O’Brien’s math seems to suggest that it would be impossible without destroying the publishing industry in the process.
In reply to these two articles, on Friday, October 8, Steve Ross, former President of the Collins Division at HarperCollins, posted a “Manifesto of Sorts” on The Huffington Post, titled Can’t We All Just Get Along?
Ross began as follows:
I will define “the industry” as the organization of major book publishing houses based primarily in New York City and owned by a handful of (primarily foreign) media conglomerates, a body of companies that 20 years ago numbered in the dozens and can now be counted on one hand, with maybe a few fingers on loan from the other.
Reflecting his long tenure in the publishing business, Ross complimented the industry for its selflessness and dedication to “the enduring significance of books and their ability to educate, inform and entertain.” He then addressed both Coker and O’Brien, first by demonizing them, then casting the publishing industry as victim:
I have watched the incremental troubles metastasize, while at the same time, I have noticed over the past few years a troubling trend entering the picture, a trend that is encapsulated in the blogs posted by Chip O’Brien and Mark Coker.
Both blogs are, to this reader, rife with fallacious thinking, faulty reasoning, and/or tunneled perspectives that ignore the complex realities that publishers face during this turning point for the industry. But at a time when it is in the best interests of everyone who loves books to help the major houses endure, they’re being scapegoated, demonized and ridiculed for trying to survive with the crippling business model they’ve been handicapped with for decades.
This kind of rhetoric is not going to solve any of the problems in the publishing industry, nor is it the kind of rhetoric one would expect in an editorial titled, Can’t We All Just Get Along? Ross also confuses the book as an object with the knowledge and information a book contains; a distinction O’Brien took pains to highlight. Like flowing water seeking the path of least resistance, knowledge and information are now flowing to an easier and cheaper means of expression and distribution, and that’s true whether you use Coker’s math or O’Brien’s math.
Framing the pricing question from the publisher’s point of view, Ross notes that O’Brien’s $21.50 e-book price point is being bludgeoned by Amazon’s attempt to cap e-book prices at $9.99 in order to drive demand for its Kindle e-reader. He also notes that many of the bestselling e-book titles are actually free:
Faced with a $9.99 price tag set by Amazon and cemented by Dan Brown, this leaves a margin of slim to none.
The puzzling financial paradox for publishers is further exacerbated by the fact that, as I write, Brown’s e-book rests comfortably atop the Kindle bestseller list, but the #2 bestseller carries a price tag of $0.00, the same price carried by #3, and #4, all the way to #10. Many of these e-books derive from major publishing companies, like HarperCollins or Random House, where the costs for creating the books were absorbed, and the responsibility for explaining the royalty structure for such e-book “sales” to the authors and agents is a perplexing mystery akin to a Dan Brown narrative, but without the tourism.
Publishers are giving e-books away free to see if they induce demand for book sales of the same (or other) titles. It is an experiment, and a necessary one, and one that follows Coker’s line of reasoning. But Ross makes a fair point: if $21.50 is breaking even, and $4.00 is taking a loss, then FREE is probably not going to save the publishing industry. At least not without significant downsizing.
Turning to Coker’s math, and his idea of a $4.00 book, Ross embraces his “Can’t We All Get Along?” message by smearing Coker with the title of a book on Coker’s site. Sticking to the low road, Ross then attempts to school Coker on a point that seems generally accepted:
But when he states that “many publishers view e-books with a skeptical eye” I know we’re dealing with someone who is operating from hearsay rather than relevant experience in the trenches of a large and established publishing company….
Publishers are withholding e-book sales of frontlist titles because they believe that e-book sales will cannibalize book sales. This is a fact that is not in dispute, and it was this fact-not-in-dispute which Coker was referencing. Here again is Coker’s full quote:
Many publishers view ebooks with a skeptical eye. After all, won’t cheap ebooks cannibalize expensive print books?
However eager to get along Ross may be, brandishing a chainsaw — even if only to shred his own limbs — is counterproductive. But Ross can’t help himself. Taking a second swipe at one of the erotica titles on Coker’s site (a subject worthy of legitimate debate, which I intend to engage), Ross reminds Coker that even the bestselling e-books owe their success to the traditional publishing industry:
While such services [e.g. Smashwords] provide a helpful function for aspiring writers (and Bad Ass Bitches) everywhere, it’s worth noting here that the overwhelming majority of e-book bestsellers, like print bestsellers, are books that were published, usually at great expense and with a concerted cross-departmental effort, by a major publisher.
The publishers have had to pay the agents and authors sometimes usurious rates at auctions for the rights to publish and sell these books. This is so for several reasons — because agents and authors have managed to pit houses against each other in their need to fill inventory pipelines, and because of publishers’ increasingly desperate search for anything that might carry the scent of a Big Or Important Book, and because of the audacious and perpetually unrealistic demands of the parent company for a 12 percent return on investments, and because publishers tend to be staffed by people of great passions serialized from one prospective project to another.
And here we need to stop. Because in bleating about the injustices done to the publishing industry, Ross has achieved the rather neat trick — with the help of his own bloodied chainsaw — of reducing the publishing industry to a handful of well-intentioned people who are the victims of everyone.
At the beginning of his editorial, Ross defined the publishing industry as follows:
….the organization of major book publishing houses based primarily in New York City and owned by a handful of (primarily foreign) media conglomerates….
But now Ross is taking part of that back:
….because of the audacious and perpetually unrealistic demands of the parent company for a 12 percent return on investments….
Ross’s definition of the publishing industry now seems to include only the “major book publishing houses based primarily in New York City,” and not the actual owners of those companies. Meaning the people who own the publishing industry are part of the problem, and specifically part of the pricing problem — which seems to put Ross in Coker’s corner, if not allying him with other voices “rife with fallacious thinking, faulty reasoning, and/or tunneled perspectives.” The non-owner New York executives who are paid by the foreign conglomerate owners and who do what the foreign conglomerate owners tell them and who at some point presumably decided they needed to sell themselves to their foreign conglomerated owners, are helpless victims.
If Ross is correct the remedy is clear. The publishing houses — meaning the real publishing industry, the one in New York City, which cares about books and is routinely abused by agents and authors — need to be freed from their corporate taskmasters. Unfortunately, this has nothing to do with Coker or O’Brien or e-books or e-readers or the internet as a delivery mechanism, and everything with going back in time to a happier place.
Which, after another paragraph decrying the publishing industry’s self-inflicted wounds, is where Ross heads:
Why do we demonize publishers as greedy, monopolistic and backward when they are peopled by such idealists and lovers of literature trying their best to navigate a ship that was corroding from decades-old rust well before the economic collapse placed icebergs in the water?
The pain in these words is clear, and it is not surprising when Ross reveals, sentences later, that he recently lost his job in the publishing industry. Ross does exhort the industry to “start talking among ourselves about the forces we face,” but even this plea places Ross in a bind. If the industry truly has not engaged these issues until now it is guilty of gross negligence, if not suicide. If it has already engaged these issues it has ultimately proven itself utterly incapable of doing so.
Struggling to regain the aspiration of his own title, Ross closes with the following hope:
There must be a middle road between the old model and Mr. Coker’s $4 book, but to imagine what that road might look like requires brainstorming, community, open conversation.
From the context of his comments, however, it’s not clear that Ross is inviting Coker to the table. It’s also not clear that any amount of brainstorming, community and open conversation will help the publishing industry if Ross’s line of attack is followed. Because despite the arguments Ross makes in his editorial, there is one important — make that critical — word that is nowhere to be found.
It is the internet, and nothing else, which is driving the changes the publishing industry is facing, just as the internet has forever altered the music business. Incredibly, this simple truth seems utterly lost on Ross. Clouded by spreadsheet data, historical trends, legacy titles and romanticized industry propaganda he also seems incapable of recognizing why the internet is changing his business and why there is nothing he can do to stop it.
The heart of the matter has nothing to do with Coker’s $4.00 book or his web site, nothing to do with the Kindle or the price of e-books, and nothing to do with the merits of books, the hallowed history of the book-manufacturing industry or the break-even price of a hardback. It has to do — solely — with the internet as a system of communication and distribution which inherently bypasses Coker and O’Brien and Ross and anyone else who wants to play a part in conveying the words of an author to the eyes of a reader.
Prior to the internet the only writers who could connect with readers were those who met the tests of various gatekeepers (editors, publishers, agents) or who were wealthy enough to self-publish and auto-distribute their works. Now, for the first time in history, writers and readers do not need Mark Coker or Jeff Bezos (CEO of Amazon) or Steve Ross in order to connect because all previously-essential distribution services, including even previously-necessary web sites (think AOL) and hardware configurations (the desktop computer), have been bypassed.
Everyone in the new content pipeline must demonstrate added value in order to be embraced by both authors and readers. As an author, if you are not helping me monetize my content in some way, I have no valid business reason for partnering with you or hiring you. As a reader, if you are not providing me a service I need at a competitive price I will simply go elsewhere.
That this fundamental change presages no clear model by which current authors can monetize and protect their works, or by which publishers can monetize and protect backlist titles, does not deny the truth of the change. It should also not blind us to the immediate threat this poses to many established businesses large and small, and to the many honest, honorable lives that are being affected. The fact that answers will inevitably come in time is no relief to someone who has bills to pay or a child to feed.
But therein lies our common ground. No one is getting a free pass on the internet or making out like a bandit, and that includes writers and readers. Authors, copyright holders and publishers suddenly liberated from distribution headaches now face the constant threat of piracy. Booksellers who may in the future have print-on-demand access to any title ever published have no clear revenue stream that will allow them to survive until that time. Readers who love books (physical books and e-books alike) have access to more titles at cheaper prices than ever before, but no simple and standardized method of accessing those titles.
As an independent author I do not escape the horrifying truth that Ross cannot face. In return for making distribution almost effortless and almost free, the internet promises nothing. No revenue. No readers. Nothing.
As a writer, questions of cost and profit and revenue are of interest to me because I now have a direct pipeline to readers. I know I can reduce my costs to something approaching zero, so the question of most concern to me is how to generate revenue. I know I need help to monetize my content. I need sites that will host it and promote it, readers that will recommend it, and publishers who will do the same if I want to reach the widest possible audience.
I want to make deals with business partners in order to accomplish these goals. I want to have the money to hire professionals like editors and designers to help me produce the best work I can. And I want publishers to help me reach the widest market if that makes sense to both of us.
I want to be successful. And if I’m not good enough by some measure, I want the next independent writer to be successful. And the next. And I want Ross to want them to be successful, too.
That’s our common ground. That’s the future of publishing.
— Mark Barrett
Mike Cane says
Let me just cut to the chase already:
He said: the enduring significance of books and their ability to educate, inform and entertain.
Then he said: to fill inventory pipelines.
He’s the kind of guy who’d spit on Van Gogh on the one hand yet brag to his friends about owning a Van Gogh painting.
He has nothing to say.
You’re right about the contradiction.
As to what Ross has to say, I think he has something important to say, but instead of speaking the truth he lashed out at others. I cannot imagine how much pain there is in the publishing industry, and how much loss is being felt. Even if much of the damage is self-inflicted, as Ross clearly believes, that probably only makes it that much worse.
I do feel for the man.
Kat Meyer says
Excellent article. The point is well made that all the players involved (authors, traditional publishers, new media publishers, vendors and hardware makers) would be very wise to play nicely together AND to think a lot more about the end users (readers) and serving their collective desires. It’s really depressing that even when provided with a detailed map of what NOT to do (courtesy of the music industry), those at the highest levels in the publishing industry — those with the most ability to make key decisions that could result in incredible progress and potentially incredible profit, seem to be insistent upon doing all the wrong things.
It has been said before – the digital/Internet genie is out of the bottle. There’s no putting it back. But, there is an opportunity to get to know the genie. Find out how to work optimally with the genie for everyone’s benefit. Hope the bigwigs with the power and money and ability to drive change quickly on a massive level can take time out from their name-calling and criticizing others, and instead make some positive change happen.
I would like to see more civility, but as with all things in capitalism it is going to be a fight to the death — then another fight to the death after that, and after that, etc.
You’re quite right that the industry’s leadership is failing in every way, and this despite the fact that they have both a blueprint from the music industry and a product which is less likely to be pirated simply because it is that much harder to digest. (A three-minute MP3 can play in the background of your life. It’s much harder to read something.)
In the short term I think it’s every person for themselves, and I think third-party players (particularly small publishers and independent bookstores) may be hardest hit.
Katherine Warman Kern says
This is an excellent example of the ever tightening knot created by the circular arguments swirling among stakeholders in the publishing, news, and entertainment markets.
Gives me an irresistible urge to scream “Stop the Madness.”
I see a lose end sticking out of this knot that may help to unravel it.
Each stakeholder, most typically the content creator vs. publisher, seem intent upon blaming each other for this problem.
If you want someone to blame, blame the hazards of being a public company. To make money, Wall Street wants the share price to go up. Share price goes up when there is potential for earnings growth. So management decisions are based on predicting the odds of growing earnings. Typically the most reliable odds are what worked in the past. There are two ways to analyze what worked in the past. One is to look at the tactics, the other is to look at strategy.
An example of a tactic that worked in the past is – when I lowered the price 10% sales increased 30%.
An example of a strategy that worked in the past is – when I introduced a new product that reduced time spent on housework and freed up time to spend on more enjoyable activities, sales and profit margins both increased 30%.
When one chooses to repeat the discount tactic, it works for a while, but becomes progressively less successful and margins erode.
When one chooses to repeat the strategy, there are many hurdles to overcome – it is hard to inspire internal staff who believe what they do can not be surpassed and recognize opportunities for new products, the time it takes to invent new products, marketing in a highly competitive environment – but when successful, e.g., Procter & Gamble’s Swiffer, the returns are sustainable and have a halo effect on the rest of the company.
It is much more typical for a public company to repeat the tactics than the strategies that have brought past success.
Book, News, and Entertainment companies suffer the same challenges. The solution is not to throw the “babies out with the bathwater.” The solution is for leaders to engage and internal staff to respond to the challenge of recognizing what is good about their current products and how the interactive media could add value over and above those products. P&G did it by engaging the consumer to participate.
What do books do for their consumers? For me, a book offers an experience totally different than a movie. It stimulates my senses in the process of telling of the story. The movie fills in a lot of blanks that the book doesn’t. In fact, I am reluctant to see a movie version of a book I loved because I am afraid it won’t be up to the way I imagined it. But when I do like a movie version, it creates an appetite for me to want to re-experience the process of reading the book again.
That’s just an example of how tapping into consumers can offer insight into an opportunity to add incremental revenue and profits from another media, like movies, to the book business. I understand that the publisher doesn’t necessarily have the rights, but I would suggest to the writers that there may be mutual benefit to working with a publisher who maximizes the incremental value of your story across all media.
I agree with many of your points here. Regarding corporate ownership and the bottom line (meaning shareholder value), I’ve become convinced over the years that some businesses cannot function when they are scaled past a certain point, and I think publishing is one of those businesses. The book business does not do better when controlled by conglomerates, just as Hollywood studios have rarely fared better under tight corporate control.
There is more art than science in these things, and that requires sensibility. The products are not widgets which can be tested for function and durability, the markets are not based on needs.
I also agree that there should be a mutual benefit between writer and publisher. That’s exactly how it’s supposed to work. Too often, however, the publisher is the writer — from packaged books written for hire, to books bought and then bludgeoned into some other form by a marketing department looking to fill a hole. I don’t begrudge the publishers any of this, but it creates a corrosive effect. (Some of the angriest rants from people in the publishing industry seem to be expressions of self-loathing.) I simply say it’s not what I want to do.
April L. Hamilton says
From an article I wrote for Publetariat (link embedded in my name above), which was based on sessions I attended and conversations I had at the O’Reilly TOC conference this past February, where several editors from different major houses told me the lion’s share of expense for ebook production is layout/design/typesetting, that author advances and promo budgets are what they are whether there’s an ebook release or not:
The software, videogame and film industries take cross-platform support for their customers a step further by providing simplified or downsampled versions of their products for use on mobile devices. No one playing Guitar Hero on a Nintendo DS expects the same gaming experience as playing the full-featured console game, no one using MS Office Mobile expects to find the same feature set as regular MS Office, and no one watching a movie on an iPod expects the same audience experience as seeing the film in a theater. Makers of these products understand that on a portable device the customer’s priority is—surprise!—portability. Content and functionality matter to customers too, but customers are willing to trade bells and whistles for convenience and cost savings.
When *you* start down the road to release a book in electronic, portable form, you begin with the assumption that you must preserve the “integrity of the page” and “integrity of print branding”. If you can’t exactly duplicate the frames and shading employed in sidebars, or get the tiny graphic of the geek with his finger in the air to display in the exact location and size as they appear in the print book, you don’t want to release an electronic version at all. Even when working with a minimally-formatted book like a novel, you strive to preserve original fonts, typesetting and layout details in the ebook version. You set up task forces, invest in development of new devices, software and technologies, and generally make things much harder and more expensive than they need to be.
You appear to be completely oblivious to the fact that one of the major draws of the ebook is the flexibility users have in controlling how the text is displayed. Most e-reading software and devices allow the user to change the font, font size, line spacing, orientation of the page, and sometimes even the font and page colors. All your efforts to preserve the “integrity of the page” are wasted.
Nevertheless, you pass the expense of these efforts on to the ebook buyer, and as a result your customers think you’re ripping them off on ebooks. You repeatedly defend your pricing on the grounds that your overhead in producing an ebook is comparable to producing a print book, but you leave out the part where you could provide a simplified version of the ebook at a much lower cost—a cost consumers would find much more reasonable and appealing. You ignore the customer’s priorities (portability, convenience and cost savings) in favor of your own, self-imposed priorities.
Also, I can’t feel too bad for publishers who whine about being forced into “usurious” auctions. Nobody’s forcing them to participate, and when the numbers get into the high sixes and low sevens they know very well how hard it will be for the resulting book to earn out, never mind earn a healthy profit. When the majority of bidding war books fail to live up to their promise, all it means is that the winner of the bidding war made a very bad business decision.
You cut to the heart of the matter: at every step, all I seem to be hearing is how the publishing industry (meaning the larger corporate houses) is having a hard time making the new reality fit the old practices. If any publishing house is using book-publishing methodologies to ready titles for e-book readers (particularly at this early stage, when the machines are rudimentary), they ought to be fired en mass.
As to the seductions of bidding wars, this is the same cyclical gambling binge that hits Hollywood again and again. Everyone is afraid to lose the next big hit, so they pay a premium for the chance to scratch off the filmy silver layer and see if they can match the names of an author three times. That each ticket may costs millions is nothing compared to finding a Dan Brown.