A good discussion to drop in on…..

Thad McIlroy has an interesting discussion of The Wall Street Journal‘s article about the Sourcebooks decision to withhold an e-book edition of its big Fall book. He raises a couple questions based on statements in recent coverage of e-books, including whether people who buy e-books also buy and read paper books, as well as whether graphics-intensive books would be better in paper than on the Kindle.

I think the Journal’s reported “one to two percent” of book sales now being accounted for by electronic publishing is well above the real number. I’ve looked at a lot of publishers reports and the aggregate industry figures, and it appears that the correct range of e-book revenue as a percentage of total publishing revenue is between 1/10th of one percent and a half percent. As a share of units sold, e-books account for two to three times the revenue figures, because e-books are sold at a deep discount to paper editions.

Amazon’s numbers suggest that Kindle users frequently buy both the paper and e-book version of a title in order to read in different settings. Frequently does not mean the majority, but the statements by Jeff Bezos last fall and in January were unequivocal, Kindle sales have not cannibalized paper sales and the Kindle buyer buys more books than the ordinary Amazon book customer. There’s no evidence that Kindle readers don’t read paper books or vice versa and, the categorical statement that no Kindle buyer also buys paper books is clearly incorrect. I buy both, choosing formats for different kinds of uses.

Vertical markets, services and the challenge of many media

Mike Shatzkin, taking on some ideas posted by Andrew Savikas of O’Reilly, in “Vertical” versus “service”: semantics, nuance, or dueling metaphors?

The clinching metaphor in Andrew’s piece is that we aren’t actually buying food when we go to a restaurant (because, if we were, we’d just buy it at the grocery store.) This is tricky, because, indeed, you do want that hamburger cooked and served on a bun and you want a place to sit while you eat it and maybe some ketchup supplied. So, in fact, you’re buying both food and service. You wouldn’t patronize the restaurant if they didn’t give you the food, so it seems a bit of a stretch to say it isn’t what you’re buying!

The clinching metaphor in Andrew’s piece is that we aren’t actually buying food when we go to a restaurant (because, if we were, we’d just buy it at the grocery store.) This is tricky, because, indeed, you do want that hamburger cooked and served on a bun and you want a place to sit while you eat it and maybe some ketchup supplied. So, in fact, you’re buying both food and service. You wouldn’t patronize the restaurant if they didn’t give you the food, so it seems a bit of a stretch to say it isn’t what you’re buying!

Savikas makes the mistake, I think, of conflating “content” with “creativity” when he writes: “This is not just about using free digital content to sell physical goods. It’s an acknowledgment that what you’re selling as an artist (or an author, or a publisher for that matter) is not content. What you sell is providing something that the customer/reader/fan wants. That may be entertainment, it may be information, it may be a souvenir of an event or of who they were at a particular moment in their life (Kelly describes something similar as his eight “qualities that can’t be copied”: Immediacy, Personalization, Interpretation, Authenticity, Accessibility, Embodiment, Patronage, and Findability).” All content is equal in this argument, ignoring the hard-won reputation that great creativity earns in the marketplace. Moreover, several of the “qualities that can’t be copied” apply to any form of creativity—there is another, not mentioned, Authority, which we attach to a source based on previous experience with them.

In short, engagement with a writer or artist is the ephemeral feature of this commercial relationship that is being shoe-horned into the category “service.”

Further on, in comments, Savikas argues that The Economist magazine seldom publishes “news,” which he apparently equates with “breaking news” or “scoops”, because it is printed on paper. He says he “pays for the preparation” of the magazine, which utterly misses the value of the time and research that go into deep reporting about issues rather than simply reporting the new. Analytical thought requires more work, but the output, if measured in terms of letters on a page, is exactly the same as any other printed information. Savikas’ equation leaves the creator of the work out of the value-chain. And, surely, as Mike Shatzkin points out, Savikas is speaking from his experience of working as a publisher.

Shatzkin argues that the difference between “service” and “vertical,” as in “vertical market,” needs to be acknowledged:

Rarely can”service” be delivered broadly; it has to be targeted so vertical be comes a sine qua non. And anybody really trying to build a vertical will do it by offering service and tools, which they would hope would also lead to the ability to sell content.

This, too, reduces the question of the future of publishing to a paradigm that doesn’t bend, but breaks, when applied generically. Specialization, the essence of the divisions of labor that create economies of scale, is not sufficient to establish a brand without “service” that engages the customer for the full life of the value in information. We go to the restaurant because we want food and service, and we buy a non-fiction book by an author because they promise to make us experts on a topic. In the quick-to-obsolescence world of real-time information, ongoing service may be required to engage a customers’ interest and to provide the full-range of expertise, because some insight only appears in the give-and-take that evolves out of published work.

The useful metaphor stretches further when “service” and “vertical” are tempered into a useful alloy. It allows authors of entertainments—true, some genres are vertical markets unto themselves, but entertainment is also a generic quality attributed across many genres—to offer engagement after the initial text is finished. It could be a signed book, a sort of avatar for having a relationship with the author, or it could include ongoing access to notes and other musings by the writer, simply because the buyer enjoys the experience.

Services and verticals define a variety of market approaches. We’ll be experimenting with the resulting alloys for many years. Which is better, watching Picasso paint or looking at the painting? In our world, both are possible, both are inevitable. Neither is exclusive, though each mode of viewing stands alone.

Old readers discussing new books

Mike Shatzkin describes the results of a question he asked the audience at NYU yesterday:

So, with time running out, I got the indulgence of the organizers to ask the crowd a couple of questions. The first one was: “how many of you read ebooks.”

Two hands went up. Two.

The next question was not worth asking. But I sure got a dose of new information to ponder.

There is a saying about eating your own dog food. Everyone talking about e-books needs to be reading them or admitting that many of them are unreadable. Books went through an evolutionary period when many poor copies of a title obscured the value of well-made and edited titles. With e-books, the formats are awkward to begin with, and the poverty of the technology is amplified by the badly converted texts, not to mention a lot of bad texts.

Readers will lead this change. That is doubly true of publishers who wish to lead a change toward digital texts, they need to read first and ask more of their titles before trying to sell them.

Agents, advances and the “long tail” going negative

Mike Shatzkin has an excellent piece today on the evolving role of agents in publishing. His notion of the writer and agent as business partners is important to keep in mind as authors seek the help of an agent. Business tends to be focused on the short term, quarterly results; in publishing, the advance has been the focus on the agent’s efforts, since most books never earn back that advance and it represents the only opportunity for the agent to share in revenue. That needs to change in the midst of a radical realignment of the industry. Long-term partnerships with adequate rewards for everyone involved will have the time and energy needed to solve new publishing challenges.

I’ve never used an agent and am fairly satisfied with the result, because I have not seen much creativity in deal structure in comparison to the agreements I’ve made with publishers. As long as an author is willing to pay attention to the details of a contract, up to date on the current standard for a deal in the market, and uses a lawyer to review the contract, I think the agent can be a wasted expense. However, if an agent can find creative ways to multiply revenue streams and increase the author’s share, they can be invaluable.

The alternative, of course, is to self-publish, about which Shatzkin makes an interesting observation:

But in addition to shrinking, publishing advances are taking on much more of a power law configuration, with concentration at the top and a long tail of books getting less and less (and extended by mushrooming self-publishing where the “advance” is actually negative; it’s a cost!)

The “long tail” of book publishing used to end closer to the base of the X axis of a graph and north of the $0 line (fewer authors made a minimum of positive revenue). Now, it goes on twice as far and dips well below positive revenue, with authors spending their own money to start sales of their books. Too often, when authors follow Chris Anderson’s “long tail” thinking, they envision a positive contribution to their bank accounts no matter where they fall on the power curve. The reality is that nothing is free, as Malcolm Gladwell explains in a devastating critique of Anderson’s new book, “Free,” in the latest issue of The New Yorker. How to exploit “free” transactions to drive real revenue is the problem Anderson misses and Gladwell dismisses.

For many authors today, the “advance” is their investment in the book. If they fail to embrace that investment with the support of marketing and sales efforts it deserves, they are simply throwing their money away.