Jun 15 2008
During Book Expo America, ebooks were the hot topic. A report from the New York Times signaled that there is some within the industry who are fearful of the rise of ebooks in general and the increase of Amazon’s market power in particular. There seems to be a lot of resistance to ebooks in the publishing industry and I’ve never really understood why. It’s not clear to me whether the concept of change is the root of the problem or whether it is the repercussions of technology itself.
The current publishing industry as an economic model is quite inefficient. NPR recently did a story (thanks Jill F for the link) on the business of returns in publishing. Returns are not the returns from consumers to the retailers, but from retailers to publishers.
According to the NPR story, after the Great Depression, publishers wanted to encourage book retailers to order more books and to take chances on new authors. To do this, publishers offered booksellers the right to return unsold books for credit. National Book Company in Dunnsmore, PA, a major warehouse for the publishing industry, says that 1 in 4 books that is sent out is returned.
I’ve seen at least one report that indicated that almost 40% of books shipped are returned because they are unsold. This actually correlates with the report of authors who indicate that a 50% sell through on a print run is considered a success.
Under the current return policy, the publisher loses money on every other book it prints. It’s amazing that a publisher makes any money at all.
HarperCollins new imprint, HarperStudio, wants to eliminate returns, advances and try to revolutionize the book industry. Of course, my answer to this is ebooks. The current ebook model has no returns because there is no print run. There are no resales. There are little to no advances. Authors are paid a high percentage of the retail price (35-45% in many cases) and are paid on a quarterly basis with no amount of the royalty held as a reserve against a return (because there are no returns). The move away from reliance on print sales toward ebook sales is not something to fear but embrace. It is ebooks and ebook technology that could save the publishing industry in spite of piracy worries.
The benefit the book business has is to study the digital model of movies and music. Understandably, these aren’t exactly comparable mediums but both industries because of technology have faced changing revenue streams. 10 years ago, CDs comprised 74.8% of total music sales (full length cassettes had a market share of 18.2%). In the last five years, digital music sales have gone to not even registering as a percentage of overall sales to accounting for 30 percent of all music sales in the US.
Music has gone from Vinyl LPs to 8 Tracks to Cassettes to CDs and now bits and bytes. Despite technological innovations, music is still being produced and sold. Individuals within the industry are looking for new ways to monetize their art.
Even though the book form has remained in use for 500 years, we are on the tipping point of a major cultural shift in reading. There’s a love affair with the printed book, but its inefficient and environmentally unfriendly. But it’s a mistake to cling to this love of the printed book in an effort to stave off the move toward digitizing all areas of entertainment. In this, I believe, if you don’t innovate, you’ll lose out.
With every technological innovation there are those who get left behind. In the ebook scenario, though, I don’t think its the authors. In some sense I think ebook technologically can benefit authors in that it could decentralize the power of the publishing industry. Instead of the industry dominated by just a few publishers and just a few retailers, the internet will make and has already made publishing success available to those with little money and a great idea.
Technology will not stand still. It’s inexorable march into the future will not be stopped by paper and ink. The publishing industry is in the unique position to learn from the other markets and to adapt to the way future generations will consume books. It doesn’t make sense to fear the change, but to embrace it; to be at the forefront of the digital age rather than behind it.
Harlequin is one publisher who I see is really taking advantage of the digital opportunities with its epublished only fiction, it’s decision to digitize its entire front list of over 120 titles every month while digitizing its backlist at the same time, by offering all series books a month in advance, by pushing its content onto devices through partnerships with Daily Lit, providing its content for cellphone users.
I don’t agree with everything Harlequin does as it relates to ebooks. I think for a commodity that cannot be resold or returned, the prices are too high. I think that the tying of books to a certain format creates headaches and barriers to adoption. I also think that publishing has to rethink how it compensates its authors, perhaps asking authors to take more risk in the form of lowered advances for a greater cut on the backend with royalties paid on a monthly basis rather than a bi yearly basis.
Right now is the time for publishing industry folks from publishers to authors to retailers to readers to participate in discussions about the best way to monetize the publishing industry so that tomorrow’s generation has a vibrant and diverse selection of reading materials that are provided by artists who are fairly compensated.