Dec 4 2011
I’m concerned that publishers have a deep disconnect with readers. This shouldn’t be a surprise given that readers aren’t the customer of publishers, but recent events really highlight this. I have wavered on posting this article because on the one hand, do I really care what happens to publishers? Won’t I be able to find good authors without the publisher mechanism? Should readers be concerned about the decline of publishing in its current state? After all, publishing will still exist even if those that are in charge of 80% of the books sold go out of business tomorrow. Yet this is a topic I’ve given some thought to and so, by virtue of the time expended in my little head on this issue, it must be important to me.
On November 3, 2011, Amazon announced the Kindle Lending Library for Prime members. This allows Prime members to download one book per month for free that is in the Kindle Lending Library. Most publishers did not agree to be included so Amazon is testing the limits of the first sale doctrine and ownership by buying copies at their wholesale discount and then lending them for free to Prime members.
Later in November, Penguin disabled all the Kindle library lending options through Overdrive, was upset that the Kindle lending occurred at the Amazon site and not through Overdrive (as Overdrive is not considered a direct competitor), and then restricted any new digital lending. If Penguin brings back digital lending for new titles, the access will be windowed only allowing digital titles to be lent after some period of the books being on sale.
I really have no problems with this from a business standpoint (a corporate charitable or moral discussion may be different). I understand the publishing is a business and that businesses must make the best financial decisions for them. I understand Amazon is feared because its goal isn’t in concert with publishers. One librarian has suggested that if library patrons bought just one more copy per year, it would equal the entirety of the library market which is around 10%. While there are statistics to indicate the physical book lending has led to sales, there is no data that this is true for digital book lending. Of course, digital lending library is in its infancy and thus making predictions now on whether it will decrease or increase purchases is dangerous. But digital library lending is thought by some to lead to the overall devaluation of content.
The goal of any manufacturer or producer is to sell the product at the highest dollar it can achieve. Barnes & Noble is built along the same guidelines. High prices in exchange for a high quality product and great customer service.
I wouldn’t know about customer service from publishers because they don’t consider the reader as a customer, but I know that B&N’s business rests, in part, on being a trustworthy brand with superior customer service in its stores. It can no longer rest upon providing more content than any other retailer.
But the world has changed and more rapidly than anyone can expect. Carolyn Reidy, the CEO of Simon & Schuster, told a group of Korean business people that ebooks would be around 25% in 2016. Others thought it would not be until 2020 that the digital market share of books would be at the quarter mark but for trade fiction it’s 25% now and for some authors its 50% or greater now. In 2012, the digital market will easily be half of trade book sales. Unfortunately, when long range vision planned for digital adoption to be slower by a factor of 5 that business plan isn’t well suited to change which leads to attempts to slow the pace of adoption to match the plan. I don’t believe the latter works.
A publishers only goal cannot be to thwart Amazon. Hachette CEO Armand Noury stated:
“It’s not that I am against libraries, or a book being sold and then read by 10 different people, but it’s clearly a way invented by retailers to change the balance of power.”
Business goals must be to meet and anticipate the consumer demand because publishing isn’t just about finding and producing books. It’s about selling them as well.
For too long I think publishing thinks of themselves as a speciality industry, unaffected by the vagaries that might influence change within other entertainment industries but hardcovers and print books will be treated like vinyl records in a few years. These will be artifacts for a few. I still believe that there is a market for hardcover books, but it will be primarily because there is a uniqueness to the printed form of a particular book . Ordinary hardcovers, trades and mass markets won’t have a market big enough for them to be available in large quantities.
Problematically, there is a downward pressure of pricing. Most readers believe that digital content should be cheaper than physical content. There are many reasons given for this but primarily I think it comes from a lack of substance. Digital entertainment is somewhat disposal, as mass markets have often been viewed. Disposal or transitory entertainment has less value. This concept isn’t aided by the push by digital content creators to abrogate the first sale doctrine by defining the transaction between publisher and consumer as a lease instead of a sale. If a reader doesn’t have true ownership, the value of any product trends downward dramatically.
Publishers must be frustrated by this push to the bottom because they’ve been told that the digital book buying customer demographic currently isn’t short of funds. Executives are frustrated to think that the reader’s disposable income is sufficient to allow them to buy iPads and ereaders but they balk at spending $25 for a book. From Noury again:
Nourry said he would like to one day find a way for readers to lend each other e-books, but said copyright protection was currently more important as the industry’s new business models were still fragile.
“My business consists of selling books,” he said. “People who buy Kindles every 18 months and iPads for $600 — they don’t need our help.”
But what publishers believe customers should do and how publishers believe they think doesn’t actually matter. It’s what customers do and what customers believe that should be the guideposts. Aside from how wrongly I think Noury views the reader (and this isn’t a surprise because readers aren’t his customers) readers, even those who are willing to buy new Kindles every new product cycle or new iPads aren’t looking at lending as a financial break. Instead, they are looking at trying to get a return on their dollar spent. Free books or low cost access to books increases discoverability. It isn’t about “helping” the pocket book of the reader. (Digital library lending and library lending, in general, sometimes invokes the corporate citizenship concept and the moral responsibility that publishers and those in the publishing ecosystem may have to support the library and I think that is a separate issue. I want to acknowledge that publishers have the right to make a business decision, even a bad one).
Books are simply one of many entertainment option that readers have at their fingertips. It is foolish to think that readers wouldn’t want immediate access to books as they have immediate access to movies, music, and video games. The big problem that publishers have here is not anticipating the moves of the readers. Publishing does not stand alone in a separate silo. Instead, readers’ expectations toward access and price of content is influenced heavily by other entertainment options. Thus if every other entertainment option that is at a reader’s disposal offers digital downloads, publishing needs to offer digital downloads. If every other entertainment option that is at a reader’s disposal offers some type of subscription access to unlimited content, publishing needs to offer that.
The way to combat Amazon and other retailers isn’t simply to withhold content because Amazon’s response (as other retailers’ response will be) is to create their own content and thus make publishers irrelevant. The method of combatting Amazon and other retailers is to offer alternatives. This is what Amazon is doing for authors through self publishing. It is offering a viable alternative. Publishing needs to provide a viable alternative.
1. Change your customer focus. I really don’t understand anymore why publishers believe that focusing on the retailers as their customers creates a competitive advantage. The biggest accounts such as B&N and Amazon are directly competing as publishers. I understand the desire to take care of “accounts” but what good is it? B&N and Amazon need publishers right now. This might not be true five years from now. B&N’s physical retail existence is weakening every quarter. The only thing that is keeping B&N from Borders’ fate is its Nook focus but Nook is taking a ton of money and retail space away from the sale of actual books.
2. Publishers need to sell direct. Maybe they should be working on more cooperatives. Bookish, an unrealized site, was announced early this year and was a site that was backed by three different major publishers: Simon & Schuster, Penguin, and Hachette. The site was going to sell paper books directly to the consumer. Paper books. Not digital books. Paper books. They should be experimenting in ways to draw readers away from retailers by selling books in advance or at a discount or both. There should be advantages such as club memberships. The idea is better content at a good price.
4. Be synonymous with quality. Of course, if you want to keep prices elevated in exchange for quality, then quality has to be delivered. No more Reamde debacles. The great wealth of crappy self publishing offerings helps to increase the value of quality offerings but if the higher priced goods are crappy, then readers might as well pay $.99 instead of $7.99.
5. Leverage resources. The biggest advantage publishers have over any of the other retailers is their catalog. The deep breadth and scope of books in the publishers’ catalogs should be leveraged to attract readers. Why doesn’t Harlequin have a Harlequin Treasury subscription? These are books that have already earned out (or written off) whatever money that was initially invested in them. Why not charge readers $25 per month (with a one year commitment) for unlimited access to the Harlequin Treasury library?
6. Speak to the readers. When I updated by apps on the iPad the other day, two companies’ update notices stood out to me. Zappos wrote “With 2.2.0, we added HIGH DEF images and zooming, but removed the swiping between images. We’ll be the first to admit that that was a mistake.” Goodreader said “by popular demand, we’re re-enabling the “Textured background” switch in app settings for PDF files.” Both these updates indicate that the companies are listening to their end users. The end user experience is important to them. How are publishers listening to their readers? If they are listening, how are publishers conveying that the reader’s input is important? Who are the ambassadors of the publishers? There are actually great ambassadors: editors. Whenever I’ve had the opportunity to speak to an editor, they’ve always sold me on the books that they were working on. Plus, they are real people who have something in common with readers – the love of books.
7. Learn how to monetize free content. Amazon is offering this free content to Prime members because Prime members spend more money at Amazon than any other type of customer. In this way, Amazon monetizes its free content.
8. Anticipate the reader. If one can get out ahead of the game and anticipate the reader, that company can create value where one was before. In other words , if you create a product that the reader suddenly believes she needs, then the value and the price is what you’ve defined it.
I completely understand that a) publishers want to maximize their dollar; b) the advance model of publishing is expensive; c) a multitude of free content can lead readers to believe that content is inexpensive to produce; and d) Amazon is a threat to the existing publishing business model. But competing with Amazon and Barnes & Noble and Kobo should not be to oppose every action that they take, but instead offering the reader an attractive alternative.