Amazon The Monopoly

Re-post from March 28,2008

Trouble at Mill. Manufacturing of old had it that the mill owner owned the means of production and the mill workers toiled within an inch of their lives, lived in company barracks, spent scrip at the company store and if they had anything left they banked at the company bank. Amazon is a latter day mill owner. The company is attempting to tie their client/POD publishers to them to the exclusion of other relationships the client publishers may have through Amazon's web of administrative, financial, distribution and content tools. As a practical matter, it is becoming harder (and may be financially impossible for many small POD publishers) to maintain separate relationships with Amazon and all the rest of the publishing community.

The blog world is enraged at the moment over Amazon's new policy on POD. The company is effectively telling POD customers that if you want to sell your POD products via the Amazon store you need to be on our platform using our tools. If that means all your titles need to be converted then that's your problem. This is not a situation where these POD publishers can say 'I'll just go some place else'. Amazon has sucked them in because of all the wonderful tools they offer the publishers and of course the sales penetration. In announcing the Booksurge/ CreateSpace merge in August 2007, Amazon's senior v-p, North American retail, Jeff Wilke said, "The new CreateSpace Books on Demand service removes substantial economic barriers and makes it really easy for authors who want to self-publish their books and distribute them on Amazon.com." As it turns out this is true, but there are some significant caveats.

The Wall Street Journal was kind (and misleading) in its assessment of this Amazon initiative:

"Amazon.com Inc., flexing its muscles as a major book retailer, notified publishers who print books on demand that they will have to use its on-demand printing facilities if they want their books directly sold on Amazon's Web site. The move signals that Amazon is intent on using its position as the premier online bookseller to strengthen its presence in other phases of bookselling and manufacturing.

Amazon hasn't been merely a book retailer for some time. While many in the industry - PND included - can't help but have admiration for this company they have amassed a level of market influence across the publishing value chain that should concern everyone. Today, the issue is focused on a small (ardent and vocal) minority of POD publishers who's entire livelihood in many cases is dependent on the Amazon retail expanse. The WSJ should know better. Without being too dramatic, the release of Windows 3.1 heralded a period of intense exclusion at Microsoft: If you didn't play ball with them you essentially had no marketplace. Perhaps at first blush the publishing industry doesn't appear to have any correlation to the software world but with the migration to 'platform' based publishing (a publishing version of iTunes for example) we are seeing the germination of a world where there are only one or two legitimate channels to the consumer. If their actions in the POD world over these past two months are anything to go by then Amazon definitely has monopolistic tendencies.

Repost: Death of the Big Box

With the imminent crash of Borders into bankruptcy I was reminded of this post from December 3rd, 2008.

Travel up Route 17 in northern New Jersey and you traverse the spectrum of retailing. These stores - from Ikea to K-mart - represent the shop windows on late 20th century retailing but, in contrast to their apparent ubiquity, the days of the stand-alone big box may be numbered. A number of years ago, I saw some old photos of Route 17 and was shocked to learn it used to be a four lane (two each side) parkway with a wide grass median strip bisecting its length. Today, it is a clogged eight-lane shopping aisle and is just one of similar examples across the US from Rockville Pike in MD to Beach Boulevard in Orange County, CA.

Barnes and Noble, on their call a week ago, noted that many of their leases are coming due and these will be renegotiated at lower rates. While this sounds like good news to shareholders, the current dire economic situation coupled with the Border's situation will result in a significant reduction in superstore locations. Projecting current physical retailing trends will make many current locations simply unprofitable even at significantly lower rents. We may be witnessing the demise of the suburban book superstore and suburban consumers may be indifferent. Online retailing is going to be the huge winner across all retail segments, but particularly in book retailing.

We have a perfect storm: An excess of media options reducing the time traditionally spent reading books, the economic slow down reducing all spending, the increasing acceptance and comfort of online retailing to virtually all consumers and the advent of the online superstore which encourages a cost-conscious basket approach to consumption. Increasingly all of us - not just those of us who have been checking our bank account and buying airline tickets online for years - will be buying everything online, at the best combination of pricing and free delivery, and all without dealing with the expense and hassle of traveling.

Multi-store malls will continue to live on for many years. In contrast, we will see many large, empty retailing boxes punctuating the sides of our traditional highway shopping aisles. Already this year, the big-box retailing environment is dire with a range of store liquidations and bankruptcies from Linen & Things to Circuit City. In years past, other retailers would fill these spaces with their new formats or new concepts, but those days are gone never to return. Retailing innovation - to the extent that it exists - is emerging on the web but not in physical retailing. The big losers will be the real estate owners who won't be able to find tenants (there are only so many ice rinks or roller rinks you can have in any one community).

Superstore physical book retailing, particularly its suburban version, may be a casualty. For a strong retailer like Barnes & Noble there will be plenty of time to adapt but others will fail. The current recession is going to change many things and some business segments just won't recover as consumers transfer all their shopping online. The economic crisis will push retailing over an imaginary Rubicon: More physical stores are unprofitable so they close, which reduces consumer access and pushes the consumer online. The cycle repeats itself and big-box book retailing will be no different. Ironically, big-box retailing made shopping convenient for suburbanites and retailers chased the consumer diaspora with vigor. The convenience that suburbanites sought is now the demise of the same retailers that promoted convenience. Physical can't compete with virtual. Tant pis.

But perhaps it's not all bad news. Mitigation may be driven by a population migration back into city centers which is most apparent in big cities like NYC, Washington and even Los Angeles. Couple this urban population growth with the daily office crowd and we have the re-genesis of an old phenomena: Main street shopping, which doesn't attempt to compete with the webstores abundance but serves deeper consumer needs. Retailing on a small scale operating with smaller inventories that turn rapidly, defined as 'scarcity' merchandising. The notion that if you don't buy it now it will be gone - which is the philosophy of The Gap, The Limited and some others.

Books are sold exceptionally well online but their merchandising could adapt to smaller format retailing. Urban book retailing will continue to be dominated by chains; costs will simply be prohibitive for independents to support sophisticated merchandising and supply chains that will be needed in the type of retail environment foreseen. Regardless, store size will shrink as the inventory mix skews to movie style 'openings' and 'events' designed to bring in a volume of buyers in a short time frame. A publisher once told me that if he owned a store he would only stock 40 best sellers. That concept (or a variation) will become the next phase in physical book retailing. Will it be the last hurrah?

Repost: Sinatra's Stamp

First posted May 18 2008. Frank would have been 95 on Sunday

Frank Sinatra toured Australia in 1974 and they just wouldn’t leave him alone. Dogged by questions about his alleged connections to the mob and his decision not to give a press conference the press were merciless, and when he described them in true Ratpack fashion as “fags, whores and pimps” it was like chum in a shark tank. In Melbourne, outside The Southern Cross Hotel, he and his entourage were mobbed and one camera man was pushed, fell over and his camera damaged. On top of his comments and this “obvious” aggression by his bodyguard, an apology was demanded. Everyone got on the bandwagon and workers in the heavily unionized country threatened to call their members out if the tour went on without an apology.

Everyone was excited about Sinatra. Across the country, the concerts were sold out and Sinatra was a mega-star in a time when few made the trip “down under.” My father was the manager of The Southern Cross and we lived there for five years. A day or so after the camera-man incident, I had just arrived home from school and was watching Hollywood Squares on TV when my mother shouted out that Frank Sinatra was coming by. I wasn’t sure what to think. Ten minutes later, there was a knock at the door, I opened it and in comes Frank, Barbara and a very large man. For some reason, Mom made herself scarce and I hosted Frank in our apartment living room all alone. He said I should continue to watch TV but I shut it off: Truthfully, I was slightly embarrassed about what I was watching. He wished me “happy birthday” (I was soon to turn 12) and asked me what I was up to in school. In my mind’s eye, I can still see Frank--leaning back with his legs crossed--and Barbara—covered in jewelry--sitting on the hotels’ best mid-century furniture. The furniture was upholstered in bitter-orange crushed velvet. I think the décor would have reminded Frank of Vegas in the mid-fifties.

We lived on the first floor of the hotel and Frank was about to escape the hotel through my parents’ bedroom roof terrace and over the roof into a waiting car at the bottom of a fire escape. After about ten minutes, the call came and our casual conversation came to an end. I shook Frank and Barbara’s hands and off they went without a hitch to the airport and his private jet. My father got to ride in the limo with him and on the plane Frank signed an autograph for him. One of my great regrets is that I never asked Frank to sign my book (but I do have my eye on the photo he signed for my father).

The tour was essentially cancelled, but an agreement was reached whereby Frank would do one show at the Sydney Opera House. He did it for charity and the show was broadcast on national TV. Naturally, by this point, I was a big fan and watched the entire show.

Since that encounter, I’ve convinced myself of a personal connection to Frank. Having ended up living in Hoboken-- where he was born--makes the whole thing even more surreal since he is a hero here. This, in spite of the fact Frank didn’t really care for the place and, by most accounts, the last time he visited Hoboken was in 1980 when he joined Ronald Regan on a campaign stop. There was a long gap prior to that but it doesn’t seem to worry many Hoboken old-timers, some of whom were at the unveiling of Sinatra’s postage stamp last week.

Repost: Frankfurt Presentation: Publishing in a Digital Age

Repost Friday and this post originally appeared on October 20th, 2008. Since I am addressing this same meeting on Tuesday I thought I would re-visit the last presentation.


This week I presented at the 30th International Supply Chain Specialists Meeting at the Frankfurt Bookfair. The presentation is available on Slideshare

Frankfurt Bookfair Supply Chain Meeting: Publishing in a Digital Age from Michael Cairns

If you click on the notes tab below the slideviewer you will be able to read my verbal comments attributed to each page. Without these comments the presentation is likely to be next to meaningless. (For some reason, you will need to click back from page two to page one to see the notes for page one - looks like a small bug to me).

Also, the presentation was videotaped (here). My video is the second one. The A/V guy starts in on page three for some reason.

It is about a 24 minute presentation. Some seemed to enjoy it and a number of people came up to me at the end although, I wondered why no one asked me who 'Kenneth' was. The other presentations that day were interesting and I will note the link to the editeur site when they are all up.

Re-post: Massive Data Sets

Originally posted June 24th, 2008

Large publishers like Elsevier, Macmillan and Kluwer spent the past 20-30 years or so consolidating journal publishing under their umbrellas and building virtually unassailable positions in numerous vertical publishing segments. The open access movement has had only minimal impact on the prospects for these businesses and there is little indication even market forces will reduce their commanding positions. Much of the consolidation has occurred but occasionally, some large concentration of journals comes on the market however, it is unlikely that a new publisher would be able to build a significant position in any meaningful segment because all the important titles already belong to one of the major players.

Journals publish the outcome of the intellectual activity of the article authors. In some cases, access is provided to the data that serves to back up the investigation but invariably this data remains in the dark. Some publishers have experimented with allowing journal readers to play with the data but this does not appear to be a developing trend. Data's day may come however. Several months ago (via Brantley) I read of yet another initiative at Google.

Sources at Google have disclosed that the humble domain, http://research.google.com/, will soon provide a home for terabytes of open-source scientific datasets. The storage will be free to scientists and access to the data will be free for all. The project, known as Palimpsest and first previewed to the scientific community at the Science Foo camp at the Googleplex last August, missed its original launch date this week, but will debut soon.

The article on their web site is brief and my immediate thoughts had little to do with the gist of this story. My immediate thought was that here could develop the next land grab for publishers and perhaps other parties interested in gaining access to the raw data supporting all types of research. As publishers develop platforms supporting their publishing and (n0w) service offers will they see maintaining these data sets as integral to that policy? I believe so, and I suspect in agreements with authors, institutions and associations that own these journals the publishers like Elsevier will also require the 'deposit' of the raw data supporting each article. In return, the offerings on the publisher's 'platform' would enable analysis, synthesis and data storage all of benefit to their authors. But the story may be more comprehensive than simply rounding out their existing titles with more data.

The current power publishers in the journal segment may find themselves competing with new players including Google in thier efforts to gain access to data sets that may have been historically supplemental or even not considered relevant to research. In addition, sources of massive data sets are growing with the introduction of every new consumer product and exponential web traffic growth. In the NYTimes today is an article about a number of new companies that are analyzing massive amounts of data to produce market reports and business analysis. From the article:

Just this month, the journal Nature published a paper that looked at cellphone data from 100,000 people in an unnamed European country over six months and found that most follow very predictable routines. Knowing those routines means that you can set probabilities for them, and track how they change. It’s hard to make sense of such data, but Sense Networks, a software analytics company in New York, earlier this month released Macrosense, a tool that aims to do just that. Macrosense applies complex statistical algorithms to sift through the growing heaps of data about location and to make predictions or recommendations on various questions — where a company should put its next store, for example. Gregory Skibiski, 34, the chief executive and a co-founder of Sense, says the company has been testing its software with a major retailer, a major financial services firm and a large hedge fund.

As noted in the article, the data (growing rapidly to massive status) has been hard to manipulate but this issue is diminishing rapidly. As it diminishes we will see more and more companies, groups and even individuals note the value of their data and begin to negotiate the access to this data. All of the large information publishers will see themselves playing a significant role in this market as they gather data sets around market segments just as they did with journals. If they don't do this they could undercut the value of their journal collections if they are forced to separate the result/analysis from the data. Signing agreements for access to these data sets (cell phone data in the example above) will enable Journal publishers to concentrate research even further by making access to this information a pre-condition to publication in the respective journal. Either way, the providers of these data sets are likely to be looking at a new and significant revenue source.

Repost: Pimp My Print

Originally posted on December 10, 2008

Many pundits pontificate on the demise of publishing (myself included and some others I could mention) and while many of these versions of the future are well intentioned they often lack substance. Today in ComputerWorld - an obvious organ of reasoned strategic discussion about book publishing - is a perspective 'from technology' that decries the effort by Penguin and some others to launch their content on mobile platforms as 'painful'. The author's wider point seems to be that publishers need to place their full content - not just snippets - in as many places as possible so that readers/consumers can access it with as little difficulty as possible. Music publishers did not do that and became the victims of rampant piracy, and some have argued that because electronic access to music content was limited this drove piracy. Had there been easy access and easy payment options perhaps the music industry would be in a different place now. But that is 20/20 hindsight and at the time, you would have to have been a certified genius to have seen that.

Publishers have a different issue. Reading is immersive: We are active readers and passive (music) listeners. 'Pimping' the content so that it appears on a smart phone or a web browser or a flat panel will only ever have limited success. It is tactically important to do this with the current inventory of content that a typical publisher will own, but that's not going to sustain the future of the business. Any publisher who's digital policies and activities are focused entirely on retro-active conversions and the migration of their historic product packaging to an electronic environment will see their market whither. It is possible that some publishers may make a choice to cash-cow the existing content and sell it on every available electronic platform they can. That makes some sense but not if in doing so they believe that model will sustain their future publishing programs built on delivering readers a 250 page novel or a 12 chapter business book with an index limited by the number of blank pages left in the last folio.

Pimping the print compounds an issue publishers have faced for a long time (forever?). They don't really know what consumers want. To paraphrase Wannamaker 'I know only 50% of what I publish sells, I just don't know which 50%' (He said it about advertising). The publisher of the future is going to spend more time understanding the consumer and fulfilling their needs (marketing 101: a need is filled not created) than transferring the current model to phones, screens and digits. If I were heading a publishing house, I would hire a band of 25-30 year old editors/writers, give them a budget to acquire content and have them build a new 'publishing' operation unfettered by print runs, business models and pub dates. Their responsibility would be to create content a target market valued enough to use, to experiment in how to monetize the content and to be able to replicate the model. With guidance - not oversight - provided by the many experienced managers that exist in a typical publishing house the team won't fail. And yes, I would do this TODAY. So forget pimping existing print and think about delivering content consumers need.

The Best Posts of the Year...but then I'm Biased.

As I close out the year and wish everyone best wishes for the new year, I have compiled a summary of what I think were my more interesting posts. Frequent visitors will have read these. As always, thanks for your support and tell your friends to come visit and subscribe.

In Death of The Big Box (December) I thought about how long-term macro changes that emanate out of the current economic crisis will impact the retail channel. I speculate how these changes will impact the sale and merchandising of books. This week I read an article about the near bankruptcy of the second largest mall operator in the US and an article about how shoppers are flocking to on-line discount coupon sites. The web is easier and there is no going back.

On the theme of print to web transformations and migrations, I had several posts most recently the questionably titled Pimp My Print (December and my favorite for title of the year) and Generational Chasm (June). If I were to write a book the idea of the generational chasm really interests me. It's not a unique idea I have to say.

As always Amazon was in the news - Amazon The Monopoly (March)- and I noted concern expressed in the market place about their increasing dominance. Amazon was brutal in their exertion of market power in their argument with Hachette UK. Mike Shatzkin picked up the theme in this guest submission Amazon and Book Pricing (April) (He also tackled the question Border's Stickers Books - Why?) Earlier in the year, I had speculated on the budding competition between Amazon and Apple: Amazon Versus Apple: Is this a Cage Fight (January). Apple may have the last laugh with the numbers of iStanza e-Book downloads to the iPhone. We await the next version of the Kindle in 2009.

In keeping with the e-Book theme, I posted thoughts on a possible development of an e-Book mass market channel. Rackjobbing the E-Book (July)

The post that generated the most comment during the year was on Brand Presence (July) where I noted the continued attempt by publishers to organize around branding concepts that remain largely irrelevant to consumers. In a similar vein I thought about the implications of big-name author's defecting from one publisher to another in Defections (February) and a possible Google play.

I had a lot of fun putting together a presentation to the Supply Chain Interests group (October) at Frankfurt this year. I'm not so sure the audience felt the same way.

My post on Massive Data sets (June) suggested that publishers may think differently about all the data collected during the preparation of published research articles, dissertations and other types of data intensive publishing.

Lastly, the post office launched a Frank Sinatra stamp which gave me an opportunity to tell my Frank Sinatra story (May). I am waiting for the Clint Eastwood stamp so I can tell that one. I missed the John Wayne stamp but maybe I'll tell that story one day anyway.

I think that's enough. I wonder what 2009 will bring? All my predictions of 2008 (January) where basically wrong but maybe I can do better this time around?

Update:
I have created a pdf of all the posts that is available here.

The Google Registry

It would be a shame if the opportunity to create a unified (and uniform) bibliographic database itemizing the copyright status of our collective published works only resulted in a copyright database. Perhaps that comment appears strange but I believe the establishment of this 'registry' under the terms of the Google/AAP/AG settlement opens up a opportunity to tie an alphabet soup of identifiers, bibliographic (and multi-media product details), full content and transaction capability together in one form.

A primary reason ISBN was implemented so successfully in the publishing industry was that the number rapidly became integral to the publishing supply chain. Newer standard numbers such as ISTC, DOI - even ISSN in the retail channel - are not widely adopted because they have not become transactional identifyers. The same will be true if/when an Interested Party Identifier is established. The development of the Google Registry (surely the first task of the Executive Director is to come up with a name) may represent the only opportunity to tie each of these ancillary identifiers to one common objective. That objective is the better identification of content - not simply 'book' content, but content we will be using and transacting in an on-line environment.

How the registry may be formed is anyone's guess, but for sake of argument I envision a pyramidal structure. The identifier segment forms the pointy top layer, bibliographic data the second layer, content the third and the 'transaction gateway' the bottom tier. Then again maybe it's a cube and I should be adding subjects, a retail/library segmentation, and transactional details like rights information. Regardless, it seems to me combining each of these segments into a registry might engender significant opportunities to improve the publishing supply chain. But more than that, the combination I suggest works better for the on-line world than the off which is the failing of the current crop of ISBN databases (including Amazon.com).

Merchandising and search would be vastly improved if we were able to search by ISTC or IP using one database that would return all renditions of a work or all works/items produced by an author. Additionally, access to the content would be immediately available providing views of the content the searcher was interested in. Of course, all the copyright details about that work would also be available. Importantly, each of the elements in this registry would be linked so if someone happened on work they could rapidly find associated versions (ISTC) or other content produced by the author or publisher (IP).

The most obvious application enabled via the 'transaction gateway' would be purchase but a 'transaction' can be many things: views, queries, checkin-out, use rights, syndication and may more. An open service architecture would enable development of third party API's that could result in all kinds of new applications but existing ones would also benefit as well. Worldcat and Copyright Clearinghouse applications are good examples where users could find the physical content in a library or attain usage rights from CCC.

Google has provided $35mm to fund this registry and the governing board including publishers, and author reps will be forming a company to carry out the objectives of this registry. I hope their vision isn't too conservative because delivery of a copyright database is too simplistic a solution given how our content businesses are developing. Visioning a comprehensive 'bibliographic' solution that marries uniform content identification with an end transaction is what our industry really needs. We don't really need another stand alone bibliographic database.

Brand Presence

Most people in our industry recognise the irony inherent in discussing brand management in the publishing industry. Every aspiring author and agent seeks the validation that being published by a major publisher brings, yet most consumers have only a passing awareness of the publishers' brand. There are exceptions--Harlequin, Hungry Minds, O'Reilly- but across the panoply of publishers, brand strength is only partially monetised.

This recognised fact has not stopped publishers from investing heavily in branded web sites that cocoon their authors in an experience that generally is not relevant to the consumers they are attempting to attract. That is not to say that the content and applications available on the websites of most large publishers are inadequate or unsophisticated, but they are misappropriated. I especially like the websites of Harpercollins and Penguin, who have both taken up the challenge of community building, widgets and e-Content. And it is difficult to be critical of these attempts, given the aggressive level of experimentation undertaken.

What seems to be lacking in all publisher websites, though, is a strong sense of engagement. And engagement that is resilient. Just as consumers return to their favorite booksellers, publishers need to believe they can engage their consumer base to such an extent that they return each time they are interested in purchasing a book. And that's any book.

Publishers are best placed to build author-centric and subject/theme-oriented websites--not sites oriented around a "brand" that isn't relevant, but those that focus attention on segments of the business that remain relevant to consumers. Envision the Spiritual segment at a site supported by Harpercollins which has a unique, appropriate and relevant focus far apart from the current 'corporate' approach. All segments are valid candidates for more of a silo approach to marketing publishers' products. And I would go further in recommending that publishers consider marketing within these silos all titles available, rather than just those produced by the publisher. What better way to condense a market segment and become a destination site for Self-Help, Spirituality, Mysteries, Computer and any number of other book-publishing segments. Consumers aren't dumb. Amazon's main attraction is that all the titles in any one segment are available in one place. As long as publishers continue to ignore this fact, they will under-serve the market and under-perform given the investment in their sites.

So, which publisher will be the first to license a "Books in Print" database (as B&N, Google, Borders and many others have already done)? That would be an excellent start; moreover, the publisher is best placed to augment this data with more details, content and community- building applications that will draw in consumers. A quick search for Doris Lessing and George Pelecanos shows that Books.Google.com and Wikipedia are more likely to be the initial reference points for consumers. On their respective publisher's sites, these authors retain a significant presence, but that presence does not appear to be adequately monetized. Many publishers will argue that they are there to support the retail sale and as long as a book gets sold-- based on their effort-- they have done their job. There is something to this argument but the age-old paradigm on which it is based--multiple retail channels, limited retailer power--is long behind us and getting worse for the publisher.

Web presence for many companies (including publishers) remains a fluid engagement. The inherent benefit of the web is that you can try and fail repeatedly, with limited downside, assuming you monitor closely. In the publishers' case, it is important they not attempt use the web to build brand awareness around their trade-marks which continue to be removed from consumers' experience, Internet or not. What their focus should be is building a discernable alternative to the predominant web retailers by segmenting their offerings around logical categories and building their brand around those segments as they use their content knowledge, author relationships and technical expertise to build something powerful for the future.

Rack Jobbing The EBook

A change, equivalent to the launch of the mass market paperback just took place but did you notice? Months in advance of the expected release of the new iPhone thoughts ran wild on the potential for an Apple iBooks store as much for its potential impact on sales as for its counter point to Amazon.com. With the launch of the 3G iPhone publishers have been found wanting, sadly waiting for the market to be gifted to us rather than proactively setting out to define it. This post from Kassia Krozer sums it up perfectly:

On a weekend when headlines were there for the grabbing and customers were searching for both toys and content, the publishing industry, perhaps practicing summer hours, was curiously silent. Not a single major initiative, announcement, horns-blaring call to check out these great offerings on iTunes.Call me crazy, but I’d expect an industry that salivates over moving 150,000 units to be all over the potential for reaching seven million “mobile is the future” customers. Are you not out there, listening to readers, gauging their interest? They want, you have, and you’re still hiding the goods. I get this isn’t the largest market you have, but is that an excuse to sit on the sidelines?

Publishers are again about to have a market dictated even as they continue to complain about the market power of the online retailers. Now $9.99 may become a defacto RRP for eBooks and as volume increases via the prodigious iPhone apps store publishers won't know whether to laugh or cry. When mass market paper backs gained market acceptance at Woolworths in the 1930s publishers gained access to a market they never would have developed on their own. Books were suddenly available for a dime and as publishers stood on the sidelines it wasn't until years later that they entered the market directly or bought up the main suppliers. Will history repeat itself with publishers buying ebook apps suppliers like Fictionwise or build their own applications? Hopefully, at least one or the other.

Traditionally, we think of distribution and content development as separate disciplines within publishing companies but in the e-Publishing world they co-mingle. Content optimization becomes the normative state where the end-user builds their own product out of a content repository created by the publisher without limitation on how the end product is rendered. The 'distance' between publisher and end-user (where distribution as a function currently sits) is wide but becomes virtually non-existent in the future state.

To bring us back to the iPhone circumstance, as long as publishers continue to think in terms of traditional functional silos and roles and responsibilities they limit themselves in their ability to leverage their assets. In contrast witness Amazon which has never considered any aspect of the publishing value chain to be off limits and more publishers need to think in this manner if they want to redress some of the advantages Amazon and others retain (or new competitors develop) in the marketplace.

Some other views on a similar theme:

Teleread
Adam Hodgkin
Shimenewa
theDigitalist

ISBN's On All Formats

According to ISBN official standards, each format of an e-book should be given its own ISBN. This means if a book is sold in mobi-pocket and Adobe formats each would be given a separate (unique) number by the publisher even if the content is exactly the same. During the revision process for the current standard, this point received intense discussion mostly focused on the burden that applying what could amount to several hundred ISBNs to a single work would have on publishers' processes. We resolved this issue for the standard with judicious use of words such as 'shall' and 'should' but the issue was raised again recently when the ISBN board released a 'policy statement' reaffirming the need for separate ISBN's on each format of an eb0ok.

The reasons for this action is simple. Downstream supply chain business such as wholesalers, distributors and retailers require a unique reference to all products that pass through their operations. If one doesn't exist these businesses tend to apply their own numbers. In actuality, the practice of downstream partners applying their own numbers has been going on since the establishment of ISBN and isn't unique to e-books, but the issue is coalescing now around the obligations of a publisher to 'correctly apply' the ISBN standard to e-books.

At a meeting this week at AAP NYC a number of publishers expressed doubts about the need for this requirement. As a participant in the revision of the standard my view was simple. A publisher should want to manage and control the meta-data associated with all their products and enabling - by omission - the need for someone else to apply their own information never seemed prudent to me. Secondly, the veracity of the ISBN system is brought into question if more than one entity applies separate numbers to the same content. This occurs if B&N and Amazon sell the same e-book in the same format but in the absence of a publisher number they apply their own identifier.

At least one major publisher at the AAP meeting is not following the standard and after several years of distributing e-books and applying one ISBN irrespective of format (.epub for example) they are seeing no issues with confusion or misuse of their meta data. This is a powerful argument and comes from a publisher that is highly protective of their bibliographic information. If reflective of a general consensus the ISBN board should reconsider the wording of there directive. For example, simply changing the wording by inserting the words 'publishers may apply ISBNs to separate formats' would give enough latitude to those publishers that see a need to apply separate ISBNs and those that do not.

There are several qualifications (and others may raise more). Firstly, the issue of downstream partners which need identifiers for their internal process requirements must be governed. For example, in those cases where a publisher expects detailed sell-thru data they may provide ISBN's. If a downstream partner can only use a 13 digit identifier in their systems the publisher may require the partner to use an ISBN provided by the publisher. If the partner can use a non-ISBN (but NOT a dummy ISBN/13 digit id) such as letters and numbers the publisher may see no need to apply ISBN's. Secondly, the danger that rogue ISBNs that are intended to operate only within the operating systems of specific partners (wholesalers, vendors, etc.) escape into the supply chain causing confusion and much remediation is a real one and should be recognised. Currently, there aren't that many e-books and there aren't that many publishers working outside the recommendations of the standard. As e-books explode in distribution, data integrity problems that are virtually non-existent today may become very relevant issues very quickly.

Lastly, in a supply chain world where suppliers and retailers are racing (admittedly not a sprint more a marathon) to apply unique identifiers on individual items via RFID, this discussion runs counter to the logic other more sophisticated industries are following. Quite rightly, with volumes as small as they are, it may not be interesting to know which e-book versions seem to perform better, or get less customer service/help desk calls, or which package of products seem to show up on what platform or which segment of buyers seems to have what behavioral characteristics, or which partner seems to sell what types of products or formats, or which formats tend to be pirated more or less, and on and on and on. As the chain becomes flatter - as it is - publishers are going to want to know this stuff and tying a user to a format may be critical to all aspects of what they do.

Generational Chasm

Publishing used to be predictable across generations. Parents read the same books in the same manner as their children and grandchildren. Not so today. Today's publishers for the first time in their history have no confidence that their child's generation will be (or are) interested in their published output. It is not that publishers aren't making an effort; however, I have a disturbing belief that there is an preponderance of focus on forcing existing content into a format and delivery mechanism (e-books and e-readers) that is not ideal only to have that e-book content used by a market - my and my parents generation - that is in long term decline.

In other words, migrating content so that it is available on an e-book may provide a false sense of security for publishers who believe this is enough to 're-launch' their content to the newest generations. No publisher should not have an e-book strategy just like they shouldn't have an Ingram or POD strategy but today's one dimensional content is no longer enough. This is why experiments like the recently announced agreement between Harpercollins and 4thStory are so interesting. From the press release:

4th Story Media and HarperCollins Publishers today announced their partnership in The Amanda Project, the first multi-platform series to be written in part by its audience, girls ages 12-14. 4th Story Media, which owns all rights for the property, will produce the content for The Amanda Project with a creative team including web design agency Happy Cog, young adult authors, artists and graphic designers. HarperCollins Publishers, which is a strategic partner in the venture and an investor, has acquired the rights to publish an eight-book The Amanda Project series worldwide."It feels like the art and craft of publishing great stories for children is on the brink of revolutionary change," said Lisa Holton, founder and CEO, 4th Story Media. "We are exploring new ways of using the web to tell stories, while also leading kids back to the joys of reading. By combining talented authors with creative web designers we are fusing traditional storytelling with the interactive world of social networking, online games, and user-generated content. We are thrilled to introduce 4th Story Media with the launch of The Amanda Project and are delighted to be partnering with the exceptional team at HarperCollins to bring this series to life."

More of this 'web first' publishing will be seen as the normal way to launch a new product or title. Harpercollins is one example but the methodology is appearing across the publishing spectrum. For example, the publisher of Bass Fisherman (no I don't subscribe) creates targeted web sites that combine social networking, a minimum of editorial content and rely on users to power the content build with their own youtube videos and podcasts. Having built an interest group, the publisher is now planning a print product targeted at this group. Doing it the other (traditional) way would have been expensive and speculative; moreover, it wouldn't have engaged the market in the manner that the web-first approach does.

Tomorrows version of the monograph is unknown but it is not the e-book version of today's book. The hype around Bezos' appearance at BookExpo was troubling to me because of the manner in which we hang on his every utterance. Certainly Amazon is important, but we are the content providers and I hope we are all looking forward to the day when a panel of publishers gets up and serially announces game shifting developments in content and content delivery. Will it be next BookExpo?

Time to Re-Think BookExpo

Imagine the lone guy on the periphery minding his stand with only a solitary apparently lost attendee to keep him company once an hour. By some accounts that was the state of affairs sometime over the weekend at BookExpo America in Los Angeles. In advance of the fair Thomas Nelson, one of the largest publishers in the US decided to pass on attending the show. This action was different than the publisher boycott of several years ago; in this case, Nelson recognised that exhibiting at BookExpo is increasingly irrelevant in addressing the dynamics of the market place. In an age when the traditional publishing schedule is looking decidedly frayed, how BookExpo measures these dynamics will determine how many publishers continue to value their attendence.

In much the same way that Publisher's Weekly has seen their traditional advertising model change fundamentally as the bulk of bookstore book purchases are made centrally and six - nine months in advance of publication, BookExpo is in danger of suffering a similar dislocation. In PW's world there is no need to advertise and in BookExpo's world attendance becomes an expensive way to reach independents. More publishers will drop out - perhaps not next year as the show is in New York but it will happen, because the current show format is an old and increasingly ineffective tool. The decline will accelerate as more publishers take advantage of electronic marketing and promotions tools such as NetGalley (functionality will rapidly expand across the MarCom value chain) and more publishers will experiment with virtual trade shows , webinars and virtual worlds like Second Life.

There are two segments to BookExpo - the education program and the exhibits - and both need revamping. On the education side, BookExpo is losing ground to new upstarts like TOC and SIIA conferences. In both these cases, the conference organizers are successfully exploring the intersection of publishing and technology which many of us in the traditional publishing world continue to battle. Attending SIIA conferences with its breadth of content and technology companies all addressing new and old problems in unique ways can be a stunning business experience. At BookExpo we may see this in isolated cases but not comprehensively. In the traditional publishing market an education program similar to TOC or SIIA is still a market opportunity given the concentration of publishers attending BookExpo. On the other hand O'Reilly (TOC) may have already established the beach head. Consumers are decidedly lacking at BookExpo and in some other trade education programs panel discussions include consumers - in one memorable case they were all thirteen year old girls. Our business is in complete flux and that's the kind of education we should be looking for.

On the exhibits side, BookExpo must lead in the expansion of marketing and promotion programs that go beyond the physical limits of a three day event in a location not everyone can attend. The BookExpo America site should be a 365 day exhibit space. Many publishers and some websites are hosting e-versions of their catalogs. Coupled with more product details, ordering facilities, merchandising tools, etc. the traditional conference attendee should be able to visit and interact with all publisher products on the BookExpo site. (I do mean all publishers). The experience can and should be better than visiting the physical show. The traditional publishing calendar is disappearing - it serves no purpose (just as television has eroded their producer driven schedules) other than as a reminder of the formulaic approach to publishing. The physical exhibit can continue but it must change unless it is to devolve into a middling trade show for small and medium sized publishers.

BookExpo also needs to think strategically about exhibitors and to seek new categories of attendees. There should be more technology companies, service companies and others. Since the market is retail what is more logical than encouraging more vendors who market store systems and products? On the technology side there are many vendors who want to expand into the publishing business but do not attend BookExpo. They do attend SIIA, TOC and Book Business conferences. Expansion along these lines is a double-edged sword since a target audience needs to be in attendance. For that, a stronger education program and specific outreach programs need to support exhibitors and attendees. First time exhibitors should get two years for one paid year for example. (As an aside, I also believe the central exhibit floor 'neighborhood' where the largest publishers congregate should be broken apart to encourage more interaction).

Anyone who has stayed over the weekend at the Frankfurt bookfair (as I did on my first visit - and never again) will hiss and blubber over the idea that BookExpo be open to consumers. This issue has previously been debated by BookExpo managers, and indeed at Frankfurt, the issue of consumers attending the fair has long been controversial with the UK and US publishers. My suggestion is based on simple logic. Book reading is declining so what better way to introduce consumers to what publishers have to offer than showing them. Look at the success of the various city wide book fairs including the one in DC.

I have always enjoyed attending BookExpo but seeing the lack of traffic in many areas this year I doubt I would be the only one considering rethinking my exhibition participation for next year. The fact that BookExpo is in NYC next year will cover over the troubling issues because of the influx of many publishing staffers. In reality the addition of 10,000 publishing staff attendees from NYC is not really what will help return BookExpo to the preeminence it deserves.

Borders Stickers Books - Why?

As promised Mike Shatzkin for a second time this week.


I don't buy a lot of books in bookstores anymore -- I'm an ebook man -- and when I do, I generally patronize Barnes & Noble or an independent. So when a colleague a couple of days ago walked in with a couple of books he'd bought at Borders and pointed to the stickers on each book and said "hnh?", it recalled a bit of book retail history and some considerable irony.

It is obvious, or should be, that for a bookstore to be stickering every book is evidence of a pretty dumb supply chain. Every book has a bar code with a price extension. This is extra work that should just not have to be done.

It was the early 1970s when the B. Dalton chain introduced point-of-sale capture at the cash register. This was only a few moments after the invention of the ISBN and before there was any cash register technology for "reading" by scanning. So it was complicated to do this.

The way it worked is that each title Dalton bought was assigned an SKU number. When the buyer in Minneapolis made a purchase decision, stickers were generated for the books and sent to the store. When the books came in, they were stickered before they went to the sales floor. There were "holes" in the system, of course: when a store bought a book from a local wholesaler, they often would put a "dummy" sticker on that got them past the cash register but didn't record the specific book being sold. But the system delivered information that was light years ahead of what any chain retailer had ever had before and rapidly pushed B. Dalton ahead of their competition at the time, Waldenbooks, and particularly so in the sale of steady-but-slow backlist.

It was a revelation at the time to learn that the sale of six copies a week across all stores (in a multi-hundred store chain) was a "hot" title and that sales of six titles a month got you on the "warm" list. That introduced some real perspective to how books move. Or don't.

For a few years, Dalton operated with knowledge of what was selling and Walden didn't. Then, in the later 1970s, "machine-readable" typefaces were invented, which I think were called OCR-A and OCR-B. Harry Hoffman had taken over as head of Walden by then -- he who had introduced the microfiche reader at Ingram a few years before -- and he told publishers that, as of a certain date (I think this was about 1980), Walden would require that the ISBN be printed on the books in a readable font. And suddenly, Walden leapfrogged Dalton. Dalton had invested in a system that required a unique number (their SKU) and stickering and punching those numbers into the cash register. All of that was sidestepped by Walden, which only had to scan the readable ISBN (or punch in the ISBN if it weren't readable.) No stickering. No unique numbers.

The irony today is that Barnes & Noble, which owns (and is closing) B. Dalton, has a great supply chain that requires no stickering. And Borders, which owns (and is closing) Walden, has a poor supply chain which requires them to put their books into a "flow-through" warehouse to be stickered before they can go to the stores.

Amazon.com and Book Pricing

Mike Shatzkin of The Idea Logical Company asked if I would like to post the following article. He also has another in the wings which I will put up on Wednesday.

Amazon stirred two controversies in the past couple of weeks. A lot of attention was paid to the one concerning print-on-demand, where they did an arm-twist to get publishers who use the capability to set their books up at BookSurge, even if they were already set up someplace else, most likely Lightning. I have expressed my concern on behalf of publishers about that policy which, although characterized as a mere attempt to be customer-friendly, should be a matter of great concern to Amazon's suppliers.

The second controversy, however, is a bit more complicated and, to my way of thinking, Amazon's position is considerably more justifiable. That was Amazon's suggestion that they will interpret the price at which a publisher sells directly as the "real" retail price, on which discounts to them should be based. This recalled for me a 10-year old industry conversation and, in doing so, showed me the sense in Amazon's position.

In the 1990s, the suggestion that retail prices should come off the books became pretty vociferous. Bernie Rath, then the pioneering (and publishers and big retailers would say, "troublemaking") Executive Director of the American Booksellers Association was among those making the case. In a nutshell, Rath and some very sophisticated and successful booksellers made the argument that it was a mistake to "cap" the retailer's margin with a printed price, above which they then obviously could not charge. The argument was that retailers in every other field adjusted their prices to the neighborhood, reflecting both the cost of real estate and the local community's ability to pay. By limiting booksellers' margins, publishers were, in effect, limiting the number of outlets that could sell their books.

At that time, there were two "most popular" arguments against the idea. One was that booksellers, by and large, benefited from the prices being on the books. It saved them the effort and cost of stickering prices themselves; it relieved them of the responsibility for prices in the eyes of their customers, who could clearly see the price was printed before the bookseller got the book; and it dramatized any discounting the bookseller cared to do. Because book clubs were a more important component of a publisher's sales at that time, they represented another constituency that supported the printed price because it emphasized their own cut-price offers. And booksellers could live with that discounting because book club membership was constricting; it was not about buying what you want when you wanted it.

At the time, I often made a third argument, which I believed was the most important even if it wasn't the most ubiquitous. Publishers have always been willing to sell any book they publish to any consumer who asks for it. At the time, it was absolutely routine that those sales would be made at the full publisher's retail price, plus some charge for postage and handling. In that way, publishers respected the reality that some of their books might not be widely available (remember, even after there was an Amazon, there was a period before most people had regular internet access and a comfort level about using it), but avoided "competing" with their retailers.

I pointed out that this practice meant there really IS a publisher's price, so the question narrowed to whether it would be revealed to the consumer on the book, or not. And the retailer who decided to sell the book at a price higher than the publisher's price -- which, even at the time seemed more of an imaginary than real opportunity -- would be taking the risk that his/her customers would soon know they had been gouged because either they or somebody else might let them know what the publisher's price actually was.

How times have changed. And two aspects of this equation have really changed with it.

First of all, no bookseller today would anticipate being able to sell a book at higher than the publisher's retail price. There are already consumers walking around bookstores with handheld computers checking prices online while they shop in the store. And, as we all know, prices online are never going to be higher than publisher's suggested retail, whether printed on the book or not.

But, secondly, many publishers now sell to consumers aggressively through their web sites, and price offers are part of the effort. So while the old bookseller arguments for taking the prices off the books are no longer valid, neither is my rejoinder. Time has passed both arguments by.

But Amazon is making a good argument here, and it is one that B&N and other retailers, and, by extension, all wholesalers, will likely join them in pressing on publishers. The price printed on the book really means nothing if the publisher doesn't sell at that price. All it becomes, then, is a basis on which to establish prices to intermediary customers; it is no longer a meaningful price to the consumer, "suggested" or otherwise. And if the longtime industry convention that prices to intermediary customers is pegged to the price charged (presumably by the publisher) to the consumer, then the discounts should be calculated from the publisher's consumer selling price.

We have not heard the last of this argument. Publishers selling direct to consumers better be thinking this through very carefully.


Mike can be reached at mike (at) idealog.com.

Defections

Another big name author has followed the money and moved from his long term publisher. Richard Ford has moved from Knopf to Ecco after 17 years, and he follows Tom Wolfe who earlier in the year moved from FSG to Little Brown. Who can blame them? This is not a trend, as authors do move around periodically (and take their editors with them). It will have little impact on traditional publishing. The mid-market and specialty author is not suddenly going to be in a better competitive position vis-a-vis the publishing houses. What strikes me as curious, though, is that we haven't seen incursions by web companies such as Google, Microsoft, Amazon and Ebay into the original content business. Yet.

It seems so logical that one or a few of these companies will experiment in some way with branded authors. We all know the author brand is primary and we also know that some authors have become aggressive in expanding their brand - Patterson as the prime example. It may be inevitable that a major author(s) signs a three book deal with Google or Amazon. According to Publisher's Lunch, Wolfe received between $5mm and $7mm (these numbers from several sources) for his deal. It is a sad reflection on the publishing industry that these figures represent little more than gas money for the larger internet companies. Skills in book production, design, marketing and promotion, etc. are readily available and would not represent an impediment to success. It is really the expanded catalog of skills and expertise that an internet company could bring to bear that could be really interesting for authors and consumers.

Launching Major Author X via 'GooglePub' or similar would transcend the traditional publishing model and, perhaps, return it to something more like the publishing of the late 18oos where serialization (blogging) and direct reader involvement (social networking) were fundamental elements of trade publishing. (Remember Doyle trying to kill off Holmes, resulting in near riots from readers?) One of the most interesting aspects of the Radiohead experiment was that they finished their album only two weeks before it was available for download. In the world of publishing, the length of time from finished manuscript to bookstore can be years. Not only would consumer access be much faster in a 'GooglePub' world but the engagement with the author and the authors' work could be far more intense (and positive) for both author and reader.

Imagine the author maintaining an ongoing rapport with readers as the book is written. The author blogs about the process, posts excerpts, background material relevant to the story, and plot and character notes. The author publishes finished excerpts (ie. serialization), as development continues. Perhaps derivative titles or sequels are also initiated. Audio, Podcasts and video is made available. At the launch of the title, the book will have been exposed to millions of readers - perhaps all of the title has been published in parts or not - but the excitement will be significant. During this time, site traffic will also have grown and perhaps an advertising revenue share for the author will also augment their annual guarantees.

As in the Radiohead example, a physical version will be produced but, even here, the model could change. Perhaps 'GooglePub' strikes separate deals with B&N, Borders or others who produce their own versions of the titles by selecting from the wealth of content available as a direct result of the content created during the process. Basically, the author and 'GooglePub' leave it up to the physical publisher to create the physical product and just take a (painless) cut of revenues.

Publishers can't compete with this model. By the same token, the process could give rise to a new caste of publishing staffers who are familiar with the web-publishing model, social networking and engagement and who become required assets as authors migrate their brands to the internet. An interesting scenario: How prepared are large trade houses if their top-ten branded authors defect to 'GooglePub'?

Amazon Versus Apple: Is This A Cage Fight?

Amazon is buying Audible.com for $300mm: This changes everything. Audible is already a destination site for Audio books (and content) what more appropriate gateway exists to boost the growing (e-)book content that Amazon is selling via their Kindle? As I speculated a few weeks ago, the Kindle will be a delivery platform for content (not just e-books), and it doesn't take too much imagination to see how Audible's content fits very nicely with the Kindle strategy. Audible has also taught their users about the benefits of subscribing to content and have proven that this model can be successful. So, not only does the Audible acquisition have the potential to bring new customers to the Kindle platform (on the basis of a subscription model for content), Amazon.com will also gain the expertise of staff at Audible who has built up this program. Extending a subscription model to content presages the resurrection of the Book Club model. Didn't we all know it would come back? (Well maybe not, but Bertelsmann were spied coming out of Madame Radzwilli's House of Fortunes just the other day).

Strategically, this acquisition makes fundamental sense at the product level alone. Coupled with an increasing need for Audio versions of text (what with our aging population) with the already loyal Audible customer base there is little to argue about. And I do believe, it will escalate a change in business model for trade (consumer) publishing content.

How publishers react to the news will be interesting to watch. Most will not see the significance and many will be happy at the increased exposure that audio books will get as part of the Amazon.com empire. Where there is concern, it will orient itself around the realization that even greater market power will be exerted (either overtly or not) by Amazon. Given my comments above, this acquisition could represent an end-run of the order of I-Tunes. Look how music publishers are now tied to the $0.99 cents per song model. It just snuck up on them. Will the same happen to book content?

Which brings me to my last comment: It is all out war with Apple. (In fact, I would not be surprised to see a competing offer for Audible. I know Apple are not in the content owning business but they might do it to be mischievous or to protect a budding position in the book market). There has been some speculation about whether Apple would develop an e-reader device as part of the I-Phone. Despite his comments to the contary, I believe Jobs was planning some development here and I speculate that Amazon thought so as well. Amazon will do everything they can to keep Apple out of the content distribution/platform business. Apple for their part don't want Amazon's movie and music distribution (or the Kindle) to challenge iTunes. How this rivalry plays out will be very interesting to watch. They both come at the issue from completely different starting points.

NYTimes