Among the leaders of the book publishing industry gathered recently for the Book Industry Study Group’s (BISG) annual Making Information Pay Conference, there was general agreement that the book industry’s supply chain is broken when applied to electronic books.
As a first time attendee of this meeting, I was puzzled by the use of the term. Of course I’m familiar with the notion of a supply chain when applied to, say, Napoleon’s Grande Armée, but what does it have to do with book publishing?
Quite a lot, it turns out.
When trade book publishers talk about their customers, they are not referring to readers — the people who actually buy their books. They mean bookstores. And in many cases they don’t sell directly to bookstores but go through wholesalers, who buy in bulk and then resell to bookstores (I won’t even get into returns, a topic that makes my brain hurt).
The problem is that this supply chain (publisher > wholesaler > bookstore > reader) doesn’t work with ebooks. Ebooks are sold through a very small number of online stores (e.g., Amazon’s Kindle store, Apple’s iBookstore, Barnes & Noble, Safari Books, etc.). The traditional partnerships, distribution channels, and revenue models that publishers have built over decades no longer make sense.
But this isn’t the real problem for trade publishers. In some ways, it’s a much better deal than what publisher have contended with in the past. Rather than having thousands of bookstores to deal with, they have dozens. They no longer have to give a cut to wholesalers. There are no returns to deal with. Profits should be larger even if list prices are somewhat less than they are for the typical hardcover (after all, the costs of printing and shipping drop away).
The new supply chain for ebooks looks something like this: publisher > ebookseller > reader.
Except that is only one-half of the real supply chain. The vexing problem for publishers is with the other half — the half that starts with the author.
See, the full supply chain looks something like this: author > agent > publisher > ebookseller > reader.
The question that dare not speak its name is whether publishers are needed at all in this chain?
What’s to prevent an ebookseller, such as Amazon, from simply going to the source and working directly with authors and their agents? These authors would view Amazon (for example) as their publisher for all intents and purposes: author > agent > ebookseller > reader.
The New Yorker recently published an excellent piece by Ken Auletta exploring precisely this topic. If you haven’t read it yet, I would categorize it as “must read” for anyone in the industry.
Auletta notes that Amazon is already actively exploring just this scenario along several fronts. They have set up a self-publishing division called CreateSpace (formerly BookSurge). They are also working directly with high-profile authors such as Stephen Covey.
And there’s nothing to prevent other ebooksellers from doing exactly the same thing as Amazon.
The question now becomes: What do trade book publishers do that that adds value for authors and is not easily replicated by ebooksellers?
Historically, publishers have performed a number of essential functions on behalf of authors, including:
- Developmental editing
- Book design and composition
- Management of printing and distribution
- International rights licensing
- Providing advances against royalties
In recent years, publishers have largely ceded developmental editing to agents. Copyediting, book design, and composition services are widely available without need of traditional publishers. Distribution to all of the major ebooksellers can be found via any number of self-publishing service providers or, as discussed above, via direct relationships. Ebooksellers are increasingly providing international distribution, and agents can negotiate any translation rights.
This leaves publishers in the role of providing advances against royalties and marketing.
Author advances would not even appear as a rounding error on the balance sheets of companies like Amazon, Google, and Apple.
This leaves publishers with marketing.
It should be noted that Amazon and Apple are probably the two savviest marketing companies in the world, and Google is the world leader in online advertising.
This leaves, um . . .
However, Amazon, Apple, and Google have their hands tied when it comes to marketing particular authors. While they can promote authors in some very effective ways (“If you liked Michael Lewis’s The Big Short you might also like Andrew Ross’ Too Big to Fail”), they can’t be seen to obviously privilege the work of certain authors over others or they will have an author revolt on their hands.
Ah. This leaves a space for publishers.
The only problem is that trade publishers (unlike STM and scholarly publishers, as Joe Esposito has noted) have little-to-no brand recognition among readers and know very little about consumer marketing.
Historically, book publishers have excelled at marketing as a function of distribution. Marketing in the traditional context meant getting books onto shelves at bookstores. For bigger authors, a publisher might take out an ad in the New York Review of Books the TLS or a relevant magazine. A publisher’s connections might help land a review.
But such efforts are decreasingly valuable to authors. Assuming there remains a limited number of ebooksellers, digital distribution will not require publisher expertise (unless, as literary agent Nathan Bransford points out in an insightful post, a proliferation of ebooksellers requires distribution management). Anyone can take out an advertisement. And reviews in traditional publications are of diminishing importance given that ebooksellers now have reviews right at the point of purchase (to say nothing of the proliferation of blogs that review books).
For trade publishers to continue to have a place in the new supply chain, they will likely need to do some combination of the following three things (and ideally all three):
- Develop brands that matter to readers. Publishers might, for example, develop subject-specific brands that serve as a valuable imprimatur for enthusiasts of that subject (e.g., sports, cuisine, mysteries, sci-fi, history, etc.), in much in the same way that the a journal brand matters to readers in STM publishing.
- Become savvy at consumer marketing. Publishers might become specialized marketing firms that delve into readers’ interests and information seeking behavior to the extent that political market research firms delve into voting trends, micro-segmenting voters with sophisticated analytics. But to be truly valuable to authors, publishers will need to do more than conduct market research – they will need to deliver results, developing techniques for marketing to various reader segments.
- Move closer to the content. Once upon a time, publishers’ in-boxes were filled with manuscripts from aspiring authors waiting to be evaluated. Not so much anymore — the manuscripts go to agents as does much of the substantive editing. If publishers want to stay in the game they must move closer to authors, reclaiming some of the functions they have ceded to agents. They might even put some of their new-found market research to work, commissioning work on topics they know readers want to know more about.
While print books will likely be with us for another generation at least, ebook sales are rising. With nearly half of consumers planning on purchasing an electronic reading device in the next three years, I think it’s safe to say that the age of the electronic book is upon us.
Bransford argues — and I think he is right — that the shift will not happen all at once. Publishers will continue to derive revenue from print for some time. Authors will continue to work with publishers at the same time other authors move to direct relationships with ebooksellers and self-publishers. Some traditional booksellers will move into the digital space, attempting to leverage their bricks-and-mortar presence and established local relationships (the Wall Street Journal has a very good write-up on this angle). Agents may begin to move into some of the space currently occupied by publishers (they are in an excellent position to negotiate distribution deals with ebooksellers and could move into marketing more easily, in some ways, than publishers given their proximity to content development and lack of legacy production infrastructure). New, natively digital organizations such as Smashwords and IndieReader will appear that provide distribution and marketing services for authors who elect to not use traditional publishers. It will be, as Ray Davies would say, a mixed-up, muddled-up, shook-up world for some time.
That being said, it is becoming increasingly clear that to remain a valuable link in the supply chain for digital books, publishers will need to develop new, and very different, skills and expertise. Value is shifting from production and physical distribution to marketing and digital distribution (and remains with content development). Making this transition will not be easy since, at the end of the day, it’s not obvious that an organization that makes such a shift would even be considered a “publisher” in the current sense of the word. They will be something different, something new.
Sometimes, breaking chains is part of forging a new tomorrow.