Mike Shatzkin talks about the impressive/scary growth of ebooks in the US market:

Michael Cader of Publishers Lunch reported you have to subscribe to use the links that BookScan numbers show a drop in unit sales of printed books of 4.4 % from 2009 to 2010.

But don’t take that number to any bank. It is already out of date. Cader did a further analysis of more recent BookScan data shortly thereafter showing that print book sales have dropped by over 15% compared to the prior year over the first six weeks of 2011! And the share of print sold online keeps rising, so that almost certainly means that print sales in stores has fallen even faster. Could print sales in stores have dropped 20% or 25% from a year ago? They certainly could!

Sales of iPads, Kindles, and Nooks exceeded most expectations for Christmas 2010. Dominique Raccah, the head of independent publisher Sourcebook, a company with a diverse trade list, reported on her blog that dollar sales at her company in January were 35% digital!

via From some perspectives, we are tipping right now and publishers’ metrics will show it – The Shatzkin Files.

The recent decision by Apple to reject Sony’s eReader app seems to have opened up a much larger and far more wide-ranging debate about in-App and non-iTunes purchases.

Amazon’s Kindle App sends readers to their buying system in Safari to avoid paying Apple’s toll (30%) but recent suggestions are that Apple are intent on stopping that and enforcing either full in-app purchases or at the very least offering in-app purchase as an option.

It brings to mind for me the need for publishers to have their own web strategy and not to become reliant on the platforms of others whose goals and plans are in no way aligned with theirs:

Apple has indicated the sales outside of iTunes can continue, as long as sales through its store are provided as an option. “Rest assured that we want our customers to be able to get their publications easily both from our App Store and obviously from websites or other ways they get them,” Mr. Cue said.V

Apple is tightening enforcement of a rule governing how some apps for the iPad must handle sales, a shift that affects online books as well as other electronic publications. Above, a customer looks at the Angry Birds game on an Apple Inc. iPad tablet computer at the Simply Mac store Salt Lake City, Utah.Apple hasnt disclosed details of terms it is offering publishers, but generally takes a 30% cut on such iTunes transactions. News Corp, which also publishes The Wall Street Journal, appears to be getting a similar deal for The Daily, which Apple helped develop. Rupert Murdoch, its chairman, said in an interview Wednesday on the Fox Business Network that his company is getting 70 cents of every dollar for the first year, with Apple getting 30 cents. He said the terms after that were subject to negotiation.

via Apple to Tighten Control of How Magazines, Content Are Sold for iPad – WSJ.com.

There’s an issue I’ve been exploring on this blog and elsewhere for some time. It’s about digital change and what it does to large and small markets, especially when the rates of change in these markets differ. I’ve called it the differential rates of digital change problem and I think it is time I put a solid definition on it.

So here it goes. The Differential Rates Of Digital Change Problem occurs:

When a large publishing market undergoes a more rapid shift towards digital delivery and consumption of books than a smaller publishing market.

This change has many significant implications but the three I want to focus on here are:

• Rights pressure on small market publishers
• Sales pressure on small market publishers
• Growing disparity between ACTUAL digital change in small markets and OBSERVABLE digital change

Let’s look at these one by one.

Rights Pressure
I’ve highlighted how larger market publishers increasingly have an incentive to acquire global digital rights in works, whereas, as of yet, smaller market publishers have little incentive to hold on to those rights, though they know that in the future they will need them. I’ve pointed to one possible way to meet both needs here.

Sales Pressure
This is almost a bigger deal for small markets. And it has a few forms.

1. Digital sales of titles not necessarily available in the smaller market to customers in the smaller market recorded as sales in larger markets (eg Kindle Sales to Irish customers via Amazon.com or .co.uk)
2. Digital sales of titles available in smaller markets physically AND digitally but made through sites that record those sales in the larger market (eg titles published by local publishers or foreign publishers available on Amazon.com Kindle store)
3. And of course, if a small market publisher sells global digital rights to a book they publish, then the digital editions of locally published books will sell through the larger market
4. The quietest form is of course digital sales to residents who have retailer accounts in other territories, ie English Address for Amazon.co.uk Kindle sales (small I’d wager but without the stats who knows)

These sales are starting, slowly but surely, to leak sales from small markets to large markets. The levels are unquantifiable right now in anything but the most sketchy way, but they are surely growing with each Kindle,  Kobo reader, iPad, iPod Touch, iPhone and Android device sold into a small market. The proliferation of devices offering ebooks sold through large market retailers  MUST be driving sales from those markets. When those retailers start sharing their data (and how likely is that) we will know for sure.

Over time the sales impact will become pronounced, especially if the small markets don’t develop a local infrastructure for selling ebooks. Imagine for instance if all digital sales in Ireland were made through Amazon, Apple, Google and Kobo with maybe a small share for the rest? If the system remains as now, no digital sales will ever be recorded and the market for books will shrink dramatically OR at least  it will seem to.

Actual Vs Observable Data
This is a bigger issue than it sounds like and is deeply relevant. As digital change moves on, small markets get a false idea of how rapidly their market is shifting, or at least publishers native to that small market do. If sales are happening in the estores I’ve already highlighted then the local market doesn’t see them. If 20% of the market shifts to digital, but buys its books from foreign retailers, then the market will fall by 20% and it would still look like digital has no presence.

Clearly there are offsets here. For instance, if a local publisher starts putting their titles on those outlets they will start selling books and will realize that the digital shift is ALREADY happening, or perhaps they will realize that even if it isn’t happening, they can sell some of their books to a global customer base.

What’s more, local offices of large publishers (quite a few of which exist in Ireland) will be able to see their rising ebook sales through their corporate parents and will know well enough how quickly digital sales are growing.

But even so, the data for the smaller market as a whole will be fractured and patchy, controlled by outside forces whose good will cannot be relied on and all the time digital will seem, because there is little reliable evidence to the contrary, to be a marginal market.

In this strange  scenario, local publishers remain unwilling to invest in digital because they feel the market is small but equally the market to them remains small because they have not even invested to get a few titles digitized and for sale on these foreign platforms. The only way to see beyond the apparently tiny size of the market is to take the leap and invest a small amount, but companies, in the absence of data, are rightly reluctant to do so.

Conclusion
So there it is, the Differential Rates Of Digital Change Problem. It’s not a problem for larger publishing markets of course and I don’t see any real way of addressing it until figures for digital sales begin to be shared more freely by the large companies like Apple, Amazon and Google who are not really minded to share it.

The only way beyond it is to accept on faith that digital is growing in smaller markets but in hidden ways, then to step beyond that and start offering your products digitally. This doesn’t have to be a huge investment (and if you doubt that, spend some time online reading about ebook creation from text files) but it does need to happen and it needs to happen soon.

Print publishers are screwing up what could be their biggest opportunity. Many continue to botch their Web strategy, and are now doubling down by getting their iPad strategy completely wrong.The core of the problem lies in how publishers think about the iPad. Just look at the headlines: “Will the iPad save print?” asks one; “Savior crucified” proclaims another.

via MediaPost Publications iDiots Guide To Publishing On The iPad 01/13/2011.

Adam Hodgkin, at Exact Editions, one of the smartest heads in the business has been working in a much less dramatic way then the BIG consumer magazines, to move clients towards a digital strategy on the Apple iTunes (and other) platform. he has an interesting post today about that experience that’s WELL worth reading in full.

But this wouldn’t be a GLM link if I didn’t highlight ONE passage, so here it is:

One of the key things about the iPad is that it has given publishers a good reason to re-engage their existing audience in the concept of digital access. We think that this is the really, really good news about the iPad. Digital subscriptions for your existing audience are a key part of the reason for embracing the iPad. The point is that a magazine publisher can quickly and efficiently convert his print audience to a digital audience at low cost using free access to the digital feed as a reward for print subscribers. That way the circulation of the print audience is confirmed and strengthened and at the same time a new digital only audience can be won. Because the publisher sells digital access (via iTunes or directly) to those customers who do not want to buy the print service.

via Exact Editions: The iPad App Market for Magazines.

I’m really pleased to be able to share this news, it means that at least one (and probably more) of the “Story Of Series” will be available as apps for iOS devices by Christmas.

Press Release
04/11/2010
For Immediate Release

The Irish Story & Collca to Co-publish 5 Titles as Apps
The Irish Story and Collca are delighted to announce that they’ve agreed to develop and co-publish iPhone apps for the first five books in The Story Of series of Irish histories.

The partnership will use Collca’s Condor software and data framework to bring the apps to market in rapid succession starting with John Dorney’s The Story Of The Easter Rising, 1916. The Irish Story and Collca will both actively market the apps which will be available from the Apple iTunes app store as soon they’re published.

The Irish Story publisher, Eoin Purcell, said “I’m very pleased with the deal we have reached. It allows The Irish Story to move beyond ebook formats and into the world of apps, something I’ve been keen to do since day one.”

Mike Hyman, managing director of Collca, added “these books provide a very good overview of key events in Irish history. This deal will help consolidate our position as an electronic publisher of shorter concise texts covering a variety of topics – not just history. I believe that this type of publication lends itself far better to electronic publication than to print.”

Notes to Editors
The Irish Story is the Irish History imprint of Green Lamp Media and is a digital first publisher. Green Lamp Media provides publishing and publishing services consultancy as well as operating a number of content imprints: Irish Publishing News and, of course, The Irish Story.

Collca, the co-publishers of the acclaimed History In An Hour series, was founded specifically as an ePublisher. It currently publishes book-derived and other educational and reference mobile apps primarily for the Apple iOS platform (iPad, iPhone and iPod Touch). Collca is also actively planning to adopt the ePUB ebook standard as an additional platform for some new titles.

Further information from:
The Irish Story:
eoin@greenlampmedia.com
+353 87 2955 131 | +353 1 6637 667

Collca:
mike.hyman@collca.com
+44 7980 821222

photo credit: alancleaver_2000

About This Series
Things Publishers Fear is an occasional series about the realities of publishing in the modern era. For the record, survival is not guaranteed, nor is it always deserved.

Authors

I wrote the bulk of this article across on my personal blog, but it warrants a full exploration here on Green Lamp Media. You might wonder why publishers could fear authors, the life blood of their business? Let me explain the reasons.

Currently the bulk of authors are in a fairly powerless position relative to publishers. Publishers have money, access and publishing slots. Publishers finance the editorial and production work that goes into a book and have the relationships that ensure distribution, advertising and shelf space. This has been changing rapidly over the last few years.

One way it has been changing is self-inflicted, publishers shedding costs by shedding editors (and, some would argue, quality as they do it). But the other more visible way it is changing is in economic terms as the cost of making a text widely available drops very close to zero via effective digital publishing.

[pullquote]Why should you sell a paper publisher your digital rights when there is no need?[/pullquote]

In 2006 when I was only starting to think clearly about digital change (and had only been writing a blog for some 4 months) I wrote a post called Authors Will Drive Change, it was part of a short series of articles on what was changing the publishing industry.

The point is that publishing is no longer just about books and even more it is no longer about waiting for a publisher to decide your work is good enough for print. Options abound and as more and more writers realise that they will take advantage of it.

E-books will push this change even more. There is no reason why authors’ royalties should be the same on e-books as they are for paper books and in many ways there is no reason why the authors cannot sell e-books themselves rather than through a publisher. Why should you sell a paper publisher your digital rights when there is no need?

What I didn’t address back then and what has become clearer now, is how established authors will also drive change and in doing so, make a much bigger impact. After all, if ebooks begin to account for 20-30% of the market (or more) and of that major authors generate the lions share of sales then their departure from your lists will make a huge dent in revenues.

But even authors with moderate (still impressive but not BLOCKBUSTER) sales can see the benefit of direct sales and cutting the publisher out. The most recent example of this is JA Konrath who writes The Newbies Guide To Publishing blog. He has been posting for some time now about his rather impressive success in selling books via Amazon’s Kindle device:

In short, this market is perfect for a one-person operation.

I’d certainly entertain an offer from a large publisher, if they wanted to buy rights for one of my books. But I’m not going to go out looking for the opportunity. Especially since I’ll make more money in the long run if I keep my rights.

I could even make more money in the short run.

According to my recent royalty statement, my horror novel AFRAID sold about 54,000 copies in all formats, earning me around $27k.

If I released a Jack Kilborn ebook on my own, and it sold like my current ebooks are selling, I’d make $20k in a year.

It’s doubtful I’ll make $17K next year on AFRAID, since it’s no longer getting coop on bookstore shelves. But I’m sure I’d make $20k, or more, on a self-pubbed ebook.

So in two years I can make more money on my own on a self-pubbed ebook than a book released by a major publisher in hardcover, trade paper, paperback, and ebook formats, supported by a tour and advertising.

Unless it’s a big offer, I can’t imagine selling rights to my work ever again…

And There Is More
The IDPF released the figures for February ebook sales. They are pretty stunning. I’ve written elsewhere about my skepticism regarding ebooks and the industry’s obsession with price and a single format, but when one sees figures like this, it is almost understandable that they get excited and distracted by them.

Mike Shatzkin writes about what this seemingly rapid shift towards digital means for the print side of the business and it is an interesting perspective:

If by the end of 2012, 25% of sales for a new book are digital, then about half of new book sales will be made through online purchases if we count the print book sales made through online retailers (mostly Amazon.)

Online print sales can be served through inventory generated on demand. So, if these estimates are right, we are less than three years away from a publisher (or author) being able to reach half the market for a book without inventory risk!

Having half the market reachable without print-run risk or inventory storage; having half the customers connecting with their reading through online paths that make them at least theoretically identifiable; and having a quarter of those customers reading through a medium that enables interactivity will make all the changes we’ve seen so far in trade publishing appear trivial. And if the very perspicacious Carolyn Reidy, her unnamed counterpart, and I are right, that disruption is going to take place before many books now under contract reach their publication date.

Personally I caution about moving from current trends towards future results. I’m unsure if the sales will continue at their current level never mind continue to explode in such an impressive fashion. However, even if we allow that Mike and the trends are half right and we see say 33% or 40% of the market reachable via no-risk required methods by 2012, then the savvy authors like JA Konrath will see little reason to work with a publisher at all. Why, if they don’t require the finance that is one of a publishers strongest assets, would they?
[pullquote]as the market becomes more digitally biased, the greater the risk that lead and mid-list authors see first the advantage of retaining their own digital rights[/pullquote]
This is not to say that publishers don’t offer more than finance, they do and in abundance, but for some authors, the skill set that publishers offer is affordable and at a more reasonable cut than they currently allow publishers to keep.

In my view, as the market becomes more digitally biased, the greater the risk that lead and mid-list authors see first the advantage of retaining their own digital rights, then later the advantage of retaining all rights and exploiting them for themselves.

The future, for all that it offers great promise to authors and thus they WILL drive change, may not offer such great promise for publishers and certainly not as they currently exist and hence why publishers fear Authors!

photo credit: TheTruthAbout…

About This Series
Things Publishers Fear is an occasional series about the realities of publishing in the modern era. For the record, survival is not guaranteed, nor is it always deserved.

Price

Information Wants To Be Free!

Freemium Model!

$9.99

Agency Model

Right now it seems the whole publishing industry is obsessed with price. The FT carried a piece on Tuesday about how Random House “Fear An iPad Price War“. Macmillan CEO John Sargent has been blogging about it, there is even a FREEMIUM SUMMIT in San Francisco on Friday (Contrary to what you’d expect tickets cost $449.00 rather than $0.00).

And who can blame them. Price is already creating enormous problems for publishers. And it’s not just things like Kindle users punishing authors with non-existent, delayed or expensive Kindle editions by giving them one star reviews (here and here for good discussion).

Price is a problem in the real world as well as the digital one. You only need to look to last winter’s price war in the US to see that. Amazon and Walmart kicked each other (and publishers) in the head to prove they had the best price for some key hardcover titles. The price point flavour of the day was $9.99. Then Target joined the fray.

The problem of course is that these price wars and ebook protests are driving a value perception home in consumers minds. On the one hand it reinforces the idea of ebooks being “worth” less than physical books and on the other, the price of physical books is too high, why else would retailers be selling them at such large discounts.

Bizarrely enough, until the enforced change to an agency model (which is by the by not across the board and is unlikely to become the standard if Amazon has its way), Amazon was selling ebooks at a loss, at least on new releases. And all three companies (Amazon, Target and Walmart) were selling their hardcovers at loss prices.

Free Will Increase Sales
And then there is the giving away stuff will help you sell more stuff argument. There are studies which seem to suggest that there are benefits. But the key point about those studies, is that they are by their nature, short-termist. This is not a criticism, just a reality.

As the aforementioned John Sargent noted about the longer term of “Free” (HT to Mike Cane for pulling this quote):

We had a car guide, Edmund’s Car Guide. That was a distributed line we had at one point.

Edmund’s decided to put a little content up on the web. We said, “Great, it’ll drive the sales.”

He said, “I’m gonna put it all up.” We said, “Don’t do it. You won’t sell books.” He said, “I’m gonna prove you wrong.” He put one-hundred per cent of his content up for free.

First year, sales of the book went up.

Second year, they went up again.

Third year, they dropped by fifty per cent.

Fourth year, we didn’t sell another book. You don’t find them on a bookstore shelf anymore.

So there is that danger of the experimental stage of, “I give it away free and look! — my sales go up.”

There’s gonna come a point in time where I give it away for free and my sales don’t go up and then there’s gonna be a point in time when I give it away for free and I ain’t selling shit anymore.

Pushing For More
From the perspective of a book publisher, price is about the only lever one has to drive revenue. Getting more for the books you sell is going to increase your top and bottom lines results. That is if you can control costs. So it seems like great territory for a fight, it seems like a great place to drag a bigger percentage from the other guys side of the maths to your side.

Apple provided the opportunity to beat Amazon with a stick and to actually enable that clawback. Publishers, by some thinking, would have been fools not to take it.

Besieged
There are many potential retorts to this post, so many “but what about x, or y, or z” but the logic of fighting on price, of resisting free, of pushing for a higher value on content seems inescapable to most publishers who have for so long been on the losing edge of the price war.

As some of the posts in this series have explored (Apple, Google, Amazon) as an industry the ground on which Publishing is built is being undermined.

The smartest heads in the building are seeing that the future is not necessarily rosy, that survival is not guaranteed. That places an awesome responsibility on the heads of managers and executives. No one wants to be the man or the woman who brought X Company down. That leads to defensive thinking.

That is why Publishers Fear Price and when you look at it from their perspective, they are right to.

photo credit: renatomitra

About This Series
Things Publishers Fear is an occasional series about the realities of publishing in the modern era. For the record, survival is not guaranteed, nor is it always deserved.

Apple

On the day the iPad’s availablility in the US was announced (April 3 in case you missed it) I thought it suitable to discuss Apple. What’s to fear I hear you say? Hasn’t Apple provided the fodder to defeat Amazon’s nefarious $9.99 pricing demands and with the creation of the iPad opened a whole world of possibilities for publishers? To which the simple answer is yes but the complicated answer is yes, but.

Yes
You are right, most publisher probably don’t fear Apple. In fact they have welcomed their arrival on the publishing scene, seeing them as useful counterweights to Amazon. But they are wrong. Apple presents a real problem for publishers one worthy of fear.

Yes, but!
Apple has created leverage for publishers that much is true, but is that leverage actually worth anything? Apple seems to have thrown the balance in favour of book publishers in a struggle that is really peripheral to book publishers survival, but in doing so made that struggle look more important than it was. Price, especially the price on specific forms of content (in this case the Kindle edition ebook) is not the sole factor in book publishing’s future, there is much more going on. In fact, the leverage Apple provided has blinded publishers to the larger realities of change and has been, I would argue, detrimental to the industry as a whole.

As for the iPad it is a fine looking device, but the iBooks app which Apple itself describes as:

the best way to browse, buy and read books on a mobile product. The iBookstore will feature books from the New York Times Best Seller list from both major and independent publishers, including Hachette Book Group, HarperCollins Publishers, Macmillan Publishers, Penguin Group and Simon & Schuster.

will not even be native to the product but:

will be available as a free download from the App Store in the US on April 3, with additional countries added later this year.

Competition
So, video will be native to the iPad, so will Photos, Safari, Mail, Notes and a few other applications but not iBooks. Will YouTube I wonder? Think that through folks. iBooks not native, why? Why not build it in if the product is so amazing, so intrinsic to the concept? Because Steve Jobs reckons people don’t read anymore.

I guess what he means is that the people who do read will download that app anyway and that most people simply do not consume vast numbers of books in a given year and in some senses they never did, at least not in the way that they watched television or listened to music. So why go to the bother of including it for a few die-hards who will do the work for themselves?

What he means is that books are not central to the iPad as a device, but they make for good marketing copy. In fact books, as far as Apple is concerned, are probably already fringe media and so are not vital to the success of the iPad or else iBooks would have come pre-loaded sitting there ready to download books.

The iPad is about the things that people do a lot of, watch tv and video, listen to music and surf the web. People don’t read books very much on average and so books fail the mass market test. Publishers have been so eager for an ally in the battle with Amazon they’ve ignored the fact that their ally might not really care about their industry much at all.

Binding us more
And then there is the issue that by keeping publishers obsessed with the iBookstore and app creation Apple keeps publishers locked into a closed development system of Apple OS. Which suits Apple and blinds the publishers to the real opportunity they have, and have had for some time now, and which few of them have been embracing, web based content accessible over any device with the use of a browser.

If publishers had pursued web access for the last five years it wouldn’t matter if iBooks was native, Safari would be their Trojan horse allowing readers to buy access online, bypassing Apples 30% tax. Of course the more visionary have done something like this. The O’Reilly/Pearson created Safari Books Online now has some 40 publishers and I would expect to see that kind of platform thrive in a mobile multi-media device environment. At the very least it is in a position to take advantage of web broswers as well as iPad Apps something most publishers will not.

To sum up
Apple is making mobile computing cool, easy and non-geeky. Apple is making it easy to put video, games, music, photographs and just about any form of entertainment in the hands of everyone, everywhere in a cheap and attractive package. In fact, if Google represents the reality of competition with every book ever published then Apple represents the reality of competition for every second of attention with EVERY form of entertainment imaginable. As a publisher and knowing that reading has consistently lost in a straight attention fight with video, music and mass forms of entertainment, that would create quite a bit of fear. As Laocoön might have out it: “Do not trust the Horse, Trojans. Whatever it is, I fear the Greeks even bearing gifts.”