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.

I’ve written on this issue a few times before. I call it differential rates of digital change. I see it as being the biggest issue for non-US and UK publishers in 2011 and 2012.

The massive shift to digital is already leaking sales from smaller markets to those large markets. We just don’t see them. Frankly, how else can we explain the modest growth in those markets driven as they are by digital sales?

Mike Shatzkin looks at this phenomenon on his blog:

The topic of digital change outside the English-speaking world was placed on my radar in 2008 when I was invited to speak in Copenhagen to Danish booksellers and publishers. It was already the case that a large percentage of the books sold in Denmark were in English. (I have recently heard it said anecdotally that sales of English-language books in Denmark have climbed to 25% of the total!) I observed at the time that digital disruption, which would make books more ubiquitously available outside their home territories, would result in increased intrusion by books in English. It seemed to me, at first, that booksellers would be better able to adapt to this change than publishers because booksellers are not nearly as tethered to their language as publishers are.

via All publishers and book retailers are global now – The Shatzkin Files.

Too fatalistic by far in my view, but there is some truth in this piece. Publishers need to change, to adapt and to look for new ways to employ their content if they are to win out.

Publishers have been taking steps in this direction by shifting their ad spending to online, and having staff get up to speed on Facebook and Twitter as promotional outlets. But for the most part, this effort has been limited to a few relatively junior people working on a campaign-by-campaign basis and trying small-scale experiments.

In short, I don’t think publishers will figure all this out in time, which is why retailers will dominate the customer relationships in the future. They can amass enough of a consumer base that they can market a book to hundreds of millions of consumers and, more importantly, get enough of those consumers to buy the book. With those 100 million billing and messaging relationships, Apple and Amazon would only need to achieve a reasonable 1 percent conversion rate to help an author sell 1 million books, a level few authors today reach.

via Why Online Retailers Will Squeeze Out Publishers In The Book Business | paidContent.

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.

I wonder how long Google will keep plugging away at Google Ebooks, I suspect they are in for the long haul. After all, their Google Books product is bound to provide a competitive advantage at SOME point!

Google is accelerating its push into the e-book space by acquiring online publishing company eBook Technologies in a move aimed at improving the reading experience on devices such as tablets and e-book readers. The acquisition comes just weeks after Google launched its own e-book store, called Google eBooks, and highlights the firm’s efforts to gain a foothold in the digital books business. The e-book market, which is valued at close to USD1bn and tipped to grow dramatically in coming years, is currently dominated by Amazon.

via Google buys online publishing firm eBook Technologies :: StrategyEye – Industry Intelligence.

Quite a figure this. Shows just how much change ebooks alone are inflicting on the market!

HarperCollins’ digital sales of Stuart McBride’s Shatter the Bones were almost 18.9% of total sales, the publisher has revealed.

In its first week of sales, the publisher sold 6,416 hardbacks but also sold more than 1,500 e-books. The book is the number one title in The Bookseller’s Original Fiction chart. The hardback book has an RRP of £14.99, and sold at an average price of £7.37 through Nielsen BookScan’s Total Consumer Market.

via Digital sales amount to 20% of Harper number one | theBookseller.com.

This is a fascinating development. I suspect a short lived one, at least for now, a factor of the initial enthusiasm of new ereader owners rather than the way the list will remain for the rest of the tear, however, a space to watch and a sign that ereaders and ebooks change change the industry quite rapidly:

Millions of gift-wrapped iPads, Kindles, Nooks and other digital reading devices resulted in an unprecedented surge in sales of e-books last week.USA TODAYs Best-Selling Books list, to be published Thursday, will show digitals new popularity: E-book versions of the top six books outsold the print versions last week. And of the top 50, 19 had higher e-book than print sales.Its the first time the top-50 list has had more than two titles in which the e-version outsold print.

via Week after holidays, e-book sales outdo print – USATODAY.com.

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.

Berger said that the name of the game in this space is SEO: writing content “that search engines want to present their users.” Like the Demand Media CEO when I questioned him about their business model, Berger claimed that his company’s model is not competing with traditional journalism. Rather, Berger said that Suite101 and others compete with “non-fiction publishing.”

For example, he said, in the past if you were re-modeling your house you’d go buy a book on that subject. But now, people just Google it. He claimed that traditional publishers have “not woken up [to this] at all.”

I asked what traditional publishers could do to ‘wake up’? Berger replied that there has been “no response from publishing houses” to topic-based sites like Suite101. The best that traditional publishers have come up with, said Berger, is ebooks. However “the questions of the users are so much more specific” than what ebooks can address, he continued. “What rules in this space is topic expertise” – which he noted is what Suite101 is a platform for.

Content Farms 101: Why Suite101 Publishes 500 Articles a Day

Apologies for starting this post with one extensive quote and then following it, almost instantly, with another, but it will make sense very soon.

The potential of Google Books is that by supplying information from a vast accessible anywhere database you reduce the overall demand for new or fresh paid content. What’s even more frightening is that Google is a private company and access to that enormous database will be, for all intents and purposes, at their whim.

Things Publishers Fear: #2 ~ Google

I read the ReadWriteWeb post with interest today and it reminded me of why publisher fear Google. It reminded me too of a thought offered up by Tim Spalding in response to another very interest blog post (comment, post):

I haven’t made up my mind about the net effect of all the change. What bothers me about ebooks is that, so far, the positive effect is not very substantial. So far, ebooks feel mostly like a change in medium, with some minor gains for portability and instant access, not a true leap. Then again, computers at first looked like better slide rules, so I expect some leaping to take place.

All told, I worry in two directions:

First, the “treasures to come” may not be treasures at all. Was the TV a net gain for society? I’m not so sure. On average, it made us less social, less happy, murdered many richer forms of entertainment and made us fat and, until very recently, limited our options to a scary degree. I don’t see anything so bad coming for ebooks, but I am worried that ebooks will merely collapse into the internet. The internet is great, but there’s a lot to be gained from what will come to seem the boring limitations of a book. Maybe I’m wrong.

That idea of books collapsing into the net, that intrigues me. It intrigues me because Google is doing that right now, it’s Editions product will be cloud based blurring the difference between book and web.

Suite101 is also doing it too, but in a different way. Instead of relying on the old content from books that may or may not be useful, as Google is, it is following the Demand Studio model of creating cheap content in vast amounts designed to answer specific question.

Suite101 is creating the same kind of beast as Google is creating with its books database, a searchable and relevant database of content that answers questions and reduces the demand for new generic published material. Even if we imagine that the demand might increase it is clear that the value of new content where relevant content exists is certainly lower than before.

Reframe this debate
There is lots of talk about how curation is a key tool for publishers in the modern era and I agree, but we underestimate the ways in which curation can happen. Suite101 is curating the Cognative Surplus that Clay Shirky talks about and harnessing it to its own advantage and it’s reader’s demands.

Publishers could be doing that for niche subjects as easily as Suite101. Publishers, with experts in certain fields already on their books on niche subjects, SHOULD already be doing it.

The challenge for most publishers is first to realize there IS a challenge and that responding to it is less about social media, ebooks and fancy apps (though they all have a role) and more about rethinking the way you conceive content and how and where you deploy that content to engage and build an audience.

It would be a shame if the companies who have cultivated quality content for so long don’t grab the opportunity that exists and instead allow newcomers to usurp their role, but if that is what they choose …

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: Max Braun

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.

Google

Where to start with the fear of Google. The 12 million scanned books. Yes that will do for now!

It is not just that publishers are rightly pissed at the fact of Google’s actions (and the gall they have shown in continuing with them throughout the process of first suing and then reaching a complex and variously hated/despised/grudgingly accepted settlement) they fear the implications of Google’s actions.

Fearing the fact

When I say the fact I mean that Google has, at the very least, stretched the idea of fair use to the limit and in doing so created a tool of great value. A searchable database of all the works they can. Nothing will now put the genie BACK in the bottle. The database exists the power of publishers as possessors of that POTENTIAL database is gone, broken forever by the reality of Google Books. Search there and you’ll see its amazing capacities even if only partly, and in a hampered way, realised.

You may not think that this is important but it has created a database that publishers do not:

a) control
b) understand and
c) know how to profit from

If publishers had been involved in the creation of such a database they might have built in any number of changes, made any number of demands and would in any case have had different interests from each other, so much so that they probably would never have made this a reality (and why should they if does not benefit them?). But now they are presented with a fait accompli and one that, even with a settlement, leaves them disadvantaged and with a database that hardly favours them.

Maybe these things are their just deserts, perhaps you feel they have created this situation by failing to move with the times and invest in technology and rights databases, but this series is designed to take the publishers viewpoint and from that perspective, those three things are very worrisome indeed and justify some fear, regardless of the historical reasons for their existence.

Fearing the potential

Any sensible publisher, though, reserves their real fear for the potential of Google and its database. Google are very well placed to benefit from every digital trend you can envisage. The massive textual database they have built compliments this in innumerable ways. Mobile results can be enriched with tourist info from books, history texts and restaurant reviews, not to mention news stories from newspaper and magazine publishers (as if any content producer will escape). What is more so much of the database will contain books that singly have little of value but as a whole collection and cross-referenced are worth considerable sums (public domain works, government publications and the like).

The database brings the reality of competition with EVERY SINGLE BOOK EVER PUBLISHED into sharp focus for publishers as new books face increased real challenges from books published 10, 20, 300 years ago and in every conceivable context, on a phone, laptop, desk computer, iPad, iPod, wi-fi enable device, anything that connects to the cloud and has a screen (not to mention an increase in POD). So if the web enabled a flood of amateur (and let’s face it not always terribly good) content, Google’s books database enables a flood of real professional content that rings true with quality and which at a time when being published was harder than it is now has the stamp of publishers approval. This onslaught threatens directly the lifeblood of all publishing, the new book trade, in ways that all publishers rightly fear.

The potential of Google Books is that by supplying information from a vast accessible anywhere database you reduce the overall demand for new or fresh paid content. What’s even more frightening is that Google is a private company and access to that enormous database will be, for all intents and purposes, at their whim.

How do you like them apples? Well, as a publisher, I don’t like them much, but as William James said: “acceptance of what has happened is the first step to overcoming the consequences of any misfortune.”