How Long Before There are No Large Publishers?

This is a question which has been coming up more and more lately. Back in March I made quite a few posts on that author site I hang out on stating the business model could not survive. I have even had a previous blog entry about it last year some time I think.

Here is a prediction for you though:

Inside of three years there will either be no large publishing houses, or their financial condition will be worse than Borders was two years ago.

The future printed market is not wide scale distribution through traditional, but “available exclusively at xxx” like Craftsman used to be available only at SEARS.

I did some research and found that when book buyers at Target choose a title for their on-line book club (I didn’t even know they had a book club of any kind) it is generally a minimum 100,000 copies sold, but usually closer to 250,000 copies. We are, of course, currently talking about books available to the general book buying community. Currently they are using some broker/distributor which I have never heard of, but I cannot believe that company is getting into the middle of book buying transactions for free. If Target wants to really wade into the $10 hard cover market it is going to have to start making deals directly with Indie authors and small publishers. The other Big Box stores are all moving into the book market and many have joined the $10 hard cover battle.

While it is quite true that nobody could possibly hate Amazon.com more than I do, here is an interesting article.

http://online.wsj.com/article/SB10001424052748704912004575253132121412028.html?KEYWORDS=vanity+press+goes+digital

Please note the portion which says Amazon will be printing this book. It didn’t say Simon & Shuster (sp?), Random House, or any other large publisher. Amazon is going to print the book and compete directly with publishers who are selling books via their site. Quite frankly, this is the new model…well close to it.

  1. Books will be initially released in PDF or eBook form via authors directly (hopefully with heaps and gobs of professional editing first, because right now a lot of raw sewage gets released by CreateSpace and the other enabling firms which don’t mandate any professional editing.)

  2. A paid reader for one of the big box chains will read and like one of the titles.

  3. After checking with the author and verifying no other deals are on the table they will kick the title up to the buyer.

  4. The buyer will skim or just take at face value the paid reader’s recommendation, then make an offer to the author of “available exclusively at XXX”. No investment will be required by the author, they will simply pay them roughly $2.00/copy and contract out the printing themselves. Deal good for one year with right of extension.

  5. Author will tell friends and jump with joy when they see a small add in the weekly sales flyer for their local store.

  6. Some 30-90 days later, checks will start arriving and author will be quite happy.

The new model won’t have 20 layers of middle people all taking a cut. There won’t be pulped print runs (unless there is a major printing error) as we’ve all seen these stores run “end of season clearance” sales, which is what they will do with the few titles they buy and don’t put on the book club list.

New authors will end up with something they never get from a major publishing house. Marketing! These big box stores know how to work their customer base and they won’t select a title which doesn’t feed directly into their market. The companies buying movie options will have something they don’t often get…real numbers and direct feedback from Joe and Jane consumer who paid for and read the book. (Most of those big box book clubs have on-line forums for people to comment on the books.) In short, we won’t have to live through another “Sahara” movie or court drama.

http://www.omm.com/newsroom/News.aspx?news=767

Major grocery and supermarket chains have also started wading into the book business, and even the $10 hard cover battle.

http://new.publishersweekly.com/pw/print/20090427/17159-books-stay-part-of-the-grocery-store-mix-.html

Meijer has taken books in their store from a small rack on a back wall to a section of the store which stocks roughly 100,000 units according to some sources.

Think about it. What is pretty much the only thing fueling the growth of POD right now? Scams telling Indie authors they can make big money paying an exorbitant per unit printing cost if they “publish” with this service, only printing books as needed…after they pay for NNN copies up front. While there are legitimate business reasons to move long tail titles into POD, printing first run books which are not low volume textbooks or graphics intense is simply inexcusable. Toner puts out a much lower quality product at a much higher cost than ink. You need to have a print run of around 1,000 copies to get the benefits of ink, but for a big box store that is going to print 100,000 – 250,000 copies initially (or only 5,000 copies if the title is to be a regular shelf title) this is not a problem. (Actually, some of the direct to plate printers can only print about 50,000 copies with a single set of plates, so the bigger runs would be scheduled as separate runs of 50,000 each.)

Amazon has already fired the first volley. They have announced that THEY, not one of the publishers supplying them with books, will be the printer for that woman’s book. This won’t be an isolated case with them. It is one of the reasons they make it so free and easy for Indie authors to get books onto the Kindle. They want the Kindle to be the screen for those titles they choose to print. Now other retailers will have to buy books FROM Amazon if they want the title. If it sold 36,000 eBooks, it will most likely sell enough print copies to warrant shelf space. Some current industry numbers put eBooks at 5% of unit sales for a title: 0.05x = 36,000 x = 36,000 / 0.05 x = 720,000 if the industry analysts are correct.

Yes, there will be some die hard book buyers who will say nothing compares to the experience of reading a book with a $12 Latte before buying it from a book store. They are a minority. Everybody has to eat and go to the bathroom. This means everybody shops at either a supermarket or a big box store with a grocery section every week. If you don’t consider yourself a book buyer, how often do you actually go into a book store? Only during the Christmas shopping season? I thought so.

 

The Future of Publishing

I’ve been reading a lot of articles and comments lately about the future of publishing. Just today I spent some bathroom time reading another of these articles in “Book Business” magazine. (Does anyone who doesn’t frequent doctor’s offices read a magazine anywhere else?) Apparently, this prognosticator owned a lot of stock in POD companies. While I do believe they had a few things correct, I don’t believe POD will end up as anything more than another 8-track tape player story.

During some recent conversations with people from Sony about an exclusive deal for my new book, they asked where I saw the book business in five years. (I don’t know if they were asking as a stalling tactic or as a result of the feedback they were getting from those who read my book.) I might as well share the answer with you.

  1. Every major book publisher will fail.

  2. All large distributors will cease to exist.

  3. Printed books will be the last form of the written word, not the first form created.

  4. While some retail locations will have a POD device in store, they will not be in every location and there will be fewer retail locations than there are today.

  5. Paperbacks will be non-existent.

  6. The number of books published will increase, but only a handful will be printed. A “low volume” print run will be at least 100,000 copies.

Sounds shocking? Sounds horrible? Sounds like whatever I’ve been smoking wasn’t exactly what it should have been? Well, it is true, and thanks to the global recession, should happen in well under 10 years.

Understanding why this is going to happen requires two things:

  1. A good understanding of what technology is, and more importantly, is not.

  2. The ability to “read a room”.

What happens today?

A major publisher employs a lot of friends and family who ride the gravy train choosing books to print and market. They look to publish exactly the same book they published last time because they can sell that without any effort. Both variety and creativity dies while they sit there turning the crank on the commission machine. Authors starve to death due to the pathetic royalty percentage handed out to them and the one year plus lag time between sale and payment. Book stores stock a big pile of the same book they sold last time, only to find out, most of last times buyers wanted a different book to read this time. The forklifts and lowly paid stock hands reek havoc on the inventory that gets shipped back to the publisher who then has to dispose of it.

What is wrong today?

Plane and simple, the business model doesn’t work. It was always poorly thought out, but people ate what they were fed because there was a culture based upon kings and queens knowing more than the commoner. Of course the publishing houses were more than willing to declare themselves kings and queens, regardless of how much they actually knew.

Until recently, there wasn’t a viable means of choosing which books deserved to consume paper. Until recently, this industry was bent on consuming as much paper as physically possible. That has changed.

The Zero Dollar 100,000 Copy Model

This will basically be the model which allows the industry to thrive. Those who adopt it will be profitable, and those who don’t will go out of business. The old established model is no longer economically viable. Boiled down to its barest definition, all general “trade” books will be published in electronic format only until sales reach 100,000 units. At that point in time, they will either be mass printed in a large print run or set up as an on-demand hard copy at the retail location. The deciding factor will be the speed at which the 100,000 copy threshold was reached.

A good many who are trapped within the dying infrastructure will try to dismiss this as the rantings of a madman. Please pity them, for they have no choice. They don’t understand the least little bit about technology. You know that whenever they send you a Word document to look at. Professionals haven’t used Microsoft products in over a decade.

Why is this the success model? Today, there are at most 15 people in a major publishing house that decide what to print. Usually, the number of people who actually have the authority to make the decision is far smaller. I don’t care how many people they claim to listen to from inside the company, the actual decision to print is made by an incredibly tiny subset of the population. They put so many hours into their business that they have absolutely no idea what is going on in the real world or what actually interests the person who just surfed to the Barnes & Noble Web site.

Once the shell for a database driven eBook retail site is up and running, adding a title to it is simply a matter of adding a record to the database and a file in a directory. I’ve done business software development for over 20 years. Properly designed, this really is the complete amount of effort required to add a book to a retail site. The author still has to write the book. Unlike the old model, the author will be required to contract out the editing/proof reading themselves, but very little has to happen in the way of formatting or interior design. Ebooks simply don’t support such fancy looks on those screens. Now that we finally have two primary standards (LRF and ePub), creating the eBook only takes a little bit of the author’s time. The author can simply download the Calibre software package and create both versions directly from their OpenOffice document. http://calibre.kovidgoyal.net/

Sony is currently in the process of getting their Publisher Portal up and running to make getting your new release up on their site an automated thing. http://ebookstore.sony.com/publishers/

Barnes & Noble, having been burned early on in the eBook world hasn’t inked a deal to sell eBooks yet, but Borders inked with Sony. I expect B&N will ink something with either Apple or Sony before the end of 2009…assuming B&N doesn’t end up acquiring Borders by then. Another eBook site gaining a lot of traction is http://www.bookhabit.com. This site allows authors to post for free and starts books out at $2.50 per copy. The price of the book goes up as it increases in popularity. There are an increasing number of eBook retail sites out there. The problem isn’t finding one, but deciding which sites you wish to do business with. Some provide DRM and some don’t. Each author needs to make their own decision about DRM.

Not counting people who have downloaded free software from Sony and others which allow them to read LRF and ePub formatted files on their computer, there are reported to be over 2 million Sony readers and around 8 million iPhones currently in the hands of users. Other devices from other vendors allow a consumer to read one or more of these formats. What this model does is expand the print decision makers from a pool of less than 15 to a pool of more than 10 million and only 100,000 of them have to agree.

Another aspect of this situation one has to take into account is the lifespan of a tree hugger movement. Today we call it “going green”, and prior movements were called many other things. These movements tend to have a lot of false starts, but eventually one gets a lot of traction. Once they have traction there is a slow ramp up, a long peak, and a wind down. As a general rule a “go green” type movement has a 10 year run once it gains enough traction to have spots on the nightly news more than once per week. By my count, we have about six years left on this one. At the end of each of these movements, the financially viable ideas survive and the rest end up with tiny little niche markets or in the “whatever happened to” category.

Given the momentum behind the current “go green” world wide initiative and the global recession, the current model of : large publisher printing, shipping to distributor, distributor to retail warehouse, retail warehouse to chain location, idle on shelf until time to pay for them, return to warehouse, return to distributor, return to publisher, sent for destruction; is both economically and socially unmaintainable. Many who are trapped in the mindset of the 1700s are looking to POD to solve this model. It cannot. Even with the massive improvements in POD over the years it still puts out a product that looks and feels like a product made by prison labor and sold at Walmart. I haven’t correlated any numbers, but I am willing to bet the increase in returns is due more to the increase in POD use than the downturn in the economy. Consumers aren’t generally willing to return something they cherish, but they have no problem returning cheap sh*t to Walmart after using it.

It won’t take book sellers like Borders and BN long to figure out the only books with real selling power are the ones which established an reader base prior to being printed. Given the increasing number of publishers put off by Amazon business practices and Amazon’s recent move to support only their own eBook formats, Amazon will cease to be a player in the book retail market.

The ePub specification will eventually become robust enough to be the only format anybody left in business uses. Even Sony has quietly admitted this. Now, when you submit files to Sony, they ask for the ePub file to create the LRF from. Some day, they will even sell the ePub format directly from their eBook store.

Kindle will become the new BetaMax.

 

The End of POD Draws Near

For those of you unfamiliar with POD, it stands for Print On Demand. These are books printed with icky nasty toner. No matter how great the print quality is, the book still looks and feels cheap. Kind of like wheeling up to a Ferrari convention in a Yugo. It is true that laser printer technology has made amazing strides, but you can spot a toner printed book from quite a distance. You can also identify them blindfolded by simply dragging your fingertips down any given page. Feels kind of like a cross between Braille and 180 grit sandpaper.

POD falls into two categories.

1) a traditional printing house serving up toner printing for ARCs, Galleys, and out-of-print long tail books a publisher still wishes to keep in print. This is the ethical part of the business, and pretty much the only part of toner printing that makes any sense.

An ARC is an Advanced Reading Copy sent out to various professional reviewing services. Traditionally you will print 50-100 of these and they will have a special cover, if you are still entrenched in the business model which uses ARCs. Most people aren’t these days. Why? The pool of individuals requiring ARCs tend to be both unemployed and unemployable. If you have a reference or technical book, don’t bother submitting to a service which requires an ARC. If you do, your book will be handed off to someone holding a Phd. who has never worked an actual day in their chosen field of expertise. If it wasn’t for tenure, they wouldn’t have a job. In many cases they don’t. Anyone who has had to wade through a pool of recent graduates has had first hand experience with just how far out of touch college programs have become.

Galleys aren’t that much different from ARCs in this day and age. Some people still use them and some don’t. The major difference between an ARC and a galley is that a Galley is supposed to be what actually got sent off to the print shop. An ARC is assumed to still be a work in progress. I don’t know of anyone actually sending ARCs out to reviewers anymore. Galleys tend to get either a stamp or special cover indicating they are a galley. Everybody knows it is a cheap print job and they don’t ding you for it. Lead times for offset press can be measured in months, so a galley ensures there are some reviews ready to be posted with the book when it is released. In theory this helps your sales.

2) Vanity “Let us turn you into a published author” scam shops.

There is a large quantity of these companies on the market. Amazon.com even owns some of them. These shops offer “ publishing packages” to the budding author/publisher. Generally they have come-ons like “be a published author for under $600″. The package includes one of their ISBN numbers (by definition they are the publisher, not you when it is their ISBN), some kind of on-line sales page, and an immediate listing on Amazon.com when your book is done. There is generally a minimum purchase requirement on the part of the author, so they have to pay the $600, then buy 48 books at list from the printing house which is actually the publisher.

In short, this is the absolute bottom of the industry. Vanity press titles don’t get listed in any major retail chain and all of that “marketing” you thought you were getting with the package won’t generate a single sale. The author generally doesn’t find this out until AFTER they’ve already “published” through this service and find the per unit print cost higher than the retail price most of their competitors list at on Amazon. Given they have to give a 65% discount to Amazon as part of the “package deal” their list price tends to be double that of their nearest competitor. This is the publishing industry equivalent of a dark alley filled with drug dealers and disease riddled hookers.

All of that is coming to an end.

The 3.0 version of OpenOffice is getting close to the Holy Grail, the ability to save directly to ePub format. The first step, being able to export to XHTML has already been delivered. Another team has been working on a PDF import functionality. Judging from the functionality chart and percentages of completion for those features, they are getting very close. Probably by version 4.0 (if not sooner) OpenOffice will be able to import PDF files from lessor Word Processors and save them directly to ePub format.

How is that bringing this to an end?

Sony is in the process of creating a publisher portal for self/small publishers. The portal is currently going to allow for Sony to do conversion services for those who simply don’t have the foresight to bail on the now dying Microsoft platform. Publishers who can provide an ePub format can move directly into being listed. The Sony eBookstore also feeds many partner sites. Instead of being raped by POD and Amazon, you can simply release your book in ePub format to generate revenue until you can do a quality printing with an ethical printer. Or, you can simply leave your work sitting out there generating revenue without any additional costs.
As of today, you have to convert your book into ePub format. Rather than messing with this, I have been sending my files out to IT Global Solutions for conversion and loading into Sony. Very soon Stanza will have its own eCommerce site up and running for the Apple iPhone market which can also read ePub format.

Yes, the days of the POD scam artists are drawing to a close.