Kleo and I originally intended to post this on my other site, About Writing, however since I’m still fighting with DNS issues, it’s going up here.
Note regarding the update. A friend pointed out a nasty spelling mistake (I really shouldn’t write at 4:00 AM), and Mike Shatzkin has left a comment disagreeing with me. I hope he sticks around and continues the conversation. And then I spotted another mistake when pulling a commented for the article for Tuesday October 11th. How come no one told me about it? Oh well…
Some background. I have worn a lot of hats. One of the most fun ones is FUTURIST. It is also the one which gets me the most hate mail. I was wearing my that hat when I predicted that Microsoft would go into Chapter 11 Bankruptcy by the fall of 2013.
The problem with playing Futurist is that often you are working far enough in the future, that you will be called a fool for a long time. You might even be a fool, but still be right.
So when I predicted that Brick and Mortar book stores would be dead within five years in January, I got laughed at. When I changed my prediction to two years in March, the laughter got louder. When Borders died, and NO one bought it, things got quiet.
Then I changed my prediction to Eighteen months. This disturbed even people who were advocating digital publishing (EBooks). I made that change in response to Amazon’s recent changes to the Kindle lineup. Just think – a $79.00 Kindle! For $200.00 you can load one of those with a huge pile of books. There are a lot of $0.99 and $2.99 EBooks available, never mind the classics on Project Gutenberg and Archive.org.
And I’m willing to bet that someone is working on a $25.00 EReader now.
The Shatzkin Files
One of the best experienced writers covering the changes in publishing is Dean Wesley Smith. Dean mentioned a post by Mike Shatzkin, and when I went to look at it I nearly died laughing. Four years into the e-book revolution: things we know and things we don’t know is an amazingly confused mess. Dean didn’t deconstruct it. I decided to.
One could say (and I would) that the ereading revolution is coming up to its 4th anniversary since it was late November 2007 when Amazon first released the Kindle. There had been dedicated ereading devices before then, including the Sony Reader — in the market when Kindle arrived and still here, if not wildly successful — and the already-defunct Rocket Book and Softbook devices that had debuted and disappeared some years before. And in the early 1990s we had the Sony Bookman, which showed only a few lines of text at one time and disappeared with barely a trace. The biggest-selling ebook format, before Kindle, put content on the Palm Pilot and the total ebook market was so far beneath a rounding error that any investment by a publisher in digitization was being made on faith, not on commercial evidence.
Note the complaint in his voice. This is a non-existent market, and it has had the bad taste to disturb his well laid plans.
And many people in publishing believed that reading on a screen would take many years to take hold, if it ever would.
Now, less than four years later, we are living in a changed world, although not yet a transformed one. But transformed might be coming very soon.
Right. And not that long ago many people believed that computers would never find a place in the home. Now the damned things are everywhere. In our televisions. In our microwave ovens. In our alarm clocks. In our sewing machines (my wife has two sewing machines that have SD card readers).
As ebook sales in the US now appear to have reached the 20% of revenue threshhold at some publishers already (so it is there or will be for everybody very soon), there are some things we can say we know about the shape of the future, but some very important other things that we don’t know yet.
This is the point where he starts loosing it. Because he isn’t taking into account the people like me. OK, I’m not a big name, but Amanda Hocking is, and she is making a huge amount on the books she published herself. So did Joe Konrath. And Dean Wesley Smith. And Kristine Katherine Rusch. So EBook sales are higher than that. A lot higher.
At this point I’m going to cut some parts out, because they aren’t important. I’m only going to comment on the parts where he is wrong.
We don’t know whether adult illustrated book content will be equally well accepted by book consumers on devices, even though there are more and more devices capable of displaying pretty much what publishers deliver on a printed page.
We don’t know what parents will pay for a brief illustrated children’s book delivered for a device, but it appears it might be much less than they’re willing to pay for paper.
We know that consumers will pay paperback prices and more for plain vanilla ebooks, or “verbatim” ebooks.
We don’t know whether consumers will accept paying higher prices for video, audio, or software enhancements to the verbatim ebooks.
In fact, we don’t know if consumers would pay paperback prices for ebooks if the paperback were not ubiquitously on sale as a benchmark for pricing.
The first paragraph – of course we aren’t going to pay for electrons what we are going to pay for paper. Anyone with half a brain would understand that. The second paragraph is wrong also. Paperback pricing for EBooks is overpricing. Half paperback pricing? Maybe. In the third paragraph, as to “enhancements,” the answer is probably not. In the fourth paragraph we already know the answer, most people are paying paperback prices under protest. The big sellers are the less expensive books.
We know that ebook uptake, as measured in sales or their percentage of publishers’ revenues, has doubled or more than doubled every year since 2007.
We know that rate of growth is mathematically prevented from continuing for even three more years (because it would put ebooks at 160% of publishers’ revenues if it did!)
We know from announcements about new devices and a recent Harris poll predicting increased device purchasing that there are no expectations for a slowdown in ebook adoption anytime soon.
Minor switch – I agree with the first paragraph, but needed to show it for the rest to make sense. Paragraph two he is way off base. It isn’t mathematically prevented from continuing. His problem is that he doesn’t understand that the inefficiencies built into the old model, which was actively designed to prevent customers from buying books (if you don’t believe me, go read Dean Wesley Smith’s articles on publishing, he explains it far better than I ever could, and check out Sarah Hoyt’s articles, she also explains the inefficiencies in the system).
With my Futurist Hat on, I’m predicting that by January 1, 2014, EBook sale revenues will have increased to between double and triple the current publisher revenues, but that the Traditional Publishers share will drop to around 33.33% of the market, with Independent Publishers like myself taking the other 66.66% of the market. The publishers will sell fewer, more expensive books. Us independents will sell more books, with lower prices. My estimate is that the Traditional Publishers will have only 10% of the market by volume of books sold, with the Independent Publishers holding the remaining 90%.
Where it goes from here is a damned good guess. There are several other factors in play which I do not know well enough to evaluate. I decided early on to ignore Traditional Publishing with certain minor exceptions. Those exceptions are based my personal knowledge of the people involved, and an appreciation of what they are trying to do.
The people who can evaluate those issues have explained them to me. The problem is we don’t know how they are going to play out. So I’m ignoring those issues now.
In regards to paragraph three, there is no immediate slowdown on the horizon. When eReaders are in use by 75% of the total (adult and child) population, then we will see a slow down in purchasing. Maybe. It all depends upon what useful new features arrive, causing device churn. The new color eReaders are going to cause a migration to color illustrations, selling more color eReaders.
We don’t know if we’re going to find a barrier of resistance, or perhaps we should call it the barrier of “paper-insistence”, at some sales level over the next two years (at the end of which ebooks would be 80% of publishers’ revenues at the growth rates we’ve seen over the past four years).
Ah, yes. Paper insistence. The people who tell me that I’ll pry paper books from their cold dead hands… And quickly drop paper books like a hot potato the second that they get a decent eReader in their hands. I’ve seen this happen dozens of times. Hell, it happened to me.
We know there’s a big and developing market for English language ebooks globally, as the e-book infrastructure builds out in markets around the world.
We don’t know how quickly those markets will develop or how big they can ultimately become.
Actually he doesn’t know. Not really. I’ve been looking closely, and it isn’t a big and developing market. Instead it is a HUGE AND DEVELOPED MARKET. Seriously. It is already out there. It already exists. Sure, it isn’t as big as it will be in another year, just like the North American market is still growing. But the market is already developed.
We know that the number of bookstores suffered a sharp reduction in 2011 because of the Borders bankruptcy.
We don’t know if the remaining brick retail network, the bookstores led by B&N and including the independents as well as the shelf space devoted to books by the mass merchants, will get a second wind from the disappearance of the Borders competition, buying publishers some temporary stability in their store network, or if the erosion of shelf space will continue (or even accelerate).
We don’t know what the loss of brick store merchandising will mean to the ability of publishers and authors to introduce new talent to readers, or even just to introduce a new work by established talent.
Paragraph one – well doh! I’m surprised that none of the publishers didn’t try to buy Borders out of panic.
Paragraph two shows a total lack of understanding. Every time you lose a Dead Tree reader to an eReader, you don’t get them back. The eReading experience has gotten so compelling that reading a Dead Tree book is now a painful exercise that I avoid, and I know a lot of people who feel the same way. Oh, I do like fancy bindings, and there are some books, like my hundred year old complete Rudyard Kipling that I would kill to keep. But for the average book? Why bother. Besides, there are space considerations. I have over ten thousand books in the house, buying electronic saves space, and is going to cut my insurance costs (fire hazard, major fire hazard). Over the next couple of years I plan to replace all of my paperbacks and hardcovers with electronic copies, and send the dead tree copies to my favorite charity, the Salvation Army.
The erosion of shelf space will accelerate. Fewer people are going to book stores. Fewer people, less sales, less shelf space… With fewer books on the shelves, there is less reason to go to bookstores, and more reason to buy an eReader. Simple business stuff. Anyone except publishers understands it. You don’t devote shelf space to things that don’t sell.
Paragraph three shows another lack of total understanding. Most of the new talent already understands this. They’ve tried to sell books to publishers, and been bounced. So they published the books themselves. Sales have been mixed. Publishing is a business, and it isn’t something you learn in five minutes. And a lot of people who have uploaded their first book to Amazon may not have gotten all the help they could have used. But they are there, and they are trying. Some of them will give up. Some of them will work like crazy, improve, and become big names. But they will make far more per copy than they ever would have working through a Traditional Publisher, and when a Traditional Publisher comes calling later, it will cost them big time.
We don’t know if improved book discovery and merchandising is amenable to the application of “scale” by publishers outside of vertical niches, be they topics or genres.
We know that agents and authors will accept an ebook royalty of 25% of net receipts in today’s environment, where 70% or more of the sales are still made in print.
We don’t know if the threat of the alternative publishing options will force that royalty rate up if sales fall below 50% print or 30% print.
We don’t know if sales falling below 50% print or 30% print is several years away or much less.
Paragraph one – see Amazon. Paragraph two – wrong – you know that SOME agents and writers will accept this. He is ignoring the large number of writers like Joe Konrath who have abandoned ship, and are publishing themselves. Paragraph three – wrong – he already knows that the royalty rate has to go up, unless he wants defections to become endemic. Paragraph four – wrong again – we do know, or rather I know. I guess that Mike Shatzkin doesn’t listen to Futurists.
We know that the Epub 3 standard and HTML5 enable app-like features to be delivered as ebooks.
We don’t know if those features will make any commercial difference for the straight text content which is the only commercially-proven ebook type.
This is where he gets really confused. There are about a dozen different “standards” in electronic publishing. For a good look at what is available I recommend downloading and installing Calibre on your computer (no worries – it runs on Linux, BSD, Solaris, Mac OS X, and even Windows). Each of those standard has different capabilities.
He then claims that straight text content is the only commercially-proven ebook type. He doesn’t bother to explain how several people who I know are able to make money off children’s books, which are NOT straight text content. Ask the talented and wonderful Debbie Ohi. I’ve known Debbie for nearly twenty years, and was happy to hear she’d landed this. She really deserved it.
We know that content-creating brands that are not book publishers are using the relative ease of publication of ebooks to deliver their own content to the ebook marketplace.
We don’t know if book publishers will develop an ebook publishing expertise that will make them able to persuade those brands in time to go through them, the way they have in the print book world, rather than disintermediating them.
Quick translation: Content Creating Brands that are not Book Publishers means Writers. He’s complaining that people like myself can publish my own books, or in my case, set up Wayne Borean Publishing to handle all the family’s publishing requirements. I have fifty ISBNs reserved for my use (forty-seven now, I’ve used three).
As to Traditional Publishers developing the expertise that will make them able to persuade the writers in time to go through them, the way they have in the print book world, rather than disintermediating them, well, it’s all about the money. Can you supply me 70% royalties? If you can’t, you’re going to have to supply something to make it worth my while to deal with you. Think about it. This is a business. It’s about the money, honey.
Since I have been expressing my concerns about the impact of the ebook revolution on general trade publishing, which I have been doing with dramatic intent since six months before the Kindle at the BEA in 2007, I have been saying the general trade houses have to get audience-centric (which means choosing content to fit vertical niches).
This is about the stupidest statement I’ve seen in a while. No, it doesn’t mean choosing content to fit vertical niches. It means choosing content that your customers want to buy. If you don’t choose the right content, you lose money. If you lose too much money, you go out of business. Simple right? It’s part of Capitalism. You have a right to attempt to make a profit. If you are too incompetent to make a profit, you have a right to go bankrupt. The eReader has nothing to do with the situation. It was a side issue. The problem is when companies aren’t willing to work for their customers, and then complain because they aren’t willing to serve their customers properly.
Today I will add another urgent suggestion to general trade publishers: reconsider your commitments to publish illustrated books in any time frame more extended than a year or two and think about sticking to straight text, unless you have paths to the customers for those books that do not go through bookstores. If we do end up in an 80% ebook world anytime soon, and we very well might, you’ll want to own the content you know works (for the consumer) in that format, not what you don’t know works any way other than in print.
Here’s that disconnect again. The independents know that illustrated books sell. So why can’t the Traditional Publishers sell them? It couldn’t be that the Traditional Publishers are overcharging, could it?
Meanwhile the Independent Publishers ARE selling picture books, and doing well. But they are selling them for a reasonable price. A price the Traditional Publishers refuse to match. A price the Traditional Publishers probably think that they can’t afford to match. Expect them to try to raise prices, and then look shocked when sales fall like a paralyzed falcon.
For children’s books, the key is brand. There will be demand for Eloise and Madeline and Alice in Wonderland for years to come, but the product and pricing equations could be totally up for grabs.
Actually it’s Brand (character and writer), and price. Try selling an Alice in Wonderland book for $999.99 and see how many copies you sell. Then try selling the same book for $2.99. Compare your sales. This is called Industrial Economics, choosing the best price, the one which will maximize profits. Often a really low price will drive sales to levels which are, well, unbelievable.
For any books Character and Writer drive sales. But if prices are out of line, the customer will walk away. Currently Traditional Publishers don’t seem to understand that their pricing is killing them. When you pick up something like Kat Among the Pigeons for $1.99, and have a great time reading it, why would you play $16.99 for something from a Traditional Publisher?
Or how about GroundTies – $0.99, UpLink – $2.99, and Harmonies of the Net – $2.99, the ‘NetWalkers: Original Series Kindle Edition by Jane Fancher. If you buy all three EBooks at those prices Jane earns $4.53.
If Warner still held the publishing rights on the ‘NetWalkers: Original Series books, and had published them as EBooks for $9.99, Jane would have earned $2.67 for a sale of all three books. But she would not sell as many books, so she would take a huge loss. Before anyone mentions how advertising would help Jane’s sales, tell me one thing. How much advertising have you seen for any books except best sellers? So how would this help Jane, who has never written a best seller, though she writes damned good books? Jane is on my permanent TO BUY list.
Mike Shatzkin is scary. If I worked where he works, I’d be looking for another job. He sounds so positively clueless that having someone like him in a management position means that the rest of management is just as bad. Because if they weren’t, they would have moved him to a less sensitive position already. Something like Janitor.
Yes, Dead Tree books can look pretty, and smell wonderful. But you can’t take a month-long cross-country trip without exceeding your weight allowance with Dead Tree books. You can with an eReader. Some eReaders do double duty. I use my iPad as laptop replacement (I have a Bluetooth keyboard for it), and as a portable gaming rig.
But convenience is the Killer App.
Saturday October 8, 2011
Disclosure: Almost all the people mentioned above beside Mike Shatzkin are either friends or acquaintances. It is my habit to recommend people I like, and I do so whole heartedly.
I should also mention that I’m in the last stages of editing a children’s bed time story book that was written by my mother-in-law, Ann Margetson, the Poet Laureate of the Temiskaming District. I have to call Mom tomorrow to get her feedback on my last round of edits, and then we will be uploading The Tales of Middleton Marsh on the Amazon and Smashwords platforms.