The Main Forces Shaping 21st-Century Book Publishing
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Mike Shatzkin, founder and CEO of The Idea Logical Company, has been an industry consultant for more than three decades. His blog, The Shatzkin Files (idealog.com/blog), is the source of this article and offers links to speeches and posts that document the evolution in his thinking in this area.
Four overarching realities are determining the future course of book publishing—scale, verticalization, atomization, and unbundling. All four are clear and inexorable.
Scale, like its close cousin “critical mass,” offers the ability to use size as a competitive advantage in any endeavor. Verticalization entails being in sync with the Internet’s inherent capability to deliver anything of interest in an audience-specific way. And atomization means any person or entity can perform the most critical component of publishing—making content available and accessible to anybody anywhere—without capital and without an organization dedicated to distribution. Unbundling, which will be covered next month, is the breaking out of the many services performed by traditional publishers in the course of publishing a book into offerings coming, sometimes individually, from many different players.
In the 20th century, scale in publishing had to do mainly with internal operations. Big publishers had more resources to acquire books, get them into bookstores, and roll out marketing than smaller ones. Barnes & Noble and Borders had supply chain and cost advantages over independent bookstores, except that Ingram and other wholesalers lent their scale to provide partial compensation. Bigger literary agencies negotiated more changes in boilerplate agreements than smaller ones and often had helpful relationships that went beyond publishing, but a single agent could still cultivate enough editors to place a book as effectively as the giants.
All that has changed entirely in the past 10 years. Now publishing operates in a world increasingly controlled by Amazon, Apple, and Google, all companies that make far more money outside books than through books. One of the Big Six CEOs observed to me about five years ago that the time had passed when they could call all their biggest trading partners and reach those CEOs instantly. Penguin Random House has merged into a publishing company that will control about half of the most commercial titles in the marketplace, but any suggestion that its size will enable it to dictate much to Amazon, Apple, or Google is deluded.
What Random House can do is apply scale against other publisher competitors. And it will.
Critical mass (which is also a component of verticalization) is a scale-related concept. When a publisher, or any other aggregator, has enough material to allow it to ignore competition in a consumer offer, it has achieved the effective barrier to entry that scale also provides. For example: Subscription models for general books are a very difficult commercial proposition because the biggest agents for the biggest authors wouldn’t want their titles included. But Amazon might just have so many titles to include in a subscription offering that it could do one successfully even without the top of the bestseller list.
The new Penguin Random House combination might also be able to do something here, if the avoidance of a third party could enable enough revenue to be shared with authors to change agents’ minds, even though they’d be doing it with just their house’s books. After all, Spotify was able to aggregate enough music to sell subscriptions even before it brought The Beatles into its catalog.
Another smart and relevant application of scale is by F+W Media (our partners in Digital Book World conferences), which publishes across a range of communities. F+W is able to offer each one the advantages of a direct retailing operation, because it maintains that capability through the scale of its entire operation. And F+W applies scale to its niches with its Web and event teams as well.
In the 20th century, most trade books reached their customers through bookstores. That liberated publishers to be largely audience-agnostic in their choices about what to publish. They could stick a memoir, a novel, a knitting book, a travel guide, and a kid’s pop-up book into the same box, and the bookstore would sort them out for the consumer, putting titles on the appropriately labeled shelves for shoppers.
In those days, the devotee of any subject from baseball to Italian cooking would think nothing of browsing the shelves of several different bookstores to find all the relevant offerings.
Those days are gone. Twice.
Thanks to Google and its competitors, the entire universe of offerings around any topic of interest is aggregated and can be surfaced very quickly. And bookstores and the staff and shelf space publishers formerly used to sort things out are disappearing.
All of this is driving publishers to be audience-centric in their thinking in ways that were never required before. If customers are reached via the Internet and not bookstores, it becomes evident pretty quickly that marketing all over the lot with your subject matter or genres is highly inefficient. Until recently, it didn’t matter to publishers if they had the “next book” for the person who bought the last book. But it surely does when a publisher has spent good marketing money and effort to find and reach that person, and when the publisher can often stay in touch with the person in a cost-free (or at least very low-cost) way going forward.
It is in audience-centric marketing that scale can be applied successfully today, using size and resources to improve the ability to reach out rather than to lower the unit cost of some internal mechanistic function.
Understanding the reality of verticalization should also prompt publishers to rethink the way they define and build brands. Imprints are brands within a publishing house meant to communicate to their trading partners: bookstore buyers and reviewers in one direction and authors and agents in the other. In a vertical world, brand-building should be much more audience-centric. This particular requirement to think differently seems to be very challenging for publishers.
In the 20th century, it took capital and an organization to publish a book. While you always had to provide your own capital to be a publisher, ways evolved to “rent” the organization, specifically the distribution services offered by most publishers and some specialized organizations.
The barrier to entry for book publishing was always relatively low compared to other media: magazines, newspapers, radio, TV, and movies all required much more of a financial and organizational commitment than was required to publish a book. Still, there definitely was a fence around the book-publishing world, and the position of “gatekeeper” was both well earned and well rewarded.
But those days are gone too.
In April 2013, sales of any book of narrative reading will, depending on topic or genre, be 20 to 60 percent in e-books, which require no inventory investment and minimal distribution infrastructure. Sales of the printed books—the other 40 to 80 percent—will be anywhere from 25 to 50 percent through online channels. Those sales can also be achieved (largely through Amazon) without an investment in inventory, printed at the moment they’re ordered.
The first flood of opportunists exploiting this new reality featured authors who self-published. Some, such as Bob Mayer and Joe Konrath, took the brands they’d built through traditional publishing (and sometimes even the very books themselves) and created a new commercial model where the majority share of margin taken by the publisher was divided between them and the retailer, usually Amazon. Others, such as Amanda Hocking and John Locke in the early days and hundreds more since, built publishing brands on their own.
These authors were driven by the desire for recognition of their writing and, in some cases, by the conviction that they could make more money by self-publishing. Their existence in large numbers fueled the creation of an “author services” industry. The biggest and most profitable of the companies in that business, Author Solutions, was bought by Penguin a year ago (and, it happens, is now the defendant in a lawsuit). Amazon built CreateSpace to serve this market; Barnes & Noble and Kobo and Apple all offered varieties of the same set of capabilities.
Recently, we have seen a rush of other content creators—newspapers, magazines, Websites, and new companies dedicated to exploiting the book opportunity—building their presence as book publishers, or at least as e-book publishers. There are experiments with content types (short form, author-centric) and business models (subscription being a frequently tried one on which the jury is still definitely out).
But all of this is a precursor to the next wave, when every law firm, accounting firm, consulting firm, department of a college or university, retailer, service provider, and manufacturer will see the benefits of building the function of book publishing into its marketing mix. This will truly constitute an existential threat to book publishing as a business, because these entities will not be building their publishing programs with profits primarily in mind.
That will make it exceedingly difficult for the book-publishing business we’ve always known to compete. The quality they deliver costs money. The prices they need to charge are based on their costs. Their books will be in a marketplace competing with titles supported by other rewards and priced with considerations other than profit in mind.
The Future Through a Filter
Scale, verticalization, atomization. Examine any new proposition you hear about against the filter of those concepts, and I think you’ll have a pretty fair sense of whether it has much chance for success. Hitting two of those three marks is no guarantee of prospering, but failing to hit any would be a pretty fair assurance of failure.
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