Are You The Peanut Butter?

I heard Brad Inman give a speech at O’Reilly’s Tools of Change conference, and he said trying to get stuff done in book publishing is like trying to swim through a jar of peanut butter. I nearly stood up and screamed “EXACTLY!” I have had the good fortune to work with a lot of entrepreneurs and tech people, and they are doing circles around my publishing colleagues because they don’t put up the roadblocks and draw the lines in the sand. If I had to guess, the peanut butter people have no idea what that means.

Here are 10 signs you might be……….The Peanut Butter:

1) You can’t think of anything to show for your work in the last six months.

2) You think your job is to prevent mistakes from being made.

3) You believe that the more people invited to a meeting, the more successful the meeting will be.

4) Meetings take months to schedule.

5) You would rather be “politically correct” and “cc everyone” than make something great happen.

6) You’re paralyzed by the concept of “scalable.”

7) You think you have the upper hand in nearly all business dealings , but deep down inside, in those quiet moments late at night, you know you’re losing “control.”

8 ) You resort to bullying tactics to get your way without ever considering what might benefit everyone.

9) You spend your days trying to figure out how to gain control.

10) You’re an information hoarder.

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Free Lunch, Anyone?

On the first day of 9th grade, my son came home to tell me about his Global class. The teacher had held up a dollar bill and asked the kids what it was. One said “money,” another said “a dollar,” etc. The teacher went on to explain that it was in fact just a piece of paper, and that the faith people put in that paper is what gives it value. That story blew my son away (and me too, in fact).

Cut to this week when I have been asked for more FREE things than I ever remember. In one week, I received the following requests:

  • Dozens of people (media, bloggers, and everyday ordinary folk) have asked for FREE tickets to a conference we’re hosting (And by the way, this conference business is supposed to be a revenue source because everyone wants their books for FREE these days. Turns out they want conferences for free too.).
  • A TV Show wants 140 FREE books for the audience members. This seems to be a standard request these days. I’ve never quite understood how the author and publisher benefit from this, but it is practically expected.
  • A blogger asked me for 100 copies of an author’s book for FREE to give away to his readers. He was writing a review. After much deliberation and hesitation, I agreed to 50 copies, which still seemed extreme to me.

At first I was appalled, and then I realized that maybe this is The Economics of Integrity…and maybe I should be going back to these requesters and making my own counter-requests…and maybe this is how the new economy works.

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I’ll Trade You Boardwalk for Hilary Mantel

Of all the many remarkable things to notice about the exchange between Amazon and Macmillan this past weekend, perhaps the most remarkable, at least from a linguistic point of view, is Amazon’s use of the word “monopoly” in their message to their customers yesterday. Yes, the company that has frightened the book business so badly with its attempt to create a closed system for e-book delivery on its Kindles said that Macmillan had a “monopoly on its titles.”  This nasty monopoly of Macmillan’s was forcing Amazon–now the David to Macmillan’s Goliath–to “capitulate.”

Whatever your point of view on this, the use of “monopoly” to describe a publisher’s control of its content is a bit overheated, no?  Maybe we can go back to calling it what we used to in the old days: “copyright.”

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It Was the Best of Times, It Was the Worst of Times…

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

- A Tale of Two Cities, Charles Dickens

Decades from now, when we look back at the book business in 2009, it seems likely that we’ll see it as a threshold year, one in which all of the signs were there for what followed. It was a year in which sales held steady (Nielsen Bookscan, which covers 75% of the market, reported that overall unit sales through December 20 were 724 million copies, only a 3% drop from last year—and adult hardcover fiction was up an amazing 3%), and a few authors were so successful (Stephanie Meyer, Jeff Kinney) that the fates of entire publishing houses were altered by them; however, it was also a year that saw publishing’s profit margins squeezed in perplexing new ways. It was a year in which some of the most highly-respected bestsellers (Audrey Niffenegger’s Her Fearful Symmetry; Andre Agassi’s Open; Edward M. Kennedy’s True Compass) were also apparently the year’s biggest money-losers for their publishers, due to their multi-million-dollar advances; at the same time, some of the books with the highest rumored advances (Dan Brown’s The Lost Symbol; Sarah Palin’s Going Rogue) were likely the most profitable. It was a year in which e-book sales increased exponentially, with the cherry on the sundae being Amazon’s announcement that they had sold more e-books on Christmas Day than p-books (though of course this was helped by all the people who got Kindles as presents and spent the day filling them); but it was also a year in which the prices charged for those e-books made them a threat to the health of the p-book retailers on whom publishers continued to rely, and possibly a future threat to publishers’ ability to make money on the e-book format itself, in spite of that format’s wonderful ability to eliminate the costs of production, distribution, and returns. It was a year in which the largest publishing houses slowed title acquisitions and reduced the number of titles they published, while one company—Author Solutions—increased its annual output to a remarkable 24,000 authors (even more remarkably, these authors were all paying for the privilege). It was a year in which review coverage of new fiction disappeared almost entirely, and yet one first novel (Kathryn Stockett’s The Help) sold more than a million hardcover copies thanks to word of mouth alone. It was a year in which publishers continued to spend exorbitant amounts of money on print advertising, in spite of data showing how ineffective such advertising tends to be, but also a year in which some publishers discovered the power of online media to reach niche markets at significantly lower costs.

What does this mean for the future? That for every trend there will be a counter trend. And since this is the time of year for Top Ten lists, here’s mine:

1. Trend: The large publishing houses will continue to reduce overhead as profits shrink in the years ahead. Counter trend: Publishers will be looking for mergers and acquisitions to compensate for those shrinking profits. The Big Six could be the Big Three within five years.

2. Trend: These companies will continue to focus more resources on fewer titles, using their strengths as large-scale marketers and distributors to publish brand-names. Title count at the largest houses could drop by as much as fifty percent over the next five years. Counter trend: At the same time, self-publishing (including partnerships like the one announced recently between Author Solutions and Harlequin) will grow exponentially.

3. Trend: Title reduction will be most significant for new talent, with the largest houses entrusting support of new authors to a handful of editorial imprints. The editors at those imprints–editors with proven ability to choose new material successfully–will increase in value. Counter trend: Editors whose job is to handle existing talent will find their roles diminished.

4. Trend: In terms of advances, the amounts paid for brand-names will continue to increase, with seven-figure or eight-figure acquisitions commonplace among authors with established track records. Counter trend: There will be an increase in five-figure acquisitions (perhaps with profit-share arrangements) for less predictable material. The six-figure advance—that dangerous neighborhood inhabited by books with lots of potential but few guarantees—will become a rare species within the decade.

5. Trend: E-book sales will grow exponentially, with the proliferation of new devices and applications for reading on smartphones, etc… Within five years, half of all reading will be done electronically. Counter trend: There will be a resurgence of appreciation for well-designed physical books, as keepsakes, gifts, etc… While e-books will create a downward pressure on pricing, there will be notable exceptions (as seen this year with Carl Jung’s The Red Book, in great demand at $195.00, or Thomas Keller’s gorgeous Ad Hoc at Home, a bestseller at $50.00).

6. Trend: As more consumers become e-book readers, demand will increase for the availability of e-books simultaneously with p-books. Counter trend: Publishers will try a variety of strategies to meet this demand while not undercutting their p-book sales, such as offering more expensive “enhanced” e-books at publication and plain vanilla, less expensive e-books several months later (the strategy recently announced by Macmillan) or by offering a variety of “bundled” discounts to purchasers of multiple formats (prediction: within five years, it will be common practice to give every p-book purchaser a “free” e-book version of that book at time of purchase, as is already the case in the music business, in which someone who buys a cd can also listen to that cd on other devices in digital form, without paying a separate fee).

7. Trend: Fewer and fewer books will be sold to publishers at “auction,” and that practice will disappear completely within five years, as more and more publishers realize that the “winner” in such auctions—the publisher willing to pay more to acquire a book than any of their competitors–is often actually the loser in the end. Sales will be made either by brand-name authors to their previous publishing company or by new authors to carefully chosen editors with strong reputations. Counter trend: Instead of auctions for the highest advance, there will be auctions in which a basic advance is established by the agent, with the auction winner being the publisher who bids the most in marketing committed to the book.

8. Trend: As the initial sale becomes less of the focus for authors, the agent of the future will become more of a business manager who handles every aspect of an author’s career, overseeing the author’s online presence, developing sources of revenue outside of book sales such as workshops and lecture tours, and acting as the author’s publicist in between publications. Counter trend: Publishers will create free-standing departments whose services can be purchased a la carte by authors, whether that author is self-published or published by a competitor who doesn’t offer such services.

9. Trend: As the Boomers lose their eyesight and their children become teenagers, demographics will favor books for young adults over books for adults. This is also the generation most likely to embrace a variety of online and offline formats, without feeling the need to choose one over another. Counter trend: While auctions and advances diminish for adult titles, they could heat up for young adult material as publishers bet big in search of the next Stephenie Meyer. (Prediction: publishing houses will soon have entire departments devoted to developing books about the undead.)

10. Trend: Every year for the foreseeable future, books will be purchased between Thanksgiving and Christmas about how to prepare high-calorie foods (a favorite from this year: Fat: An Appreciation of a Misunderstood Ingredient, by Jennifer McLagan). Counter trend: Every January for the foreseeable future, the bestseller lists will be dominated by books about how to lose the weight gained by eating those high-calorie foods. (Not much of a prediction, sorry…but I needed a tenth trend to complete the list!)

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Less Is More

Thomas L. Friedman (Fred R. Conrad/The New York Times)In “The Do-It-Yourself Economy” in yesterday’s New York Times, Tom Friedman wrote about how the “Great Recession” was forcing companies to take advantage of the “Great Inflection,” his name for “the mass diffusion of low-cost, high-powered innovation technologies,” giving a powerful example of a recently downsized marketing agency that had made a film for 20 percent less using online technology. There is a clear message for book publishers here as well, who have not only experienced a recent downturn in sales that led to layoffs across the industry, but also face a future in which e-book pricing will inevitably bring down revenues through traditional models in the years ahead. The “good news,” as Friedman calls it, is that technology has arrived that lets us move more quickly, with less cost and a smaller staff. We all need to find ways each day to embrace it–or be victims of the “Recession” without the “Inflection” that might save us.

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The Enemy of Innovation: The Phrase “prove it”

Check out Fast Company’s thought provoking Q&A with Roger Martin who explains why “you cannot prove a new idea in advance by inductive or deductive reasoning.” Martin cites A.G. Lafley at P&G as a rare example of a CEO who was able to look at the data provided by analysts, and then push it aside:

roger martin

Martin: When he first took over, A.G. Lafley at P&G was brilliant enough to realize they were missing a lot about the holistic consumer experience by sticking to things that were rigorously quantified. For example, when the company moved into beauty products, they were looking at face cream. And the scientists decided it must be about pore coverage. So they analyzed the hell out of pores and said ‘We can cover pores better than anybody.’ So when women in their research started talking about wanting to feel beautiful and desirable, they’d say, ‘Don’t talk about that. We don’t know how to quantify that!’ And they couldn’t understand why stupid women would go off to department stores and pay ten times more when they could cover pores just as well. Ten years ago, P&G couldn’t prove they could sell women billions of dollars of Oil of Olay face cream at $30-$60. They could imagine it, but not prove it. Lafley took it as a management challenge to see across the divide.

Fast Company: If you don’t have A.G. Lafley or Steve Jobs at the helm, how can you sell your organization on the idea of an intuitive leap instead of a scientific leap?

Martin: You don’t have to convert the whole organization to design thinking. Propose a little experiment–say, three months in length–where you test out a bite-sized chunk of a problem using this method. If you have a little success, be sure to then attach metrics to it. In that way, you turn the future into the past in a way they understand.

Click here to read the full interview.

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How Much Should Books Cost?

Book prices at Walmart.com

Image: Latest book prices at Walmart.com

The argument over book pricing started to heat up with Amazon and then BN.com offering e-books at $9.99; now that Wal-Mart and Amazon have started offering the top ten industry hardcovers for $10.00 each, that argument is reaching a boil. Beyond the news stories about this “price war,” there is a lot of traffic on blogs, Twitter, etc…about what this means for authors and publishers. For instance, on today’s “ShelfAwareness” Robert D. Utter of the Other Tiger bookstore in Westerly, R.I. says,

What ARE the economics? How much money are these two behemoths losing on each sale when costs are taken into account? What would the P&L and balance sheets look like for this model? At what point is their behavior illegal and anticompetitive?

To answer him briefly, retailers pay publishers roughly 50% of the suggested retail price for books. For instance, when Wal-Mart buys a $35.00 book from Scribner, they pay Scribner about $17.50. If Wal-Mart then chooses to sell that book for $10.00, they are losing about $7.50 per copy sold. So, the “P&L” doesn’t look so good in this case for Wal-Mart, but clearly there are larger agendas involved for these companies, who are willing to use these books as “loss leaders” to establish their predominance on the retailing landscape. Their behavior is not illegal or anticompetitive; in fact, it would be illegal for publishers to tell any American retailer what to charge for a book; that’s why it’s called a “suggested” retail price.

The short-term results of this price war are some losses for Wal-Mart and Amazon, and some brisk sales for the publishers whose books have been chosen. But the “road kill” here are the accounts who can’t afford to participate in the race—traditional booksellers. And in the long term, these large retailers may succeed in convincing consumers that $10.00 is the right price for a book, whether digital or physical. That would put an enormous squeeze on an already-squeezed business, since of the $12.50 we get now for a $25.00 book, we spend about $2.00 to produce each copy, about $1.00 to market each copy, and another $1.00 or so on freight and warehousing, etc., leaving us roughly $8.50 out of which we must pay the author (who would get $4.25 if this were a profit-share, or $3.75 if this were a 15% royalty) and cover our significant overheads, before we end up with a slim profit.

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Disney Hires Steve Jobs to Make Stores More Experiential: Booksellers Take Note

While most retailers are batting down the hatches for another dismal holiday season, Disney has enlisted the help of Steve Jobs to revamp its retail space. These new “entertainment hubs” will focus on interactivity and community and adopt Apple hallmarks like mobile checkout. Apparently employees can use iPhones to control giant Lucite trees. (The Times article notes that Disney’s theater idea is a clear extension of Apple’s lecture spaces.)

Jim Fielding, president of Disney Stores Worldwide, leading a tour [photo by Stephanie Diani for The New York Times]

Yesterday’s article made me wonder if there is  a shoestring equivalent for bookstores? Indeed bookstores have always been community spaces, and one doesn’t have to look very far to find examples of young booksellers who are trying to push them (back) in that direction. I’ll be interested, for example, to see what kind of events/ open mics/ classes Jessica Stockton holds at Greenlight Bookstore which opens its doors next week in Fort Greene (we’re rooting for you Jessica!). 13-foot-tall Lucite trees sound pretty cool, but at the end of the day creating a unique space where people want to hang out doesn’t necessarily require battery operated equipment. Or does it? I am curious what people think adds to the bookstore experience -

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Freedom’s Just Another Word for Nothing Left to Lose

NYU's Media TalkI’ve been thinking a lot about last week’s panel discussion about free versus paid content, moderated by Chris Anderson, author of “Free.” The discussion moved primarily between two points of view; Chris’s view that media companies should be much more aggressive in their experimentation, giving more content away in order to sell “premium” content (he said that he should have titled the book “Freemium,” jokingly blaming his editor, Will Schwalbe, for pushing the catchier “Free”), while the panelists (John Sargent, ceo of Macmillan; Gary Hoenig of ESPN Publishing; and Alan Murray, in charge of online at the Wall Street Journal) were talking about the dangers of giving too much away. Alan Murray, for instance, was glad that the Journal had charged for its online content from the beginning, as opposed to the New York Times’s approach, because it’s very hard to go back from free to paid.

Even Chris had to admit that the experiment of giving away his most recent book for free in e-book form had been a mixed success. “Free” was given away to 500,000 people via various e-book platforms, but sold less than what Chris’s previous book had (“The Long Tail“). But as I told Chris after the panel, the problem wasn’t the experiment. The experiment was a great learning experience, and even if they sold only ten percent of the sales on “The Long Tail,” that would have been a success if the book had been done on a low advance/profit-sharing basis. The problem is when authors want to have their cakes and eat them, too…getting a large advance but wanting to experiment with free content models, or getting a large advance and then deciding that what they really want is more marketing. I love to experiment, too…but we should all benefit equally from the results.

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I <3 Groupable

groupableOne of my favorite new sites is Groupable. I found out about them on Mashable. Basically, they put together sponsors with groups. From where I sit, I can think of about 10,000 ideas for both sides of that equation. Lucky for me, Groupable’s fabulous Gerrit Hall is just a phone call (or AIM) away and responds to all of my ideas with enthusiasm and follow up (if only the whole world could be like that…).

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