Is The Book Industry Going To Get "Napstered"?

Before I retired from the publishing industry, I was a big advocate of eBooks-----in fact, if I were not sick, I would be managing my own eBook publishing company now. While I don't think eBooks will ever largely supplant print books----especially for fiction----I think they have a ton of potential for professional, scientific, and technical works, especially in subject areas where frequent revision is necessary. eBooks would also make sense for topics that are inherently "time limited," such as books on various software releases. It's doubtful anyone will need or want a Windows Vista book a decade from now, so why not distribute them in electronic form? Publishers and readers could both save money and trees with eBooks.

But one of my frustrations during my days as a publishing consultant was the emotional, irrational opposition to eBooks on the part of many publishing executives and managers. One fear is "piracy," the notion that people will download eBooks for free from outlaw web sites instead of buying authorized versions. Another, more deadly notion is that eBooks must be priced close to the list price of print editions lest eBooks destroy the market for print editions. Both of these are ridiculous ideas, but a surprising number of senior publishing executives treat them as if they came down fromn Mount Sinai on marble tablets.

I feel these attitudes will eventually cripple some book publishers, and Slate's Jack Shafer agrees. If you're in the publishing industry, you need to read his article.

More Upheavals In Book Publishing

Ya know, I got out of book publishing just in time. Sometimes I feel like an airplane passenger who arrives at an airport to connect to another flight, and later hears his original flight crashed shortly after taking off from the connecting airport.

Here's exhibit A from yesterday's New York Times. And despite the fey "everything's gonna be fine!" response at the end from the well known has-been Michael Korda, I suspect most people in book publishing today know the good times are really gone forever and things will never be the same again.

A lot of these changes are long overdue. In particular, the return on investment for sales conferences and trade shows such as BookExpo America has been very, very questionable for over a decade; they are more like class reunions, with plenty of opportunities for excessive drinking and extramarital fornication, than they are serious business meetings. In the professional and technical publishing areas I'm most familiar with, I've long questioned the effectiveness of spending to attend and exhibit at various professional society meetings. Two decades ago, I was at Academic Press and each month marketing would circulate sales reports showing how many books were sold at events like a regional meeting of biochemists. Now it might seem impressive to have sold $1500 of books in two days at such an event, but when you added up the travel costs of having an editor and marketing person attend the event and staff the booth, and then you did the math, and you realized Academic Press actually lost almost $2000 by exhibiting and selling books there. . . . . . . . . . witnessing that sort of nonsense firsthand is one of the things that motivated Carol Lewis and I to leave Academic Press to found HighText/LLH.

Robert Gottlieb, quoted in the Times article, is correct when he says excessive spending on travel and entertainment is "small potatoes" compared to other problems publishing faces. But the waste on travel and entertainment is symptomatic of the poor management found throughout much of the publishing industry. Exhibit B is this story from the Wall Street Journal. The author of that piece is an associate professor at the Harvard Business School, and it is more than a little worrisome that someone responsible for training the next generation of business leaders does not recognize the book publishing strategy she describes, with what seems to be approval, is actually nothing more than the strategy of a sucker at a Las Vegas blackjack table with all their chips bet on a hand, sitting on 17, and asking the dealer to hit them with another card. That's not a "strategy"; that's desperation!

The real problem with book publishing today is the number of parasites consuming the revenue stream from the end purchaser. There is the discount given to the retailer. . . . . . and the "co-op" payments to retailers to get shelf space for a publisher's titles. . . . . . and the additional discounts to wholesalers like Ingrams which service smaller booksellers and small orders from larger stores. . . . . and don't forget shipping and printing costs, both of which have grown faster than the list prices of books.

There is hope among some publishers the practice of allowing retailers to return unsold books for credit can be abolished. But doing that is going to be about as easy as getting a junkie off heroin. More promising would be a rapid expansion and use of print-on-demand technology to allow the same just-in-time inventory management techniques that many other industries are now using. The practice of sinking a lot of capital into printing a big inventory of books----and the costs of shipping, storing, and processing that inventory-----is something the book industry can't sustain much longer. Sadly, I see very few larger publishers willing, or able, to consider alternatives to the existing printing and distribution model.

Meanwhile, Google is moving ahead in digital publishing while most print publishers are passively watching. It wouldn't surprise me if Google isn't the largest "publisher" in the world in a couple of decades.

Speaking of Google, I am amazed and dismayed at how inept book publishers are in using tools like Google's AdWords and AdSense to direct web searchers to their titles. Try this experiment: enter the term "programming C#" in Google and see what you get in terms of ads on the search results. You get ads for contract C# programmers, C# programming seminars and classes, etc., but no ads for books on C# programming. Brain dead. . . . . . . . just brain dead.

Yet I wish I was in good health and able to work long hours, because there are sensational opportunities out there for entrepreneurs willing to embrace the digital publishing revolution. The iPhone appears to be emerging as a very potent eBook platform (more here). I look forward to seeing what creative, visionary publishing people will do with these new tools.

Digital Continues To Grow At Print's Expense

It's amazing how something that seems permanent and immutable can collapse in a very short time-----remember how the Soviet Union evaporated in just a few months back in 1991?

Something similar is happening in the print publishing business. Icons of print publishing are collapsing or staggering under the weight of increased competition and declining revenues.

The Tribune Company, publisher of the Chicago Tribune, Los Angeles Times, and other newspapers, filed for bankruptcy on December 10. Entertainment Weekly is rumored to be phasing out its print version in favor of its on-line edition. Newsweek is drastically cutting back its print edition in an attempt to survive, but some publishing industry observers think it's doomed-----perhaps as soon as 2010----no matter what.

The interesting thing in all this bad news is that its arrival should be no surprise; since the turn of the century, it's been painfully obvious digital was starting to take large bites out of the hide of print publishing. This post from Clay Shirky is a bit self-congratulatory but is also dead on-target------the changes now battering print publishing are the logical culmination of trends clear a decade ago. In a similar fashion, when I say wireless broadband will replace terrestrial radio, or that the huge bulk of technical and profesional publishing will move to digital, or that something like the iPhone will become the eBook reader platform of choice, I'm just extrapolating from trends that are well underway and have clear direction. It takes no special insight to notice these trends; you just have to be open to the notion that change, rather than permanence, is the normal condition of life.

Sadly, I think my beloved book publishing business is no better positioned than newspapers or magazines to adapt to the digital age, as this post illustrates. (Take a good look at some of those comments!) Oh, I know plenty of rank-and-file employees and lower-level managers who are fully aware of what's about to happen, but the executive suites in most larger publishers are filled with people who are convinced things can be just like they were back in 1988 if they just hang tough and wait for this wacky digital fad to run its course.

Most "crises" are entirely predictable and the logical summation of clear, obvious warning signals that are ignored until too late. Take, for example, this article from Business Week titled "What If GM Did Go Bankrupt?" A timely article, you say? Yes, but it was published on December 12, 2005. And GM's executives and employees have done absolutely nothing over the last three years to even begin honestly recognizing their problems, much less solve them. (And that's why I oppose any auto bailout; the Big Three execs and workers have spent years denying they have a problem and are utterly incapable of developing a viable solution in three months. A bailout will only postpone the inevitable reckoning for decades of collective foolishness. If Congress simply has to spend $15 billion, let them spend it instead on something like health care for uninsured children.)

I fear that many in the print publishing industry will, like GM, continue to ignore problems, deny they even have problems, until they crash head-first into fiscal reality. And when that happens, it's too late to change the outcome.

On the bright side, I think some major fortunes are going to be made by those who figure out how to use digital to meet their readers' (that is, their customers') information needs.

We're in for a wild ride. If you're in the publishing business, hang on tight!

The iPhone As An eBook Publishing Platform

Back in early 2005, I started a blog titled "Future of Radio" in which I discussed the coming revolution in radio and communications technology. One of my topic labels was "cellphonecasting," which was a term I coined to refer to phones with wireless broadband capability that could be used to receive internet radio and video streaming. Eventually, that morphed into my conclusion that one day we would carry around a sort of "universal communications device" that would be your mobile phone, have your MP3 and video files for entertainment, allow you to store photos, contact information, and other files, and would finally provide wireless broadband access to the internet.

I discontinued the "Future of Radio" after getting sick, but I was pleased to see the original iPhone validated the notion of "cellphonecasting" and a pocket-sized "universal communications device."

Elsevier gave me an iPod Touch last year after I left my consulting gig, and it was a revelation to use. I was struck by the clarity and resolution of the small screen, and had no trouble reading any of the web pages I accessed on it via WiFi. I mentioned to some of my friends in the publishing business that I thought something like the iPod Touch or iPhone could become an eBook platform. I also felt dedicated eBook platforms like Amazon's Kindle were not the way to go because most of us are looking to carry around fewer items, not more; multifunction devices like the iPod Touch/iPhone struck me as the way of the future.

That's why I found this post from Joe Wikert about his experiences with the iPhone 3G as an eBook platform very interesting. Note how his commenters are also reporting their positive experiences with the iPhone 3G as an eBook reader.

So what would I do if I were 30 and in the print publishing or terrestrial/satellite radio businesses? I would be preparing for a future in which almost everyone has something like the iPhone 3G and gets "publications" and "radio" through it.

For a lot of big, established media players, this is going to be a painful, perhaps fatal, transition. For budding entrepreneurs with energy, imagination, and boldness, it's going to be the opportunity to make a lot of money. . . . . . and I mean a LOT of money.

Given the current gloom and doom about the economy, that might sound a little crazy. But two of the greatest business success stories of the last 50 years, Apple and Microsoft, were started in the mid-1970s, in a similarly hostile-----if not worse-----economic environment. Anybody remember gasoline lines? A prime interest rate of over 20%? Double-digit inflation? It wasn't fun back then, boys and girls, but Steve Jobs and Bill Gates recognized what was on the horizon, took action, and won big. Heck, we started LLH/HighText back in 1990, and the economy wasn't exactly great then. But that's the best time to start something new because many of your potential competitors will be fearfully huddled in their caves, waiting for the storm to pass.

The same is possible today, and brains and the willingness to take a chance will be a lot more important than money and connections.

If I could be reasonably confident of being around two years from now, I'd be getting my ass into high gear to exploit these opportunities. As it is, I am going to make my next book, currently being written, available for the iPhone. If you're in publishing or broadcasting and are reading these words, what are you waiting for?

Whatever you do, or dream, begin it now. Boldness has genius, power and magic in it. Begin it now.----Goethe

Another Print Publication Goes Down For The Count

U.S. News and World Report is changing to a web-only publication. Can Time and Newsweek be far behind?

I'm glad I'm not 30 and intent on a career in print book or magazine publishing!

More Death Rattles From Print Publishing

The Christian Science Monitor is discontinuing its print version and going to a web-only version. (No word yet concerning the plans of its main competitor, the Muslim Superstition Merrimac.)

Seriously, that is big news------this is the first major (seven Pulitzers to its credit) newspaper to abandon print and opt for a 100% web version. The circulation of the Monitor had been in a steady decline, along with that of most other major newspapers. And newspapers are responding with staff reductions followed by more staff reductions. That's why I have to congratulate the Monitor for taking such a bold step to position itself for the future; it certainly beats the half-assed, emphasis on cosmetics approach of the floundering New York Times. ("I flew back from California in coach!! Oh, the horror of it all!!") And the financial markets and credit-rating agencies are starting to notice the problems of various media companies. Many print media companies are highly leveraged (that is, they are up to their asses in debt) and it is only a matter of time before some of them will be forced to liquidate assets, likely at fire sale prices which will drive down the value of media assets held by other companies. It will not be a pretty sight, and the closing of publications and job losses in 2009 are both inevitable. The only open questions are "how deep?" and "how many?".

None of this pleases me. My entire career has been spent in magazine and book publishing. I love the feeling of holding a physical book in my hands that I've written; I enjoy the tactile feedback I get from turning paper pages. But I'm a realist. Too much of the consumer cost of print media (books, newspapers, and magazines) is tied up in the printing and distribution of physical printed materials; consumers are tired of footing those bills. Advertising and ancilliary revenue sources can't close the gap. In fact, many advertisers have permanently migrated the bulk of their efforts from print to the web, and no upturn in the economy will reverse that trend.

For better or worse, a transition from print to electronic publishing has to happen; economics alone dictates it must happen. But I get this terrible feeling many in the print publishing world are not prepared, and are not preparing, for that day. There seems to be this unspoken hope that somehow, some way, it will be possible to ride out this crazy internet fad and one day circulations of newspapers and magazines, along with book sales, will return to their per-capita rates of the 1960s. All that's required is to hang tough, refuse to compromise "journalistic principles" (whatever they are), and eventually those people who insist on getting their news and information from the internet will come to their senses.

I understand what motivates those sentiments. I've tried for the past few years to figure out what the future of book publishing will look like, and I must confess I still don't have a clue in hell how it will shake out. I have this feeling it will eventually evolve into something where a physical printed book is only a small part of the total revenue mix. I suspect "book publishing" will morph into something involving a web site (with ads) where readers and others meet to to discuss the book content with the author and each other. eBook versions, supported by embedded ads, will be freely available and widely circulated. The web sites and eBook versions could include video and audio clips that can't be included in a print version. In a sense, a book might never be completed but rather continuously updated and revised as long as the readers (and author) care about the material. And print books could become something akin to a high-end souvenir, much like a team jersey or sweatshirt purchased during a trip to Texas Stadium to see a Cowboys game. (And those "high-end souvenirs" will increasingly be the product of print-on-demand technologies.) In my vision of the future, most author/publisher revenue would come from the electronic publishing side, and the print revenues would be strictly ancillary income, a reversal from today's revenue models.

And, as I've previously blogged here, maybe many authors will find it more lucrative to self-publish through Amazon's CreateSpace or Lulu.com than to go through established book publishers.

Again, I have no idea how any of this is going to be play out or whether I'm barking up the wrong tree here-----no idea whatsoever. All I know is that the tectonic plates under print publishing are shifting rapidly these days, and there are going to be some big winners, and big losers, over the next few years. There's a part of me that wishes I could be in a position to take part in this revolution, while another part of me is grateful I can watch this from the sidelines. If I were still in the print publishing business these days, I would be both excited and apprehensive about the future.

How To Turn $3 Billion Into $1 In Ten Years

The annual Frankfurt Book Fair is on. This is when book publishers from around the world are gathering in Germany to do a little business (mostly in foreign rights sales) and a whole lot of gossiping, eating, drinking, and cavorting. But increasingly events like Frankfurt and Book Expo America are starting to remind me of the masquerade ball in Poe's The Masque of the Red Death; yes, everyone's having fun at the party, but death is waiting for them just outside the gates.

Exhibit A in print publishing's decline: a little over a decade ago, Rupert Murdoch paid $3 billion for Triangle Publications, the publishers of TV Guide magazine. Last week, TV Guide magazine was sold for the princely sum of one United States dollar.

Think about that for a second-----almost $3 billion dollars of value in a media property evaporated in a little over a decade. Almost $3 billion!!!

While the case of TV Guide is an extreme one, the entire print publishing business is suffering severe financial problems and it's clear many (most?) magazines, newspapers, and book publishers are not going to survive in their current form. And other "legacy media," like AM/FM radio broadcasting, are also getting clobbered in financial operating results and the per-share prices of the companies that own them.

The big reason for this is the internet. It allows near-instantaneous global distribution of information at a near-zero cost. Barriers to entry are very low. The results were, in retrospect, inevitable. Newspapers are suffering because they are, in effect, "oldspapers"-----the most recent news in them is several hours old at best. By contrast, web sites can cover news that's only minutes old and they are invariably ad supported and free to visitors. It has been years since I read a print copy of, say, the New York Times or the Los Angeles Times, but I have both of their web sites marked and visit daily. But this means neither paper sells a physical copy to people like me, and the growth in ad revenues from their web sites has not been enough to offset the decline in circulation and ad revenues from their print editions. Other costs of the print editions-----like printing and distribution of papers-----have also been zooming, and the result is a terrible squeeze on the financials of both papers. (In fact, the office tower the New York Times owns is its most valuable asset now, more valuable than either the paper or the Boston Globe, which the Times also owns.)

The situation is similar for most magazines; their circulations and ad revenues have been static or declining while their associated printing and distribution costs have been rising. It's shocking to read a copy of Time or Newsweek at the doctor's office and see how thin such magazines are these days; they're more accurately described as pamphlets. And specialty book publishing, like technical and professional publishing, is getting squeezed by the amount of free information available on the internet. For example, I learned almost everything I know about ZigBee and WiMax from free "white papers" I downloaded from tech company web sites. A few months ago, Tim O'Reilly remarked that people looking to learn something like JavaScript no longer look for a book about the language. Instead, they search "JavaScript" at Google. In one of my last reports to Elsevier before I left my consulting gig last year, I said Elsevier and other technical publishers were facing a critical problem: how do you compete with tech companies that are distributing technical tutorials for free? Where can technical and reference book publishers add some value in the process? (I didn't have answers to those questions. I still don't.)

Ad revenues are being used to support most web sites, but ad revenues depend on the state of the economy and are now declining. Moreover, the amount of available ad dollars has not increased as rapidly as the number of publications, whether print or electronic, that depend on ad revenues; the pie hasn't grown as fast as the number of parties wanting a slice. Every media form that relies on advertising for a significant chunk of its revenues-----whether magazines, newspapers, or broadcasting-----is hurting now, and the pain is going to get a lot worse before it gets better. And I have this strong feeling a lot of publications and broadcasters aren't going to make it through this difficult stretch.

The financial prospects for many publishers and broadcasters are made worse by the huge debt loads many of their parent companies are carrying. Refinancing those debts will be almost impossible, with a big reason being the steep decline in the value of media assets. That was what really caught my attention about the TV Guide story-----if an established, "brand name" media property can go from a multi-billion valuation to almost zero in a decade, how much is any advertising-dependent media property worth these days? Are the values of such established media properties as Time and the New York Times equally overstated and illusory? What is their true value, and how much blood will be shed during the "price discovery" process? If media companies can't refinance their maturing debts, they will be forced to liquidate many of their assets, and the results won't be pretty. It wouldn't surprise me to read about a major daily newspaper or AM/FM station being sold for a TV Guide price in 2009. For those working in the media, and for the stockholders of media companies, it's going to be a rough journey in the months ahead. For those who had enough foresight to stash away some cash during the fat years, there will be bargains available. But they are going to need a lot of changes and "repairs" to realize their full potential in the digital age.

As for book publishing, especially for specialized professional, technical, and other niche publishing, a migration to print-on-demand inventory and direct sales to end readers-----cutting bookstores, Amazon, other retailers, etc., out of the loop altogether-----seems inevitable. In fact, authors of books on niche topics might be better served by self-publishing through Lulu.com or Amazon's CreateSpace and bypassing conventional publishers altogether. And while eBooks have been The Next Big Thing for over a decade now, eventually some standard for eBooks and eBook publishing will emerge, and that will definitely impact book publishing, especially for material that has an "expiration date" (say, like a book on Windows Vista) and is not the sort of book you will keep for years and re-read.

I have no idea how all of this is going to play out. All I know is that I'm glad I'm retired from the publishing business and can watch this from the safety of the sidelines!