An American Editor

January 21, 2010

A Modest Proposal III: Dying Days of Giant Publishers (Part 2)

In yesterday’s post, I gave four reasons (five if you want to count returns separately) why the giant publishers are on their funeral march: they are too big to react quickly to market conditions; they haven’t learned the Dell lesson; they let others sit in the catbird’s seat of deciding industry policy; and they haven’t come to grips with who are their future customers. Essentially, the giant publishers are early 20th century behemoths who have yet to adapt to 21st century technology and consumers.

These are interrelated problems, all stemming from the same root, which is the giant publisher having ceded industry leadership to outsiders.

In a way, the Dell lesson — Tell the customer he can have it his way and then limit the options — was tackled in my end-the-paperback proposal. Publishers have to learn to create their markets, not be led by markets imposed on them. This is the difference between Amazon, Apple, Google, and the giant publishers.

Amazon led the market by creating the Kindle and Kindle editions, and Apple and Google are inventing their own book markets. The giant publishers are trying to catch up. But Amazon (soon to be joined by Apple and Google), by leading the market defined it and is setting the terms. Amazon is also applying the Dell lesson: You can have an ebook in any format you want as long as it is a Kindle format. The giant publishers, who should have led, instead fumbled so badly that they are in disarray over how to catch up. More importantly, perhaps, for the publishers is that Amazon is turning them into the bad guys in the public relations war for the consumer soul. It’s the problem of the giant publishers being a sumo wrestler when a ballerina is needed — and not recognizing the problem.

To survive the days ahead, the giant publishers need to lead the marketplace, not follow it. If it is true that ebooks are the wave of the future, then publishers need to grab hold of this market and lead it or prepare their funeral pyres.

Publishers need to gain the upper hand in the pricing, geographical, DRM (digital rights management), and format wars. They have started by slowly adopting ePub as the uniform format, but otherwise are in disarray.

My solution: Create an international book repository owned and operated by a consortium of publishers!

Publishers should unite and create a single international repository for every ebook published by member publishers and by self-publishers. Membership should be open to all ebooks with an ISBN. All books would be kept on the repository’s servers. Consumers would buy a book once from a bookseller such as Smashwords or Barnes & Noble, but then be able to read the book on any device they own, without the need to transfer the book from device to device.

Publishers would create a single software system so that if a buyer started reading a book on his dedicated device at home, he could continue reading from the place he bookmarked on his smartphone while commuting to work, on his computer during lunch, on the smartphone for the commute home, and on his dedicated device at home. The repository would also give consumers the option to download a copy of the purchased book to a single device, just as is done now.

This would benefit both consumers and publishers in multiple ways. Here are a few: Because the books would be held remotely, they would be device agnostic. Publishers could use a single uniform format with a single uniform DRM scheme that every device manufacturer could use royalty free. Publishers could enable consumer sharing on a book-by-book basis by allowing, for example, the book buyer to give some number of named individuals access to the book, giving buyers some reasonable ability to share ebooks; different books could have different sharing limits. Consumers could buy a book and access it anywhere at anytime on any device capable of displaying the text — today, tomorrow, and for 99 years into the future. 

The idea is not to replace booksellers. Rather, the bookselling world could continue as is but when an ebook is bought, access to the book would shift from the bookseller to the repository. It could be done as “smoothly and flawlessly” as done now, even with automatic wireless downloading.  With the repository, publishers will lead the ebook marketplace and enhance their survival prospects.

January 20, 2010

A Modest Proposal III: Dying Days of Giant Publishers (Part 1)

In two earlier Modest Proposal posts (A 21st Century Publishing Model and Book Warranty) I offered suggestions for changes publishers could (and should) consider to their business model. The first proposal, to make ebooks the new paperbacks and to publish only hardcover and ebook versions of books, was not well received by consumers. (Interestingly, some of the most vocal opposition to demising paperbacks came from people who claim to only buy ebooks!) The second proposal was much better received, probably because everyone loves perfection and loves the idea that something comes with a warranty.

Now comes my third modest proposal, which begins with a prediction: The big, multinational book publishers have begun their funeral march. Within a decade or two, possibly sooner, there will no longer be giants of publishing; instead there will be a reversion to the preconsolidation era with numerous small (by comparison to today’s Hachettes and Random Houses) publishers dominating the industry.

Before getting to my suggestions about what today’s giants can do to stave off their funeral orations, let’s consider why they are now walking that funeral path. What follows are a sample of publishing’s self-destruct problems.

First, they are too big to react with grace and ease to changes in the publishing world. Imagine a sumo wrestler dancing Swan Lake. Decisions that need to be made quickly and locally cannot be made because there is always another corporate level to consult. It’s hard to survive when you need to turn on a dime but can only turn on a half dollar.

Second, they haven’t learned what I call the Dell lesson: Tell the customer he can have it his way and then limit the options. Dell always touted how customizable their computers were. Yet try to really customize a Dell computer — you can’t; Dell has limited options for particular computer models and you can’t take options from one model line to another. This is no different from what the automobile industry has done for decades. To get one feature you want, you have to buy an option package or do without. Or, better yet, cable TV. Few choices there. You pay for sports channels whether you want them or not. Unlike other industries, publishers let others dictate what they will do and offer. Publishers need to rethink this action model.

Third, publishers haven’t yet recognized where they are in the policy-setting chain. Although they should be in the catbird’s seat, instead it is the distributors and the retailers who drive publisher policies. What is the single most hurtful policy to publishers’ bottom line today? My guess is the returns policy. Who does this policy help: distributors and retailers because they do not have to pay for ordered product. No other industry has such a policy and no industry — including publishing — offers such a system to the consumer. This policy of returns for books started decades ago for a reason that was valid decades ago but is no longer valid or sustainable, yet publishers can’t stop killing themselves — it’s the fear of being first.

Publishers need to regain the catbird’s seat and immediately do away with returns. If, say, Random House were to unilaterally declare an end to the current returns system, most publishers would soon follow. Unlike computers and automobiles, there is no substitute for a Dan Brown best-selling novel that would give a competitor a leg up by keeping the return policy. Readers either want Brown’s novel or they don’t; no retailer is going to tell a customer that they can’t buy the Brown novel because the publisher doesn’t accept returns so the retailer won’t stock the book, but here is Joe Unknowns’ similar novel instead.

The returns problem highlights a fourth reason: Publishers are confused about who are their customers. Until recently, except occasionally, the giant publishers didn’t sell books directly to readers. Although the publisher has to produce books that readers want to buy, their immediate customers today are the middlemen between publishers and the readers. With the changes that ebooks are bringing to publishing, the giants will die on the vine if they do not rethink who their customers will be in the coming years and their relationship with them.

Alas, there is more to say, so this discussion continues in tomorrow’s post, wherein I reveal my modest proposal.

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