The book may have a bright future in the digital age. But the road from here to there is badly lit and full of potholes in the view of publishing industry experts speaking at Wharton’s Future of Publishing Conference held recently in New York.
According to Alberto Vitale, a former Random House executive whose donations helped found The Wharton Lab for Innovation in Publishing, “Digital will complement and enhance traditional publishing. In a short time, it will make the economics of publishing a lot more attractive and compelling.” But getting to that point may require a remaking of the book publishing business as it stands today. Noted Judith Curr, publisher of Simon & Shuster’s Atria Books line: “Every part of the publishing function has to be reexamined.” She warned that publishers may have to take on unaccustomed roles. “We must be aggregators of information, entertainers, agents and managers. At the end of the day, money has to change hands.”
Traditional publishers are trying various experiments, but they are deeply concerned about protecting their existing revenues and author relationships. “We try to experiment aggressively, but it’s hard to ignore the fact that 95% of the revenue is print,” said David Steinberger, president and publisher of Perseus Books. “Start-ups aren’t burdened by having to protect that legacy revenue.”
Al Greco, a professor in Fordham University’s business school who tracks the book industry, predicated that “we are going to remain a print business” for some time. He calculated that the average American over 18 spends $110 a year on books, meaning it would take more than two years to cost-justify buying a Kindle. “It’s clearly not the case that print is dead. At some point in the future, digital books will replace print, but not quickly.”
The positive news for publishers is that digital models will slash costs and expand reach. Said Vitale: “For over 600 years, there was only one way to publish. Now we have an alternative to Gutenberg.” Publishers must be creative and experimental, but he foresees the industry doubling in size. Hardcover books, in particular, will continue to be printed, but they “will become much more expensive, more precious and better produced.” Hardcover revenue won’t decline much in the model, he suggested, but he foresees a big increase in the number of units sold, led by cheaper electronic books for the mass market.
In contrast, Atria’s Curr doesn’t think that “we will see huge growth,” and she predicted that “the money that exists will be shared among more people” because there are so many new entrants with different ideas for selling books. The digital revolution has made it easier for anyone to publish a book electronically or in very small print ruins. Last year, there were 288,000 titles published in the U.S., according to Greco. “If content is king, we have too much content. That’s not good for publishers or book retailers.”
Steinberger, whose Perseus Book Group is an independent company that works with a number of imprints to enable publication and sales, said the digital disruption will make it easier to reach consumers and make it worthwhile to create niche products. Amazon.com, with its print-on-demand capability, has demonstrated to publishers that backlists have more value than once believed, he added, noting that many publishers have hundreds of books that sell only a single copy a month.
Electronic editions are becoming common in some segments of the industry. According to Greco, professional and scholarly books are increasingly digital. The major educational publishers have more than 10,000 titles available electronically at 51% of list price, while McGraw-Hill has reported that 15% of its higher education and professional sales are eBooks. By 2015, “all higher education textbooks have a good chance of being eTexts.”
The Future of Publishing conference was sponsored by The Wharton Interactive Media Initiative, Knowledge at Wharton and Wharton School Publishing.
Killer App in Book Retailing
Even some general readers are adopting eBooks. Curr of Atria books pointed out that “the community that is really good online is the romance readers. It’s easy and it’s less expensive for them” to buy electronic books. It still isn’t clear what device consumers will use for reading. Greco asked a number of college students if they were interested in the iPad; most responded that they would use their laptops for reading textbooks. Some 30 different electronic readers are expected to be on sale by the end of this year.
At the moment, Amazon’s Kindle is “the killer app in book retailing,” said Peter Hildick-Smith of market researcher Codex Group.”It is bringing in the best readers and the best buyers, and capturing those.” Kindle buyers increase their purchases by 11% after they buy the device, he added. Yet despite Amazon’s lead, “we expect iPad penetration to exceed Kindle by the end of the year.” Some buyers won’t be using the iPad to read books. But early adopters of the iPad are also heavy book readers and big consumers of magazines and newspapers, according to Hildick-Smith.
None of the devices is likely to help bookstores, however. Indeed, eBooks could accelerate the decline of bricks-and-mortar retailing. Hildick-Smith suggested that “if big retail chains feel declines in retail traffic and close more and more stores, that will change the game.” The demise of the bookstore is a huge problem for the book industry. “Historic research shows that when people go into a bookstore, half the books they get are unplanned purchases,” said Steinberg, adding that it isn’t clear what will create that sense of discovery online.
Historically, a publisher’s army of salespeople and relationships with book-sellers have been a big part of its value. But in the online world, the bookstore relationship isn’t important. “A big problem for book publishing is that nobody buys a book because it’s from Random House,” said Andy Hunter, editor in chief of Electric Literature noted that independent publishers can create online communities that will steal readers from existing publishers. “Publishers need to get identities and create boutique imprints to create online communities.”, a quarterly online and print literary magazine. Hunter
Currently, many publishers’ business models are driven by a need to create blockbusters. That approach involves a high risk of giving big advances to authors and spending heavily on marketing and production of hardcover books to fill the pipeline. But because a few huge hits subsidize the rest of the business, publishers pay up to improve their chances of having that happen, especially by bidding to publish best-selling authors. Ellen Archer, president of Walt Disney’s Hyperion Books, said she found that in 2009, when there were 107 books that sold more than 100,000 copies, only four were written by authors who hadn’t previously had best sellers.
But in the digital world, “the traditional blockbuster approach feels riskier than ever,” Steinberger said. As the number of bookstores diminish and core readers buy digital books, the ability to market a blockbuster by placing hundreds of copies in every Walmart, Borders and independent store is less valuable. Digital-book piracy is also a source of fear for publishers, especially those with timely books or sequels that are hotly anticipated. “If a Harry Potter[book] leaks somewhere in the world, no fan will wait two weeks for the official publication,” said Hunter.
Physical Inventories
Former Random House editor Jason Epstein had an even bigger worry. “I’m concerned about the fragility of content in digital form. In theory, it could all be wiped out by a sunspot or some future Hitler who would delete the whole thing.” Epstein, who is now chairman of On Demand Books book machine, a digital press designed to print books in malls and book stores, noted the importance of keeping physical inventories., a maker of the Espresso
Trade book publishers, far from being cautious about changing their model, have tried numerous experiments to take advantage of the new digital world. For example, Steinberger said that Perseus created the book Wing Nuts:How the Lunatic Fringe is Hijacking America with online aggregation site The Daily Beast earlier this year. The book included online columns by its author, John Avlon, and was put between covers and published in eight weeks. Curr pointed out that Atria Books has created four digital “Vooks” — electronic books in which video is an integral part of the story. “Sales have been modest,” but Atria is continuing to work on the format.
According to several publishers, the Internet and digital publishing offer new promotional opportunities. Atria created an iPhone app for best-selling author Jodi Picoult. The 99-cent app features occasional Twitter feeds from the author, updates on her book tour, and videos. The day that Picoult’s latest book, House Rules, came out in March, Atria let anyone download it free. It also used Facebook to get 425 fans around the world to host parties where attendees received coupons to buy the book for half price at Barnes & Noble. The book debuted at No. 1 on The New York Times best seller list that week. Ironically, Atria won’t sell it on the Kindle for six months because of a dispute with Amazon.
Archer said that two of its books by first-time authors became best-sellers with major online promotional help. The Physick Book of Deliverance Dane, a novel related to the Salem witch trials, had a “big digital push prior to publication,” she said. It was selected by Barnes & Nobles’ First-Look reading clubs, which get advance copies of books and often promote them online.
Another Hyperion best-seller, Heat Wave, was supposedly penned by Richard Castle, thriller-writing protagonist of an ABC TV show. The first half of the book was unveiled online, chapter-by-chapter, over several weeks. After the show was picked up for fall release, Hyperion published the full book in hardcover, and it has now sold more than 200,000 copies.
To some of the panelists and speakers, the current tumult foretells a return to other earlier models of book publishing. Epstein predicted that much of the sales and marketing infrastructure in the book business will prove superfluous, and that small groups of editors with expertise in specialized areas like trout fishing or Keats will coalesce and attract like-minded authors and readers to their websites.
According to Jim King, senior vice president of market tracker Nielsen, “lots of things that are happening now were happening in the 18th century. Book shops were publishers. Piracy was rampant. The new technology revolutionized content.” And “the feedback loop was very quick. Samuel Johnson would finish an essay at 3 a.m. By 3 p.m., it was being discussed in the coffee shops.”
For more coverage of The Future of Publishing Conference:
Will Newspaper Readers Pay the Freight for Survival? Knowledge at Wharton
Changing Times at The Washington Post: Engaging Readers, Enhancing Content
