E-books Spark Battle Inside the Publishing Industry

Publishers want to maintain their disproportionate profit margins, writers want a larger share of revenue and readers want plentiful books at cheaper prices! A large order but one that is being brought into focus by the coming of the digital age and e-books.

Washington Post Staff Writer, Marion Maneker, nailed the archaic publishing industry in her article on 27 Dec 2009:

The evolution of publishing from print to digital has caused a schism in the reading world. There are now two constituencies: readers (and writers) on the one hand, and the publishing world on the other. And they don’t want to hear each other.

Readers want books that are plentiful and cheap, publishers want to preserve their profit, and authors want a larger share of revenue. The conflict has created a strident internecine battle inside the publishing industry. At issue are the price and timing of e-books, and who owns the rights to backlist titles. While publishers, agents and Amazon.com bicker, there is little time for conceiving new content that satisfies customer demand. If the book business doesn’t tune in to that demand, it could wind up as a transitional source for the e-readers.

We know that readers want content, because it’s clear they’re not dazzled by the device. Consumers have made Amazon’s limited and rudimentary device a hit, which speaks to their desire for books that are cheaper and easier to obtain. It surely isn’t the device’s design or functionality. Both are closer to the computer aesthetic of the 1980s than today’s digital world. The Kindle may have lots of titles available — but good luck using the device to decide what to read next.

But publishers have ignored this demand. In response, several conglomerates have aggressively moved to protect their legacy. Macmillan recently announced a plan to delay the publication of e-books and offer enhancements that will justify a higher price. This tactic is aimed at Amazon’s policy of trying to set $9.99 as the expected price for an e-book. Most are priced much higher — but that’s beside the point. Amazon and publishers are fighting over this fiction, not the reality. Because Amazon’s customers have made it clear that $9.99 is still too high for their taste. Most titles in the company’s list of top 100 Kindle bestsellers are priced below $9.99, and the most popular price point is $0.00. But publishers can’t hear this, because they’re a little distracted right now.

The New York Times recently played up friction between publishers and agents over the electronic rights to backlist books. Random House has sent a letter to literary agents claiming to hold these rights even though it lost a court case on the subject. But agent, e-book publisher and blogger Richard Curtis puts the issue in perspective when he points out that few books are actually at stake here, because electronic rights became a contractual standard in 1990.

The real battle here is not over who controls the backlist rights but what royalties the publisher will pay. Stephen Covey caused a lot of consternation at Simon & Schuster last week when it was announced that he was taking his best backlist titles and publishing them with RosettaBooks, the e-book publisher that tangled with Random House on the issue and won. RosettaBooks is offering Covey half of the publishing proceeds, not the 25 percent or less he’d get from Simon. Publishers want these backlist books to add dollars to their bottom line; authors want to get a higher royalty for the backlist titles because the publisher doesn’t need to make any further investment to generate sales. There’s not a lot of room here to meet in the middle.

The stalemate ignores an important shift that digital publishing accelerates. The success of the book business over the past two decades was about expanding the supply of books. Growth came through increased volume, more titles and more title availability. That’s the story of the six big conglomerates and the growth of the superstores. But digital publishing inverts that formula — its magic is in the way it meets demand efficiently.

Barnes & Noble discovered that recently when the first of its Nook devices landed in the hands of reviewers. David Pogue and Walt Mossberg have both judged it a dud. The device seems to be a great packaging concept (dual-screen reader) marred by sloppy execution (slow navigation and refresh rates) that may leave them forever playing catch-up. Just building a device is not enough to capture sales. Amazon’s advantage is its customer base and brand loyalty. BN’s was going to be better functionality. If the books-and-mortar giant cannot make the breakthrough, more devices are coming to market — and one of them will make a meaningful move forward.

This doesn’t need to mean the end of book publishing. Publishers can no longer be vast containers of intellectual property distributed in paper form to bookstores, supermarkets and warehouse clubs. But they don’t have to be: They can become highly selective distributors to bookstores, supermarkets and price clubs. That’s the lesson of the television, music and movie businesses.

But if the publishers want a role in the e-books business, they’ll need to get over it and get on with it, embracing lower-priced e-books with higher author royalties. That seems unlikely. Because it’s now clear that publishers just don’t want to listen to what their customers are telling them.