Publishing/Writing: Insights, News, Intrigue

10/13/2013

Books Don’t Want to be Sold for Free


Is publishing, as it was, doomed? Probably not completely, but many fear for the fate of publishing for good reasons. Hell, Barnes and Noble’s book shelf space is shrinking, being replaced with doodads for the desk, toys, magnifying glasses, etc.; the hopeful savior Nook is proving unsustainable and five major publishers have hefty payouts due to loosing their price-fixing suit!

But, in spite of all this turmoil, if you step back and take a broader view, books are not failing, falling or disintegrating pricewise as products of other cultural industries have due to the digital revolution.

According to Evan Hughes (who has written for such publications as The New York Review of Books, the London Review of BooksThe New York TimesThe New RepublicThe Boston Globe,n+1, and The Awl): “If you’re in the business of selling journalism, moving images, or music, you have seen your work stripped of value by the digital revolution. Translate anything into ones and zeroes, and it gets easier to steal and harder to sell at a sustainable price. Yet people remain willing to fork over a decent sum for books, whether in print or in electronic form. “I can buy songs for 99 cents, I can read most newspapers for free, I can rent a $100 million movie tonight for $2.99,” Russ Grandinetti, Amazon’s vice president of Kindle content, told me in January. “Paying $9.99 for a best-selling book—paying $10 for bits?—is in many respects a very strong accomplishment for the business.” 

In other words – books have a stronger cultural value and appreciation AND, therefore, staying power. Another reason books have fared better than their cultural cousins (music, movies, television, journalism articles) is ‘the book is so low-tech, it’s hard for technology to degrade it.’

To find out just how digital by-products such as disaggregation, bundling, piracy and other outside influences have crushed all the cultural products EXCEPT the book you will find the follow-on article from the New Republic by Evan Hughes indispensable and a great read:

Books Don’t Want to Be Free

How publishing escaped the cruel fate of other culture industries

You hardly have to wait in line at Barnes & Noble anymore. The cashiers stare into the middle distance, while on the sales floor, space for books steadily erodes. Instead: toys, magnifying glasses, doodads for the desk. Also: Nook devices, which are supposed to represent the future. Except the Nook division is actually doing worse than the stores themselves. Independent booksellers still have not recovered from the last decade’s brutality. And five major publishers just learned that, as part of their settlement of a price-fixing suit, they’ll have to refund about $3 for every electronic copy of a New York Times best-seller that they sold over a 25-month period. Reasons to fear for the fate of publishing are not difficult to find, and neither are the prophets of doom.

Step back and look at books in a wider context, though, and the picture changes. If you’re in the business of selling journalism, moving images, or music, you have seen your work stripped of value by the digital revolution. Translate anything into ones and zeroes, and it gets easier to steal and harder to sell at a sustainable price. Yet people remain willing to fork over a decent sum for books, whether in print or in electronic form. “I can buy songs for 99 cents, I can read most newspapers for free, I can rent a $100 million movie tonight for $2.99,” Russ Grandinetti, Amazon’s vice president of Kindle content, told me in January. “Paying $9.99 for a best-selling book—paying $10 for bits?—is in many respects a very strong accomplishment for the business.” At the individual level, everyone in the trade—whether executive, editor, agent, author, or bookseller—faces threats to his or her livelihood: self-publishing, mergers and “efficiencies,” and, yes, the suspicious motives of Amazon executives. But the book itself is hanging on and even thriving. More than any major cultural product, it has retained its essential worth.Of course, publishers think that $9.99 is still too low for popular e-books, an assessment that drove their ill-fated effort to work with Apple to take control of what they cost. (After racking up legal bills that “look like the unit sales numbers of Fifty Shades of Grey,”as one of their CEOs put it, the houses settled anyway and incurred that $3 penalty and a raft of other punishments.) It may be that a higher price would be more equitable. But other media still have reason to look at the relative economic health of the book with envy. Putting together an album requires not just the talents of the musician, but expensive instruments and recording equipment, costly studio space, and a team of engineers and technicians. Each edition of a newspaper consumes enormous resources. Movies and television involve sinking millions into performers, crews, and effects. Yet audiences have come to believe they should get all that on the cheap, if not for free. Meanwhile, books—not as complex a production—have held up much better.

Continued at article source

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02/12/2012

Publishing 2011 & 2012: Some Business Trends and Surprises


Publishing Industry Mergers Equals Growth

Media M&A (mergers & acquisitions) were up in 2011. 896 deals were done representing $47 billion dollars in value (damn, who says publishing is dying?). When M&A is up in an industry I believe it is indicative that value and growth is trending positive and money is flowing and churning!

Bottom line: publishing is NOT hurting. Some think it is because these figures don’t come close to the banner year of 2007 ($104 billion in deals done!) … Sounds like a bunch of spoiled greedy bastards to me 🙂   

But, the publishing industry (including, of course, digital) is growing and trending positive and the outlook for 2012 looks to be even better according to JEGI (Jordan Edmiston Group Inc.) , a leading independent investment bank for media, information, marketing services and technology.  

This insight (with charts breaking out the industry sectors) is from FOLIO Magazine by Bill Mickey

Overall Media M&A Up 9 Percent in 2011

Marketing and interactive services drive growth with 32 percent of total value.

The media M&A market saw its third year in a row of growth, closing out 2011 with a 9 percent increase in total value over 2010, according to a year-end report by The Jordan, Edmiston Group.

There were 896 deals done, says the investment bank, 15 more than 2010 and more even than in the blockbuster year of 2007. Total value, however, still hasn’t come close to that year. In 2011, the deals represented $47 billion in value, up $4 billion from 2010, whereas 2007 saw $104 billion in deals done.

A key trend in 2011 was marketing and interactive services, which represented 32 percent of total deal value and accounted for 17 of the 32 biggest deals, and a third of total transaction volume.

And while expectations remain high for private equity, strategic buyers were decidedly more acquisitive. Out of the 32 largest deals (more than $400 million), 24 were done by strategics.

Sector by sector—JEGI tracks 10—exhibitions and conferences recorded a 249 percent increase in deal value over 2010. There were 32 deals totaling $451 million. JEGI points out that the fourth quarter marked quite a bit of activity from strategic buyers, with UBM, Bonnier, Diversified Business Communications, PennWell and Reed Elsevier making deals.

Consumer magazines also had a busy year with 32 transactions valued at $3.2 billion, a huge jump over 2010’s $214 million deal value.

B-to-b media was comparatively quiet, recording only 14 deals and $50 million in value—a 62 percent and 91 percent decline from 2010, respectively. B-to-b online media and tech, however, spiked appreciatively in value. The year’s 63 deals were 2 more than 2010, but value jumped 132 percent to almost $6 billion.

Interestingly, mobile media and tech declined slightly in volume with 72 deals done in 2011 versus 77 in 2010, but value jumped 37 percent to almost $2 billion.

John’s Note: Before I send you to the parent article I want to define a couple business/investing terms for those that may not readily recollect them for convenience and better understanding:

EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization

Strategic Buyer – A buyer in the same line of business who wants to buy and hold.

Financial Buuyer – A buyer (usually from a Private Equity Group [PEG]) that wants to buy low and sell high.

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11/14/2011

Publishers Are Going To Loose Not Only Their Retailers But Their Authors In The Future


"Where have all the authors gone???

How you ask? Let’s get to it.

It’s no secret Amazon has been selling digital books at a loss to gain more sales for its Kindle family. The strategy is simple enough … they need product (books or written content) to sell on their hardware e-readers which is where they make their profit. And they will give the product away, if necessary, to provide the widest selection available on its Kindle r-readers. 

Amazon wants the biggest catalog available to choose from.  And for those who are premium members (own Kindles and not some other product with a Kindle app … plus belong to the $79/yr Amazon Prime service ) they are indeed offering books for free from their library. You can borrow one book free a month and keep it as long as you want. 

Virginia Postrel tells all about it in Bloomberg Businessweek:

Amazon E-Library Is Publishing’s Profit Model

Nov. 14 (Bloomberg) — Amazon.com Inc. is at it again. To the consternation of much of the book industry, the online giant is again offering digital titles for less than major publishers think books are worth. And this time, the price is zero.

If you own an Amazon Kindle, as opposed to just using the Kindle app on another device, and you also belong to the company’s $79-a-year Amazon Prime service, you can now “borrow” one digital book a month from the new Amazon Lending Library for free. You can keep the book as long as you want, but you can have only one at a time.

The new service worries Wall Street, too, because it increases Amazon’s out-of-pocket costs. The company is paying wholesale prices for some of the books in the lending library. For others, such as the titles from Lonely Planet travel guides, it is paying a flat fee for a group of books over a period of time. (It will report sales figures on individual titles back to those publishers.)

Beyond short-term earnings, however, the lending library is just the latest innovation to raise big questions about the whole publishing ecosystem. In an environment where books are increasingly digital, what’s the most effective way to create value for readers, for authors and for intermediaries? And — the biggest question — which intermediaries will survive the transition?

Big Six Balk

The lending library doesn’t include any books from the Big Six U.S. publishers — Random House, Simon & Schuster, HarperCollins, Macmillan Publishers Ltd., Penguin Books Ltd. and Hachette — because Amazon can’t control what it charges for their digital books. They are undoubtedly relieved to be excluded. But the pricing control they value so highly reflects rigid arrangements they may come to regret.

Amazon used to pay publishers a wholesale price for e- books, just as it does for physical copies. It set whatever price it thought best for its overall business, even if that meant losing money on an individual title in order to boost traffic or sell more Kindles. It could adjust prices up or down to reflect new information or offer special promotions. Its standard price was $9.99, which was often less than it paid for each copy. Major publishers thought that was too low, but most couldn’t do anything about it.

Then came the iPad and the accompanying iBooks store. Apple Inc. struck a different deal with publishers, known in the business as the “agency model.” Publishers set the retail prices, with Apple taking a percentage for its services. The Big Six liked that deal and wanted it to be the industry standard.

Amazon resisted, going so far as to remove all the physical books from Macmillan off its site in hopes of forcing the company to continue the wholesale arrangement. But that sales strike alienated Amazon customers, who were angry when they went to the site and couldn’t buy the books they wanted. Amazon blinked.

As a result, most of the big-publisher titles in the Kindle store now sell for $12.99 to $14.99 each — a range Amazon called “needlessly high” when it capitulated.

I should say at this point that I am not an entirely disinterested observer. I’m an author, with two books available in digital form. And I agree with Amazon that, at $14.99, my 1998 book “The Future and Its Enemies” was priced needlessly high when its Kindle edition was released last spring. You have to either love me or your Kindle a lot to pay that much for a 13-year-old book you can get in paperback for $6. But, like Amazon, I have no say over how my e-book is priced.

Publishers, for the most part, don’t believe customers care much about the difference between Amazon’s old price and their new, higher ones. They’re skeptical that consumers respond to small price differences. A former publishing executive recently told me he simply didn’t believe that “if I really want a book for $9.95 I don’t also want it for $10.95 or $12.95.”

Look at Research

People in publishing say things like that all the time. While they admit that charging $100 for the typical hardback would be foolish, they don’t believe that changing the price of a book by a dollar or two will significantly change the number of copies sold.

The economic research suggests the opposite. In a 2009 paper that looked at consumers using computer price-comparison systems, or shopbots, to buy physical books online, economists Erik Brynjolfsson, Astrid Andrea Dick and Michael D. Smith found that a 1 percent drop in price — a mere 25 cents on a $25 book — increased the number of units sold by 7 percent to 10 percent. Shopbot users tend to be more price-sensitive than most consumers, but that’s a huge difference.

Publishers resist such evidence. The standard response is that it’s hard to know anything about pricing because “every book is different.” Every title is a unique good, and every customer values each book a little differently. So you might as well trust your gut.

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03/01/2010

Penguin’s U.S. Publishing Unit Is Profitable!…Bucks Industry Trend

Filed under: backlist books,eBooks,Penquin publishers,publishing profits — gator1965 @ 6:14 pm

Penquin publishers made good bucks in 2009 due to a surprise vampire bestseller and robust paperback backlist sales from known authors. This is a spot of sunny news in the middle of a publishing-profit drought! Must be good vision and leadership AND a little luck, huh?

Anyway, Matthew Flamm of Crain’s New York Business, reports this publishing-profit oasis this way:

‘The surprise bestseller The Help, Charlaine Harris’ Sookie Stackhouse vampire series and a spike in paperback sales of older titles allowed Penguin Group (USA) to shine as the star performer of parent Penguin Group, which on Monday reported 2009 revenue of more than 1 billion pounds, or about $1.5 billion, up 11% over the prior year.

The parent company’s gains were entirely due to a strong dollar relative to the pound. At constant currency rates, revenue fell by 1%. But sales were still up at the U.S. division over the prior year, according to Penguin USA, making the publisher one of the few American houses to see growth in 2009. A tough environment for retailers that has hit booksellers particularly hard has hurt the publishing industry overall.

Penguin Group, a division of Pearson PLC, does not break out the performance of its units, but it is generally considered that Penguin USA contributes about 60% of revenue.

“If we’d been thinking a year ago about whether we could deliver this kind of performance in 2009, we would have been pretty doubtful about it,” said Penguin Group Chief Executive John Makinson.

The breakout success of Kathryn Stockett’s debut novel The Help, which has 1.7 million copies in print, played a key role. But Mr. Makinson said that overall the division was helped by a wide range of best selling titles, many from well-known authors with proven track records, like Nora Roberts, Michael Pollan and Ms. Harris.

“This was the performance of a business that had thought quite carefully about distribution of risk, and wasn’t dependent on any one big bet,” Mr. Makinson said.

Penguin USA Chief Executive David Shanks also credited sales growth at the children’s division and double-digit growth for paperback sales of titles by brand-name authors like Patricia Cornwall and Ms. Roberts. Those backlist titles performed especially well in the bad economy.

“We felt and went about convincing our accounts that in a bad time, if people had money to spend, they were going to fall back on names they could trust,” Mr. Shanks said.

E-book sales, though still a fraction of the overall business, grew by 300%, year over year. According to Mr. Shanks, those sales also contributed to how well the backlist performed.

“We sold a lot of backlist e-books,” he said. “It wasn’t all New York Times bestsellers.”

Operating profit for Penguin Group fell 10% to 84 million pounds, or $125 million. At constant exchange rates, the decline came to 17%. It was attributed to restructuring costs at Penguin UK and the Dorling Kindersley division.’

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