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Earlier this week, the USA’s largest book publisher, Random House announced a change of terms regarding eBooks. They switched from the ‘wholesale plan’ to an ‘agency plan.’  By doing so, they joined the five other largest publishers with this plan. They comprise 65-70% of the published titles and closer to 85-90% of bestsellers. So an industry standard has been established.

Wholesale plan:  Based on the policies for physical books (esp. Amazon). The publisher establishes a “digital list price.” It is usually pegged to the retail price of the lowest print edition. The retailer generally pay 50% of this price to the publisher. The retailer is then free to charge the consumer any price they prefer. So if an eBook comes out when the HC is issued, it’s price would match. The publisher may put a $30 price tag on the HC and the same on the eBook. The publisher would receive $15 (50%). The retailer can price it at anything, many bestsellers were listed at $9.99. The retailer took the hit.  The revenue for the publisher was fixed tagged to the digital list price.

Agency Plan: Based in the policies for iTunes and established by Apple. The publisher establishes a “consumer price.” This is usually set at $9.99; $12.99 or $14.99 although there are many other pricing bands. The retailer is forced to charge the consumer the price set by the publisher. Under this plan, the retailer pays the publisher 70% of the price. The account takes 30%. If the consumer price changes, then so does the revenue that goes to the publisher.

When the iBookstore went live a year ago, five of the biggest six publishers changed their terms of sale to Agency. HarperCollins, Penguin, Macmillan, Simon & Schuster and Hachette all set the standard. Random House held out and their books were excluded from the iBookstore. But they were still available on Amazon’s Kindle and sold very well. After a year of holding out, Random House and Apple have come to an agreement and now 17,000 RH titles are available on the iBookstore. This is good for choice and consumers. But the prices on eBooks is rising because of it.

So, for most of the eBooks, prices are set across all retailers. Some feel this is a good thing. I am not as much a fan. I feel it artificially keeps prices higher than they should be. I would like to see price competition.

Now that the biggest publishers are all Agency plans, will the smaller, independent ones follow? Probably. It will depend on whether the retailers will accept it. Apple requires it, but it will be seen if the others do too.

These terms of sale issues are invisible to the consumer – and they should be. But publishers will now be responsible for pricing strategies. Historically this is a skill reserved for retailers. I believe publishers will create upper-level positions responsible for manipulating and dictating eBook pricing. Because the pricing is fluid and can be changed easily, publishers can start to experiment and track the effectiveness of price changes.

This is potentially a position that can earn (or lose) publishers millions of dollars each year.

It’s a brave new world. I love it!

My father always told me to never bring up politics and religion in conversation unless you wanted an argument. So I take a risk by discussing Ronald Reagan in this post.

 

I will start off by saying I have both Republican and Democrat friends. I believe the discussions in America are healthy and am glad people have the right to speak their mind. I am not happy with the anger and lies. I don’t like when the debate gets away from the facts and wild statements come out. That is not helpful and actually insulting to most people.

 

Ronald Wilson Reagan would have been 100 a few days ago. This brought on books, speeches and neo-cons continuing to build the “Myth of Reagan.” I am not saying this is bad. Americans need heroes. America needs to look back at figures and make them larger than life. To do this, they also need to ignore and alter the truth.

 

This has been done with all out heroes.  JFK’s disappointments outweigh his accomplishments, but the image prevails. Washington, Adams and all the founding fathers did great things but they also were just men and had their faults. Lindbergh had a secret family, Jefferson had children with his slave, Babe Ruth drank like a fish, etc.

 

My point is not to tear down these men. But to acknowledge that they were just men and had their flaws.

 

Reagan is looked at by Conservatives today as a great man. They want to name airports and roads after him and put him on a pedestal. People forget that he raised taxes 11 times during his presidency. He ran up record federal spending and debt. He sold weapons to our enemies (Iran) and financed an illegal war in Nicaragua. How can we forget his testimony in front of Congess where he said over and over, “I don’t remember.” I believe he was telling the truth, he didn’t remember.  All signs show that he had Alzheimer’s for most of the second term and possibly the first.

 

But he was THE GREAT COMMUNICATOR. He was an optimist. He made Americans feel good. He was a symbol of hope. So the policies don’t matter. The actions are not important. What is important is he made us feel positive.

 

Life is difficult. Times are hard. Leaders reassure us that things will be better. Leaders communicate that sense.

 

In that definition – Ronald Reagan was a great president. His myth will continue to grow. His negatives in office will be forgotten and the stories will continue to be embellished and white-washed. Is that bad? I don’t know. Today is what it is — there is no way to change it. No reason to harp on it.

 

As many have said the greatest role Reagan ever played was President. He looked the part. He was brilliant in it. He read his lines perfectly. He pulled it off.

 

People need heroes and heroes need to be created.

 

The Reagan Hero Myth is being created and that is just what it is.

In my previous post I mentioned some factors that have led Borders Books to the brink of bankruptcy.  The Borders executives have been in NY and talking with publishers for weeks.  I am not privy to any of those conversations but the general buzz in the industry is that this one is much more serious than previous years.

 

Who knows?  Borders death has been reported for the past five years.  They always seem to come out with enough financial backing to survive another year.  I hope that happens.  But if it does, Borders will need to change to survive.

 

Some suggestions:

 

The book retailing world has changed dramatically and all bookstores must adapt to survive.

 

1)  Selection is not what it once was — Borders prided themselves on having a great selection.  At one time that was an advantage. But physical bookstores can not compete with the selection on the Internet. Borders needs to cut back on selection and focus more on promotion.  I am not saying cut out all the backlist, but it does need to be weeded out.  What is the inventory turn?  How much money is tied up in wallpaper? I was in a Borders last week and they had at least one copy of every Sue Grafton mystery (A is for Alibi…).  She is on U.  Do they really need all of these titles?

 

2)  Get into the eBook game in a real way — Sure they are way behind in this space.  But this is the growth area in bookselling.  All they need is 2-3% and it will translate into millions of dollars.  Their current play is confusing.  They own 20% of Kobo and have contracted with them to run the eBook store on Borders.com.  That is fine, but I don’t see anything that makes me want to shop at Borders.com.  They need to specialize.  Also, I hope they are not making the same mistake as they did with Amazon and give away their best customers.

 

3)  Specialize in Children’s items — I like the entries into Children’s books.  The Build-A-Bear and American Girl relationships makes sense.  Borders can create the “go-to” place to bring children.  Parents are always looking for places to take their kids and if Borders can get front of mind for them, they will get repeat visits.  Sell books, videos, games etc.  Many criticized Borders for the Build-A-Bear relationship, but I think it brilliant.  Borders MUST break out of the “bookstore business as usual” to survive.  Building up Children’s is a key driver.  Make it a destination.

 

4)  Eliminate 400 stores — This may be impossible given long term contracts and agreements.  Over-expansion has hurt many retailers. But supplying all these stores with new merchandise doesn’t make sense.  I wonder if the 80/20 rule can be applied? 80% of the revenue coming from 20% of the stores.  If they can not get out of the additional leases, maybe Borders strips them down and sells remainders? There are warehouses of dead stock that could be cleaned out.

 

These are just a few thoughts.  I realize the Borders situation is much more dire than this but somethings to ponder.

 

If Borders survives, they will need to do things differently.  There is no more business as usual because the world has changed and it will never be the same — ever again.

The book publishing industry has changed dramatically over the past three years.   Once it was dominated by the publishers.   They were the ones who controlled the content.   Publishers decided what would be published, what was “good”, what the price would be and where the books were to be sold.

 

Then the retailers started to get more influence and power.

 

First came the mall-based chains, Waldenbooks and BDalton’s.  At their peak, there were over 2,000 combined locations.  The rise of the “mass market hard-cover” was born.  Authors like Danielle Steel, Stephen King and Tom Clancy benefited.  Their books were in the front of every store in every mall in America.  Also, genres like Romance, Mystery and Science Fiction all exploded in sales.

 

Then as the mall stores waned, the corporate Superstore was born.   B&N and Borders led the way.   These stores were outside the malls (although some are anchors at malls) and carried 4-5x the selection of a mall store.   They also added in coffee and music and stationary.  The superstore model was dynamic and continued to grow for twenty years.

 

But, now both B&N and Borders are struggling.   The idea of selection is no longer having more in a physical book store.   Selection is online where there are unlimited options.   Selection is also starting to mean eBooks.

 

eBooks are the growth area for publishing.   But instead of the publishers dictating terms, the retailers are now in control. A battle is on for the reader and it is between three massive corporations.

 

Amazon — wants everyone to buy from the Kindle store.   Kindle is a closed system and books bought from other places are not allowed in.

 

Apple — wants to sell everyone an iPad.   Although they have their own iBookstore, they have allowed Amazon, B&N and others in.   So, although they want to sell books, it is more about selling hardware.

 

Google — wants to sell you ads.  They want to enhance the “Search.”   So, their goal is to sell that service and use the content inside books as part of the complete search function.  They will sell you eBooks too, if you want.

 

Will be interesting to see how this all plays out.  B&N nook, Kobo, Sony, and a few others are playing in this arena — and there probably will be a new competitor emerge.  But in the end, Amazon, Google and Apple have the deepest pockets.

 

NOTE:   In an effort to keep this post brief, I passed over the important impact of Department stores; Indies; Costco; Wal-Mart; Crown; Target in the evolution of book-selling.

The final month of the year is upon us.  2010 is in the final chapter.

 

It always seems like the year just passes by.   Before one notices, it is DEC and only 24 days to Xmas.   Have you started shopping yet?

 

The advent of on-line shopping has dramatically changed my habits.  I actually prefer to do all my shopping on-line if possible.   I don’t mind going into stores and browsing and people watching.  But I hate waiting in line.  I also always feel the prices must be better on-line.

 

I downloaded an App called “Amazon Price Check” to my iPhone.  It allows you to scan the barcode and will price check it against all offers on the web.   Well, maybe not all, but many of them.   I love this App.  It is a way for Amazon to use other people’s stores to sell their items.  But I use it more for the fun of scanning and seeing what the options are.

 

I hate trying to find the right size at stores.  So much of the time, you can find the style you want but it is a crap shoot getting the size.   On-line shopping is perfect.   The size may not be in stock, but it is easy to find out.   Plus the selection is dramatically better.

I was re-reading GREEN EGGS AND HAM to my daughter this morning.   I have probably read this book 1,000 times over the years (including many hundreds of times when I was a child).  I just love this book.   Dr. Seuss was a genius.   Not many books sell as many today as it did 40 years ago.

 

But what struck me about the book today is what a great sales-person SAM-I-AM is.

 

First he is selling an unappealing product.   Green Eggs?   Ugh!    But he persists.  The other dude (does anyone know his name?) is a grouch.  He doesn’t want to see Sam-I-Am at all.  He just wants to read his newspaper and to be left alone.   But Sam-I-Am insists.  Every time the other dude says no, Sam-I-Am comes back with a new option.  How about with a Fox?   In a Car?   He won’t stop.  He is relentless.

 

Finally, Sam-I-Am gets the other dude to try.   By now these green eggs and ham are soggy, cold and been near mice, goats and other vermin.  But the other dude still tries them.  And guess what?  He likes Green Eggs and Ham!!!

 

So, I want Sam-I-Am on my sales force.    But did the other dude ever try the ham too?