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It was reported that Penguin has settled with the US Department of Justice on the price fixing eBook lawsuit. Penguin had previously mentioed that they would fight this and take it to court. But that was before they agreed to be absorbed into the Bertelsmann collective and merge with Random House. They need DOJ approval for the merger. Probably a good idea not to be fighting a lawsuit at the same time.

Last year, the DOJ decided that five US publishers and Apple colluded and fixed the price of eBooks. This “Agency-5” consisted of the 2d, 3d, 4th, 5th and 6th largest publishers in America. Only Random House (1st) was excluded. Random House wasn’t in the suit because it took a year for them to work with Apple. The publishers named were in with Apple at the onset.

Hachette, Simon & Schuster and HarperCollins all quickly agreed to settle.

Macmillan and Penguin were going to fight it.

Now only Macmillan is left.

Of the “Agency-5” or the “Corporate-6”, Macmillan is the smallest. They are also the ones who fight the most.

Macmillan fought Amazon on discounts and terms so much that the Seattle giant de-listed their books. No other big publisher was willing to fight that fight.

Now it looks like Macmillan is going at it alone again.

I wish them well.

Antifragile

12.08.2012, No Comments, Uncategorized, by .

Nassim Nicholas Taleb, author of THE BLACK SWAN and FOOLED BY RANDOMNESS has written a new book.

It is called ANTIFRAGILE – Things That Gain From Disorder.

Taleb is known for bringing his brand of questioning to business, life and the order of things. He enjoys the argument, He wants to be contradictory. For the real truth comes from challenging the status quo and not accepting what is obvious. He is a friend of mine.

I first met Nassim when I worked at Random House. I was new to the imprint and ordered about 100 different backlist titles. Books that all had consistent but slower sales histories, books that sounded interetsting etc. A random choice. One of the books was FOOLED BY RANDOMNESS. I opened it in the middle (again random) and started reading. I loved the book. The way it was written so that the reader could open it anywhere. The message resonated. I knew immediately we could sell more.

I spoke with our B&N, Borders and independent stores reps. Please talk it up. Place a few in the stores. The book went into stores and sales increased.

A year later, THE BLACK SWAN was published. At first glance, many didn’t want to understand. But enough people believed. Book was published. By this time Amazon was a force in the industry and their pre-orders continued to build. Although physical bookstore distribution was lower than expected, the book still debuted at #5 on NYT list. Stayed for years and has sold close to million world-wide copies.

Now, Nassim brings us ANTIFRAGILE.  Another concept that at first doesn’t make sense, but once you ponder it, it is crystal clear. The book was just published and hit the NYT list first week. I have not seen the numbers but my bet is the digital sales were enormous.

I am reading the book now. I am enjoying it.

Four years ago I was laid off. The chaos and disruption of digital had just started to rock the publishing industry and my position was eliminated. A few days later, I had dinner with Nassim and his editor Will Murphy. Nassim gave me advice. He said not to go back into a traditional company. He said that in a time of chaos it would be better to be on the edge and see the entire industry as a whole. By watching and consulting, I would better see the patterns and direction. That there would be lots of change and transformation in the industry. Some companies will fail. Others will succeed.

Some traditional publishers and book-sellers will die.

Some start-ups and new companies will emerge and thrive.

By watching the industry and being “antifragile” I have been able to adapt to the new world of publishing. Consulting has allowed me to work for over 20 entities from tech start-ups to industry organizations to traditional publishers to Fortune 100 corporations.

Thanks Nassim for the advice.

 

 

The Dirty Heads

11.28.2012, No Comments, Uncategorized, by .

The Dirty Heads are a reggae/ska band from Southern California. They have produced out two albums. They had a big hit on the Alt-Rock charts with LAY ME DOWN a few years ago. But I don’t listen to radio and had never heard of them until earlier this year.

How did I discover them?

I like to listen to Pandora Radio. I created a channel based on Sublime, Smashmouth and the Red Hot Chili Peppers. Most of the music consisted of songs that I already knew. But every now and then either LAY ME DOWN of STAND TALL would come on. At first, I didn’t pay much attention, but after a bit the songs started to stick with me. I checked and noticed it was from Dirty Heads.

I put it aside.

A month later I was on YouTube and just checking out videos. I stumbled across LIVE FROM DARYL’S HOUSE. A very cool channel that is hosted by Daryl Hall at his upstate NY house. He has various musical guests and they jam. Guess what? The two principals of Dirty Heads (Dirty J and Duddy B) were in an episode. They were doing the best version of Hall and Oates’ Rich Girl that I have ever heard.

I then went to iTunes and bought both of the Dirty Heads albums.

One of my new favorite groups.

But my discovery path was much different than it once was.

But that is the new, wonderful world we live in.

But I can’t find their version of RICH GIRL anywhere for purchase…

Penguin Random House

11.09.2012, No Comments, Uncategorized, by .

A few weeks ago, Random House parent Bertlesmann announced it was purchasing a controlling interest in Pearson’s Penguin Books.

If approved, this will merge the two largest US publishers.

There has been endless discussion about this and the impact on the industry. But this merger is nothing new. For decades, publishers have consolidated and gotten bigger.

Random House is made up of at least 100 different formally independent publishers. The last big leap was when Bertlesmann (who at the time owned Bantam-Double-Dell) bought Random House from billionaire Sy Newhouse. Random House was about 2x the size of BDD at the time. Both were big.

Penguin purchased Putnam a few years ago. I remember the merger and the years of integration well.

Looking at the other corporate publishers.

HarperCollins was Harper & Row. They were bought by Rupert Murdoch and the name changed. They also absorbed Morrow-Avon plus basically every big Christian publishing house in the nation.

Macmillan owns formally independent FSG, St. Martins Press, Holt and a variety of others.

These are just a few examples of the constant consolidation of publishers. It is only going to continue.

I speak with a lot of independent publishers. Many receive queries from the corporate publishers re: being bought. These are not the billion dollar deals but are still very significant. Many independent publishers were founded in the 60s and 70s. They are still owned by the founders. As the industry continues to dramatically evolve, many of these owners will sell. More consolidation.

Expect more and more consolidation. I read a lot that there will be a “Big 3” soon. But that not only considers the corporate publishers. Expect many independent and less than the biggest to merge too.

But…. just to end this on a contradictory note, even though there is this consolidation, it is also a great time to start a publisher. The barriers to entry have never been lower and the reading public never bigger. It just won’t be traditional. It will need to have as big a play for digital as physical. It will happen.

MAGA controls publishing

10.23.2012, No Comments, Uncategorized, by .

MAGA is four corporations that will control the future of publishing in America. Sure the big publishers still control the bulk of the content. But that is changing. These corporations control the access to the consumer. These corporations also have deep, deep, deep pockets.

Control of the delivery system is crucial. Amazon has shown how powerful this is by shutting off the valve when issues with publishers arise. None of them can survive without strong content…. but they control the roads.

Who is MAGA?

  • Microsoft
  • Apple
  • Google
  • Amazon

Microsoft invested $300-million in Barnes and Noble and now is a 17% owner in the new company Nook Media. Their device is the Nook HD. B&N and MSFT also are partners in the college bookstore division. Although Microsoft does not own the B&N trade bookstores, the Nook will continue to have a ‘special relationship.’ B&N superstores are the only national bookstore chain in America.

Apple just announced the iPad mini. It is aimed directly at the Nook HD, Kindle File and Google Nexis 7. Finally an Apple product that is close in price and size to these other smaller tablets. Apple has spent less time developing their iBookstore, but they do have 1.5-million titles. They also have a focus on education and text-books that the others do not.

Google has not been a player in the eBook retail world. Their partnership with the ABA and independent bookstores was a colossal failure. They aborted it in a year. Where Google is a player is the millions of orphaned books they digitized years ago. Finally all the lawsuits are settled (or appear to be) and soon they will be able to start to use in search and monetize. Google will continue to be important as they have millions of books the others may not.

Amazon is the big dog. They dominate eBooks and continue to create new models to sell books. Amazon is in first place but continues to pursue innovation. They have thousands of self-published authors that are selling books on their site. Millions of site that have books on them refer customers to Amazon via the affiliate program. Amazon is the undisputed leader.

So MAGA is in charge now.

Will there be room for another? Maybe. But there is definitely room for someone to carve out a niche where these giants have not seen. There is always hope and competition will come from places that will surprise the industry.

It’s a good time to be in publishing — even if the biggest companies in the Universe are fighting over the future.

 

Samsung appears to have bought every commercial on the MLB playoffs. So much that I am really tired of the “parents waiting in line for the iPhone” ad. I have seem each at least 50 times and it gets wearing.

But, maybe it is fatigue or maybe it is my disappointment in Apple, but I am actually considering a Samsung for my next smart-phone.

I have been an Apple phone user for three generations of smart-phones and as long as smart phones have been around. I love having access to all that data and rely on my phone for dozens of things. I need it and can never turn back to the days of my phone for “making calls.”

Why am I thinking of the Samsung?

  • I trust the brand. A few years ago I switched my TVs to Samsung from Sony. The quality is strong.
  • Bigger screen.
  • Assume it is more reliable for making calls and getting data than my iPhone. There are spots in NYC that the service is horrible.
  • Still mad at Apple for the Maps mishap and taking away the YouTube App. I don’t want to get caught in the battle between Google and Apple. Seems like the consumer loses during these battles.
  • Break away from Apple’s stranglehold on my tech tools. I have an iPhone, iPad and MacBook Air.

But I do like the ease of linking my iPad, Air and iPhone. I am very satisfied with Apple’s laptops and doubt I will ever change. The product is too damn good. But the phone is much weaker.

What to do? My upgrade is set for January. So I have a few months to ponder.

 

German digital distributor ‘txtr just announced an eReader for less than $14. The ‘txtrbeagle’ will be released later this year.  This is significant because prior to this the cheapest eReader was around $69.

Amazon Kindle, MS-BNNook and Kobo have all been bringing out new readers and dropping the prices of their older ones.

From almost $500 for the least expensive one a few years ago, to almost free today, we have come a long way.

What impact will this have?

Amazon will start to give away Kindle’s with Prime membership. It will have ads and be stripped down. Amazon has always countered competition with price. Their strategy has been to grab and protect market share with lower prices on the books, the devices and the shipping (in digital this is the free wifi).

MS-BN will lower their prices although they just did so. But they will not go to zero.

Kobo will keep the same course. They have been successful by not trying to undercut on price.

What about Apple? They are releasing a mini-ipad soon. But the price will still be higher than anyone.

More readers. This is good for the consumer.

iOS 6 is not working for me…

09.28.2012, No Comments, Uncategorized, by .

As a devoted Apple device owner and a serf to their commands, I dutifully uploaded the new iOS6 system to my phone.

I am not happy.

  • Google Maps are gone. Replaced with a ‘not-ready-for-prime-time” Apple Maps. I can’t even get Google Maps because there is no App for it.
  • Wifi connections are sketchy. I use my phone a lot and without wifi would always go over my data plan. Besides it being slower, I may end up getting hit with extra data fees. This is wrong, dead wrong.
  • YouTube being knocked out of the Apps — the new App is not nearly as good. This may be a Google issue, but I feel if Apple had not eliminated the authomatic App, all would be fine. This is a problem.
  • It’s just slower overall.

So what benefit am I receiving from this upgrade?

Apple please tell me.

Maybe it is time to cut the Apple cord — although we own four iPhones; two iPads; two MacBook Airs and a MacBook Pro.

 

 

 

HarperCollins, the publisher of TELEGRAPH AVENUE from Michael Chabon, recently settled with the government. Now all HarperCollins eBook consumer prices will be set by the retailer (Amazon, Apple, MS-BN Nook, Kobo, Google). The price at which these retailers buy the eBooks at is still set by publishers. The discounts are negotiated.

The discounts are generally between 40-60% for the Wholesale model and 70% under Agency.

Under Agency (publisher-set), the publisher’s revenue went up and down as the retail price.

Under Wholesale (retailer-set), the publisher’s revenue is the same regardless of the retail price.

So, taking TELEGRAPH AVENUE…

  • HarperCollins has it priced at $17.99.
  • Amazon, MS-BN Nook and Apple iBookstore are selling for $9.99.
  • HarperCollins receives 40-60% of the publisher price (not the end-users price) – or $7.20; $8.10 or $9.00 per sale.
  • Retailers make approximately $2.00 per book (assuming 50%).

Under the old Agency pricing method:

  • HarperCollins sets the retail price at $14.99 but it would have gone down to $12.99 when it hits the NYT list.
  • Amazon, MS-BN Nook and Apple must sell at $12.99 (or $14.99).
  • HarperCollins gets 70% under Agency – $9.10 per sale (or $10.49).
  • Retailers make $3.89 per sale.

Publishers make less per sale.

Retailers make less per sale but not at a loss as long as the eBook retail is $17.99. When the publisher price starts to go up, it comes out of the retailer because they will still probably sell the bestselling books at $9.99.

I didn’t discuss Author cuts in this piece for that worthy of it’s own post. But there are also many excellent articles on the author issues already written.

How do you compete with the New York Yankees?

They have all the money; attract the best talent; owners that are relentless at winning; buy out their competition.

How do you compete with Amazon?

Don’t take them head-on. Play small-ball; Billy-ball; money-ball.

Amazon has and continues to invest millions on systems; readers; selling books at the cheapest price; biggest selection etc. Don’t try to outspend them. Don’t get into a bidding and building war with someone who has vast resources. That strategy is one to fail. The latest decision in the DOJ suit, shows that Amazon even has political clout. Big companies change the laws. It happens in every industry.

Amazon is a great retailer. I use them. But I also shop as much as I can from my local stores. But Amazon can do a lot that others can not.

How to compete? Some thoughts:

  • Specialty retailer – Don’t try to out-Amazon Amazon. Go after a niche. Build that community and be the experts. Some publishers have tried to do this, but it isn’t that effective. Why?  To be effective, one must be publisher-agnostic and sell all within the subject. Plus, it is a full-time division that needs to do this. Not just a committee that meets once a week. There must be a commitment throughout the organization.
  • Trustworthy reviews and opinion – Recently the NYTimes reported that many Amazon reviews are bought and paid for. That the reliability of these reviews is questionable. Amazon also takes their eBook metadata from the publishers. Sure there is some additional info added by the author and users, but it is all marketing, bought and commercialized. Building a site that provides honest reviews would go a long way to building trust.
  • Subscription sales – Many publishers have resisted selling their eBooks this way. They prefer to sell the entire book and not allow people to taste bits. But this attitude is evolving. The business models are changing. Publishers have to grapple with which ones to follow. It is a lot of movement. But with the volume of books now available, moving to subscription would help some get discovered. Books get lost on Amazon. Subscription allows those books that are completely invisible a shot at being read.
  • Consumable sales – this is a “pay as you read” model. It isn’t Subscription and it isn’t straight up sales. It is based on micro-payments and the consumer having a balance (like their Starbucks gold card). The more you read, the more you are charged. I still this model working. There are specifics genres that will work better. This is an alternative method, but one that has value. I currently consult with TOTAL BOOX, who are delivering in this area.
  • Hybrid – take all the existing models and pick and choose.

One of the most difficult things about competing with any giant is if you are fortunate enough to beat them, they will either buy you out or copy. So the game is never over. It goes on and on.

Today, Amazon looks invincible. They announced newer, faster, sleeker devices. The government is on their side. Their stock is at al all-time high. But things change. For a competitor to be successful, they just need a small slice of Amazon’s pie. A very small piece of this enormous pie is enough to make a lot.

The Yankees are in a battle now with small market, low revenue Baltimore Orioles; Tampa Bay Rays and Oakland As.

It can work.

It does work.

It will work.