AAP Hot Topics: Borders’ Concept Store, Amazon’s Kindle
by Jim Milliot -- Publishers Weekly, 3/4/2008 2:22:00 PM
Representatives from two of publishers’ three largest accounts offered some insights into where their businesses are headed at Wednesday’s Association of American Publishers annual meeting. Borders Group CEO George Jones talked about the progress the chain is making in re-inventing itself, while Amazon senior v-p for worldwide digital media Steve Kessel discussed the e-tailer’s digital efforts, focusing on the Kindle.
Jones said Borders’ two-week old concept store has greatly exceeded expectations. He noted that while the company has reduced the number of titles in the store by about 20% from a typical superstore, unit sales have increased, something he attributed in part to displaying more books face out. The next new concept store is set to open in Las Vegas later this month and the majority of the 14 outlets scheduled to be opened this year will occur over the summer.
Jones downplayed Borders’ publishing efforts, saying that what he really wants is content that can be sold exclusively at Borders. He acknowledged that it doesn’t make sense for major authors such as James Patterson to be sold only at Borders, but said an up-and-coming author might benefit from be sold only through the chain; Jones noted that Nick Santora’s Slip & Fall, which was published by Borders and sold exclusively through the retailer, hit several bestsellers lists.
Jones said he was also willing to talk to publishers about changing co-op practices. Borders had 16,000 co-op agreements last year, Jones reported, adding “there has to be a better way to do this.” He said it makes no sense to fill end caps with a “conglomeration” of books paid for by co-op when those areas should be used as billboards to reach customers about a range of products. Jones said he would like to use co-op dollars to focus on certain promotions. Jones said a revision in co-op policies could be a “win-win” for publishers and the chain.
Jones didn’t seem particularly eager to spend co-op dollars on advertising. Asked by Hachette USA CEO David Young if Borders had any plans to promote the Borders brand, Jones said the most cost effective way to reach readers is through weekly e-mails to the 25 million members of Borders membership program. He said the e-mails average a 25% open rate every week and have been successful at bringing books to customers’ attention.
Jones said that publishers put too much focus on buy-ins, rather than sell-through, a practice that contributes to returns. He also told publishers that it would be better if release schedules were spread out more evenly through the year, noting that during certain dead spots Borders could help make a new book a hit.
Amazon’s Kessel offered no numbers on the sale of Kindles, only noting that the company is “working hard” get the e-reader back in stock. While Amazon is shipping readers every week, “demand is still outstripping supply,” Kessel said. Customers favorite Kindle features are that it is wireless and can supply them books immediately, Kessel said.
Amazon is certain that Kindle e-book purchases are incremental rather than simply stealing sales from print editions. He said people have started to “Kindlize” their libraries, noting that one Kindle user bought over 800 e-books. He defended Amazon’s decision to sell most e-books at $9.99--a price that makes them lower than most print editions—as keeping with Amazon’s philosophy of offering the lowest prices possible.
With its purchase of Audible set to close soon, Kessel said Amazon “has no fixed position” on selling spokenword audio with or without DRM. He said Amazon moved away from DRM in music sales because that’s what customers want, and said that at the end of the day customers’ preferences will determine how spokenword audio is sold.
The third conference speaker, newly retired Simon & Schuster CEO Jack Romanos, advised that the industry should be “cautious in going without DRM.” But Romanos was generally bullish on prospects for technology having a favorable impact on publishing. He said at some point sales of digital books will be a “significant” portion of a publisher’s revenue. Romanos said the “long tail” principle works in publishing, noting that S&S typically sells at least one copy of all titles in its inventory every month online. The increase use of print-on-demand will only increase the sale of books across a publisher’s list, Romanos said.
Publishers’ direct sales efforts will likely increase in the year’s ahead Romanos predicted, but added that retailers still have a far greater ability to sell to their customers than publishers do. On the flip said, Romanos said he wouldn’t be surprised if publishers were soon competing for rights with some of their customers. (Amazon’s Kessel explained the e-tailer’s position on acquiring content--and content companies--as a way to ensure that content is available in a variety of formats).
The cost of acquiring content, in the form of advances, has been pushed to what Romanos said was “perhaps dangerous levels” by pressure on publicly-held media companies to grow. He said that 30% of a publisher’s net revenue is paid to authors in terms of royalties or unearned advances.
A last minute addition to the AAP meeting was First Lady Laura Bush, who thanked publishers for their commitment to literacy. Her full remarks are available here.
