Challenges and opportunity often go hand-in-hand, and that will certainly be the case again in the book industry in 2007. Every problem created by the rise in the use digital technology, for example, provides the chance to find a solution that will yield new business models.

To get a flavor of where the industry is headed this year, PW asked six leaders in different parts of the business to address the major challenges facing them in 2007 and discuss what strategies they are planning to deal with those issues. For booksellers Roxanne Coady and Russ Lawrence, the major question is how to compete with e-tailers and big-box retailers. Don Katz and Steve Potash see increasing consumer awareness as key for growth in the new digital areas in which their companies operate. Independent publishers Dominique Raccah and Esther Margolis are looking at ways to differentiate their products in a crowded marketplace. And while all see plenty of hurdles ahead, they are optimistic that profitable solutions are possible.

Roxanne Coady, Owner, RJ Julia Booksellers, Madison, Conn.

We are an industry that has seen only modest sales growth over the last several years, but a major expansion and growth in distribution outlets—mass merchandisers, supermarkets, drugstore and specialty stores and, of course, Internet retailers. We also face an increase in the use of downloadable books and podcasts, formats which eliminate the need for a retailer.

The pie isn't any bigger, but it's getting cut into more slices, so some players will lose a little and some will lose a lot. The challenge for independent retailers is to determine which needs of the reader/customer we can fill in a unique and wonderful way. We must take a hard look at our customer base, our products, our merchandising and our style to understand just what the community most values about us, and how that value is best converted into a source of revenue.

At the same time, publishers need to evaluate their role in perpetuating the problematic notion of a book being a commodity that you buy from the lowest bidder. It may be that we need to evaluate the role that books with preprinted prices play in making books the loss leader of choice for mass merchandisers and online retailers. It may be that all of us in the industry need to put serious brain power into creating new readers. Maybe we can come up with a more exciting way to put the right book in the right hand.

Donald Katz, Founder & CEO,

During 2007, Audible will mark the 10th anniversary of's launch and our introduction of the first digital audio player—several years before most people understood how to download an audio file, and nearly five years before white earbuds began to sprout from the sides of millions of heads. We now have many hundreds of thousands of listeners paying for, downloading and consuming spoken audio in most countries around the world. Every day we see more evidence that digital distribution can move the spoken-word audio category beyond the limitations of physical media into something far larger.

One key challenge for the coming year is to build a greater awareness of digital audio. Everyone with an AudibleReady MP3 player, PDA or Smartphone needs to know that their devices are also digital bookshelves, ready to hold material that can entertain, teach or enhance productivity. We also need more high-quality audio to help consumers make better use of the 600 million hours per week that Americans sit in traffic. The good news is that though will be 10 years old in 2007, we are still in the early days of market growth engendered by the consumer benefits and economic advantages of digital distribution.

Russ Lawrence, Owner, Chapter One Book Store, Hamilton, Mont.

At Chapter One Book Store, we're facing a number of challenges in 2007, including the likelihood of a Wal-Mart opening up in our small town. But for us, and for all independent bookstores, the greater concerns are the dwindling number of book readers, the shrinking number of hours those readers spend with books, and the alarming absence of kids in the bookstore.

What are we going to do about it? First, we intend to make sure we continue to provide excellent service to those who still buy and read books, ensuring that they come to us for all their reading needs. Next, we need to find ways to provide the materials—including but not limited to books—that people want to read. We have to provide those materials in the format in which they want them, and when they want them—generally, "right now." This implies some kind of digital future for the independent bookstore, one which may arrive soon.

Lastly, we have to keep up the cultural fight, proselytizing for the joy of reading books. We intend to continue supporting efforts to engage children with books and fighting for the continued relevance to people of all ages of these cherished, imperishable objects.

Esther Margolis, President & publisher, Newmarket Press

As an independent trade publisher, I am always mindful of the need to compete effectively in an increasingly crowded marketplace. "Discovery" and "opportunity" have been the principles guiding our publishing program, and we plan to continue this approach in '07. Our plan is to publish new titles that will backlist well, and to build successful series and franchises. Backlist represents over 50% of our sales, a goal I set when I first started the company almost 25 years ago.

The challenge is to constantly review what's really working, and make it work even better. Toward this end, our strategy for 2007 includes a relaunch of our What's Happening to My Body? books on puberty for preteens and teens, which started with a single title in 1984 and now has two million in print. To address the realities of the marketplace—increased competition in this category, new design sensibilities—we are investing $100,000 to repackage and redesign the four main books, backed by promotion. This will set the stage for the publication in fall 2007 of a seventh title in the series, for younger boys.

Expanding the brand of successful authors is important for publishers. We will build on the success of The Dorm Room Diet by Daphne Oz. Published in September 2006, the book was a college bookstore bestseller, also selling well across the board. In addition to promoting the title throughout 2007, we will publish spinoffs to extend the brand. Working with the author and her father, Dr. Mehmet Oz (co-author of You: On a Diet), we've licensed a Dorm Room Diet Workout DVD and will publish a companion book, The Dorm Room Diet Planner, in May.

Dominique Raccah, President and publisher, Sourcebooks

A changing marketplace that rewards speed and flexibility; experimentation with new business models; an increase in the number of platforms for innovative publishing and marketing; and a decline in the cost of entry into publishing are the major trends providing independent publishers, as well as publishing as a whole, with challenges and opportunities in 2007.

To meet the needs of the market, diversification is key. To that end in 2007, we will launch a new children's imprint, Sourcebooks Jabberwocky; expand our trade program with lines such as Playskool; build our calendar program; expand our nonfiction romance line into romantic fiction; and put even more effort into our poetry program. Marketing is also an essential part of Sourcebooks' strategy. Our focused approach to marketing titles and authors has driven sell-through and sales to record levels and returns to the lowest level since 1999.

A challenge for 2007 is staying ahead of our growth structurally and putting strategies in place to take advantage of the opportunities in front of us. We are examining every aspect of our business to ensure that we are being as efficient as possible in our infrastructure and processes. The year will also bring new challenges and opportunities with respect to technology. Consumers are daily faced with new and different ways to read, watch, learn and listen when it comes to entertainment, news and education. Sourcebooks, and all publishers, will be challenged to create new initiatives and expand existing technologies to engage readers in the years ahead.

Steve Potash, CEO, OverDrive Inc.

At the recent sold-out conference in New York City co-sponsored by the Association of American Publishers (AAP) and the International Digital Publishing Forum (IDPF), top executives of Adobe Systems Inc.; Mobipocket, an company; and eBook Technologies Inc. demonstrated new versions of their digital reading software using a standardized XML-based electronic file.

Meanwhile, at the offices of the American Printing House for the Blind in Louisville, Ky., administrators launched a database for educational publishers to deposit standardized digital book files. The National Instructional Materials Access Center (NIMAC) was created to manage electronic files of print instructional materials in a standard format to produce textbooks and other instructional materials for visually impaired students across the country.

These initiatives, plus enhanced reading software platforms such as the recently announced Adobe Digital Editions, will result in significant growth in the e-book market in 2007. Today OverDrive has an inventory of over 50,000 commercial e-book titles from more than 400 suppliers that it provides to a global network of thousands of online retailers, libraries, and schools. E-book production, consumer demand and new distribution opportunities should soar as every standards-based publication gains access to digital channels using the new technical standards. While the e-book market faces challenges to develop interoperability between digital rights management and copyright protection systems, 2007 should provide OverDrive and our publishing partners the first of many years during which we benefit from industry standardized file formats.