E-books and other forms of digital content are transforming all aspects of the book publishing industry. While the transition from print to digital is not moving at the same pace for all segments, within five years it is generally believed that e-book sales will account for about half of trade revenues. With that in mind, PW asked nine executives to tell us how their company is preparing for that eventuality and what impact it will have on their businesses. A clear theme running through these essays is that, while a few years ago traditional companies were more frightened about the digital challenges than excited about the opportunities, that equation is now reversed. Publishers, booksellers, distributors, and agents are busily reworking their operations to take advantage, as Sourcebooks’ Dominique Raccah notes, of a future “with more readers, more writers, and more outlets than ever before.”
David Young, CEO, Hachette Book Group
Digital sales will represent close to 30% of HBG’s net revenue in 2012, and could reach 45%–50% for us by 2015. The dynamic growth in e-book readership gives us the opportunity to continue the evolution and development already underway at HBG to adapt and experiment and deliver our authors’ books and content in new ways, while never losing sight of the print book reader and the bookstore community. To achieve that end we’ll focus on these steps.
- Connecting with consumers by understanding consumer behavior, deepening the connection with readers, and engaging them in new ways around books through effective social media and digital marketing campaigns. The launch of Bookish in early 2012 will be instrumental: a first-rate destination for book lovers, a powerful marketing platform with an original editorial voice, great content, and a sophisticated recommendation engine.
- Partnering with authors is a high priority for us, and we strive to be the best partners for our authors throughout the publication process and their careers. Communication and collaboration are essential; HBG’s new B2B Web site and its Author Portal (coming in 2012) will bring new transparency and efficiency to our authors and business partners.
- Supporting booksellers and the bookselling community is critical. As passionate book lovers and adept marketers, booksellers are one of our most vital links to consumers, and we want to help them thrive in the changing marketplace. We’ll also need to continue to give print book readers what they want, with an extraordinary range of expertly presented content and high-quality product for booksellers to showcase and sell.
- Expanding our distribution business and enhancing our offerings to new and existing clients, giving them sophisticated digital distribution services that small companies cannot provide for themselves. We’ve built world-class digital capabilities that we’ll contemplate offering to fellow clients and publishers in 2012 and beyond. Our SAAS (Software as a Service) agreement with Round Table this year, providing access to our app templates and digital delivery platform, is an example of the innovation we’ll need to deliver to build our business.
- Focusing on inventory efficiency and reduced returns will be crucial as our industry changes. We’ll sharpen our inventory and demand planning prowess that will enable HBG to serve our retail partners effectively, make our books available to consumers when and where they desire, and significantly reduce returns.
- Continuing digital marketplace innovation will enable HBG to take full advantage of the shift to digital, the proliferation of devices and platforms, and growing consumer appetite for digital reading and products. We’ll focus on anticipating evolving reader behavior, such as consumers’ interest in short-form fiction, a great opportunity for established authors to feed their readership in new ways. We’ll continue our experimentation with formats, length, and promotional pricing.
- Thinking globally and using our strength as a global publisher through partnerships with distributees and sister companies within Hachette Livre will be essential, as will the development of marketing strategies to expand our authors’ brand reach worldwide.
David Lewis, Executive V-P, sales and marketing, Baker Publishing Group
If the local stores across this country that carry a wide selection of books, independents and chains, stay healthy, it will take longer than five years for e-books to reach 50% of total sales in the Christian market. In the religious store segment of the business, those stores diversified into other products to supplement their book and Bible sales years ago. Now that there is a direct assault on their book business, as there was on their music business a decade earlier, many of these retailers are able to remain open thanks to that diversification in their product lines. They are also fighting hard to keep as much of the book business as possible by offering sale prices on many of their key authors and titles.
We believe that having 50% of our sales from e-books would have a modest impact on our business. So far we have been able to keep our sales within 5% (sometimes up, sometimes down) of budget over the past two years as print sales decline and as digital sales increase. Any publisher’s first challenge is to find and to publish books that the public wants to read. If we continue to publish books people want, there should be a solid market for both print and digital books. The goal we keep front and center is to keep our margin the same between the two formats (print books and digital books).
As digital sales increase, they will have a direct impact on the staffing requirements for the warehouse. We have always had a blended sales force of outside commission reps and our own national account reps. This very important group of people will also need to be refined and refocused as the market changes.
The departments that will remain largely in place will be editorial, design, and art. Marketing and PR will remain fully staffed, but how and where marketing is done is likely to keep changing. Our plan is to keep all of our staff focused on creating the best books, with the best covers and with the best PR and marketing we can give them. The print or digital sales question involves only a few people in production, design, and sales.
As we reduce our inventory levels to match the new market reality, shorter print runs will be a regular occurrence. We are also planning to make a significant percentage of our titles available to all accounts, online and in-store, that use POD technology as a backup when the title a customer wants to buy is out of stock. Everyone may make slightly less margin, but the sale is captured and a reader is happy.
To put Baker Publishing’s e-book business in context, for four of our past six months, e-book sales were slightly more than 20% of our total sales. For the past 12 months, e-books have been almost 15% of our sales.
Donna Hayes, Publisher and CEO, Harlequin
In thinking about the prospect of e-books becoming 50% of our U.S. trade business within five years, I’d start by saying that Harlequin’s mission has always been to make our books available to our readers wherever, whenever, and however they want to shop. In North America in the 1970s, that was evidenced by Harlequin being the first publisher to make its books available on spinner racks in drugstores, as well as by mail through our reader service. Today, in our overseas markets it means having a presence everywhere women shop, from hypermarkets in France to kiosks in Brazil, from street sellers in India to now, increasingly, in digital.
We were the first publisher to make our entire frontlist available in digital and now we are working to digitize our backlist in multiple languages. At the same time, we are working with our print retailers in the U.S. and around the world to ensure that we are maximizing our shelf presence and our sales in bookstores and mass market merchandisers, while adjusting our print runs to reflect the new realities of digital. We have improved our in-store merchandising in several key markets this year, including the U.S., Australia, and Sweden, and we will continue those efforts in 2012.
One of the most important aspects of any consumer-focused business is brand awareness, and this is also true in the digital space. For readers, Harlequin is one of the most recognizable brands in the world. In retail stores, our presence is reinforced by Harlequin branding on shelf-talkers, displays, and, of course, on the books. The digital space offers unique branding challenges, so we’ve had to find inventive ways to create as powerful a presence with e-books as we do with their print counterparts. We’re focused on search and discovery and the use of robust metadata, building our brand digitally and enhancing our reader relationships with the interactivity digital provides.
We’re also very focused on experimentation, which is essential as our industry evolves; we were one of the first publishers to launch mobile content subscription programs. We were a pioneer in offering short-form digital-first content via e-books and mobile platforms. We created the Harlequin Treasury by digitizing our in-demand but out-of-print backlist, and we’ll be working on many more things in 2012.
If I can leave you with one thought, it’s this: digital and traditional publishing are not separate businesses. Sure, we’ll continue to examine our strategies as the market for e-books grows, but the popularity of the e-book does not alter the essential fact that for Harlequin, our primary objective is to connect our talented authors and their outstanding editorial to receptive readers, no matter what format.
Bradley Graham, Co-owner, Politics and Prose
As newbies in the bookstore business, my wife, Lissa Muscatine, and I have been struck by the lack of industry consensus about where e-book sales are headed. Anybody’s guess seems as good as anybody else’s. It may well be a good bet that the popularity of e-books will continue to rise. But how steep the climb and how high the ultimate peak remain very much unknowable. This makes planning for the future all the more difficult.
At Politics and Prose, we’re trying to embrace the e-book revolution, not fight it. Our thinking is that electronic readers, given their convenience and portability, are here to stay—and in numbers sure to represent a significant if not dominant share of the market. Many customers, even those devoted to physical books, will probably evolve into hybrid users. That is, they will read some books on e-platforms when, say, traveling, but will continue reading physical books in other settings, such as by the living room fireplace.
A major challenge for us, therefore, is making customers aware that they don’t have to worry about an either/or choice. If they want to use an e-reader, they don’t need to abandon P&P. Rather, they can download e-books through our Web site and be assured that P&P will benefit from the purchase.
Surprisingly, a vast number of customers are unaware that P&P and other independent bookstores even offer e-books. So we face a huge hurdle simply raising consciousness. To this end, we’ve started a series of seminars aimed at familiarizing customers with how to purchase e-books and download them. The seminars explain why customers should choose P&P for their e-books and how Google eBooks and cloud-based digital media work. Staff members answer questions about the differences among various e-readers, and they demonstrate how to buy and access books on the devices. Customers are encouraged to bring their e-readers with them for personal consultations.
Is this a first move by P&P to give up on printed books altogether? Absolutely not. But it is a determined effort to embrace this new dimension of bookselling, while maintaining the store’s identity as an independent, bricks-and-mortar establishment. Better at least to be part of the game than to remain on the sidelines.
Meanwhile, as a sign of our strong belief in the future of physical books, we’ve actually upped our investment in them by acquiring a print-on-demand machine. With its ability to access a vast number of out-of-print titles—and publish them in a matter of minutes—the machine makes more books easily available to our customers. Our slogan for it, “Real Books in Real Time,” affirms that producing with paper and ink can still keep up.
Jed Lyons, President, Rowman & Littlefield Publishing Group, and National Book Network
Since 2009, Rowman & Littlefield Publishing Group has been releasing all new books simultaneously in paperback and/or cloth and e-book editions. With approximately 1,250 new books published annually, we have released around 3,750 e-books in the past three years. Through NBN’s Fusion e-book service, we have also released thousands of e-books on behalf of NBN clients that have outsourced the scanning, conversion, and fulfillment to NBN.
We are now engaged in a massive effort to scan and convert our 35,000-title backlist to EPub formats. Our goal is to offer every book we have published since we started Rowman & Littlefield in 1975 as an e-book.
Publishers have been predicting the demise of physical books ever since e-books arrived. I recall a dinner back in 1999 when a group of us made our predictions of when the sale of e-books would exceed those of paper books. The consensus around the table was three years, or 2002. Now, the rapid decline in the cost of reading devices is going to exponentially expand the number of customers reading books electronically. We hope that will be the case because we make more money selling our books as e-books than as physical books. What is harder to predict is what kinds of books are likely to gravitate to e-book formats faster than other categories of books. Right now, it appears that fiction is by far the most popular category, with bestselling novelists leading the charge, closely followed by what used to be called “bodice rippers,” but is now better described as soft-core porn for both male and female readers. The electronic device is today’s substitute for the brown paper bag serving as a dustjacket.
The transition to e-books for academic and reference books seems to be occurring more slowly. Even industry leaders such as John Wiley are selling just 6% of their books in e-book formats. That’s about the same as our percentage.
We will be thrilled if we are selling half of our books in e-book formats in five years. It means we will require less warehouse space so we will scale back on our current space commitments. On the other hand, we will still need to maintain the robust IT infrastructure that supports our physical book distribution today. We will need customer service staff, credit and collections staff, and fulfillment staff. To create the books, we will still rely on editors, designers, marketers, and salespeople. What will be different is that the gross profit on e-books will improve our overall profitability even as the sale of physical books tapers off.
What could disrupt this happy outcome in five years is a collapse in the retail prices of e-books or the continued erosion of publishers’ margins due to increasing pressures throughout the supply chain for deeper discounts, more co-op, and more merchandising support.
As always, the book business will find a way to adapt and overcome whatever pestilence comes our way. Of all forms of media, books have been sheltered more from the digital storm than any other. Five years hence, the same will be true.
Skip Prichard, President and CEO, Ingram Content Group
Like any significant change, the transition from print to digital will offer a mix of exciting growth opportunities and nerve-racking challenges. To me, so far the change has been gradual. However, as we approach a digital tipping point, I believe that the pace of change and activity level will be much more frenetic. At Ingram Content Group, we have a variety of businesses and each is preparing differently. On a larger scale, in the past few years we’ve repositioned those separate businesses into one cohesive unit designed as a global service provider.
While we’ve had success with our stand-alone units, it’s the combined relationship between Lightning Source, Ingram Publisher Services, and CoreSource that makes our offer compelling to publishers. We now offer services ranging from digital asset management to allowing publishers to close a warehouse and outsource it to us.
Ingram has been an early adopter of many different technologies. Lightning Source started 15 years ago in print-on-demand. As more books go digital, publishers are cutting print runs. We can sell a book, print it within hours, and deliver it to consumers worldwide. Lightning continues to grow, expanding in recent years to Australia, Brazil, France, and Germany.
We’ve also been an early investor in digital, and we continue to support new technologies. One area of focus is education. We expect e-textbook sales to rise with the proliferation of tablet devices. Education is moving from a one-size-fits-all model to one that’s customized. Vital Source, our electronic textbook platform, is one of our fastest growing businesses. We now have two million students using the platform worldwide. It’s transforming the way students interact with educational material. In addition, it has technology that allows us to tell a publisher, “Nobody is reading Chapter 8,” as well as enhanced multimedia applications. It helps the students learn better by engaging with content in the way they learn best.
Ingram is an active participant in the industry transformation. It’s an exciting time to be in publishing, and I’m bullish on the prospects for books. In fact, I recently launched a blog (www.skipprichard.com) as an outlet for my passion for books, authors, and business in general.
Robert Gottlieb, Chairman, Trident Media Group
It has been quite the year in the publishing industry, from the rapid growth of e-books and the downsizing of publishers, the closing of bricks-and-mortar stores to agency pricing and the emergence of Amazon as a titan in our industry.
Therefore it should not come as a surprise that e-book sales will make up 50% of trade sales in short order, although this reality may be upon publishers sooner than they think, due in part to Amazon using e-books as a loss leader to stimulate other profitable sales, and now customers have come to expect lower prices for e-books. What trade publishers do next will tell the story going forward for the industry.
With Amazon not only dominating e-book sales, but also having a direct relationship with its customers, the question for publishers will be, how can they make themselves relevant in the e-book space when they are just another toll on the road for some authors? Publishers have never had to interact directly with consumers; they have traditionally relied on retailers for handling this relationship. That will have to change in the new business model.
Publishers are not the only ones at sea when it comes to carving out space in the e-book world. Most agents are there with them. I recently spoke on a panel at New York University on e-books and was not only astonished to find that publishers were not in attendance but the audience mostly comprised other agents making their plans for the e-book model. This is because agents know that they, too, must make themselves relevant to authors when an e-book can simply be uploaded to Amazon. Many agents have simply resolved to become publishers or agency-publishers, which is a conflict of interest to their clients. Who will step in and advocate for the author in a dispute over what the cover should look like or how high the advance should be?
Trident understands that authors must find a way to distinguish themselves online since there are more than two million other titles/authors on Amazon and other sites. This is why we have created unique relationships with electronic retailers in order to give our clients the white glove service they deserve. Through our new Trident eBook Operations, authors can act as publishers by selecting from a menu of various publishing services. What distinguishes this program from what some other agencies are doing is that we still take the industry standard commission for agents of 15% of the author’s earnings in North America and 20% outside the U.S. Under Trident’s new business model, authors will be able to compete in the e-book space as well as the traditional paper space.
Dominique Raccah, President and publisher, Sourcebooks
E-books already constitute over half of sales in two parts of Sourcebooks business. As a result, there has been tremendous impact on strategy and models, which will continue to evolve over the next five years. And as the market changes, we have to continue building the infrastructure to accommodate digital, both from an architecture and an innovation point of view.
As devices and software change, integrate, and inevitably segregate again, we have to be ready to deliver great experiences for each device. At Sourcebooks, we’re always looking for increases in functionality—for example, look at what’s happening with children’s picture books, where last year’s e-ink obstacles are being replaced by joyous tablet opportunities. Imagining what might be next is an important part of the job.
Over the next five years, we believe that building vertical platforms will make an enormous difference to our company. For some of our authors, there’s a very real new set of opportunities that we are creating for them—new platforms, new models, new ways to reach readers. It is (I think) going to provide some significant revenue streams down the road.
We also expect to discover and formalize new ways to work with our bricks-and-mortar retail partners. You can already see the outline of that in the work we’ve been doing with Anderson’s Bookshops, the ABA, and our college authors. Expect publishers and retailers to create more of those kinds of opportunities together. It’s certainly one of the things we’re working on. And I think you can expect publishers to have much broader relationships—with retailers, digital partners, affinity communities, authors, agents, multimedia resources, and other content providers among them. You can expect us to be “publishing” far more than just printed books and e-books.
I’m incredibly excited about what the book and storytelling itself will look like in five years, and how broad readership might be by then. That’s probably the thing that excites me the most. We (the publishing industry) are at the center of a remarkable conversation. This is in some ways a glorious time for books—with more readers, more writers, and more outlets than ever before.
Susan Katz, President and publisher, HarperCollins Children’s Books
E-books aimed at teens are beginning to sell digitally at almost the same rate as adult titles, and for the most part HarperCollins Children’s Books is working on the same opportunities as our adult counterparts. Titles for our younger readers, however, are changing more significantly as we are focusing on enhancements and interactivity, transforming picture book reading from passive to interactive.
Traditionally, we have known very little about the purchaser of our print books. In today’s digital world we can communicate directly with our readers, and they can respond and reach out to us directly. Blogs, social media, and other digital vehicles have given us insight into what our readers are looking for and how we can improve our projects.
Children and teens will have greater access to devices within five years, and we will make our content available on all of them. The process for creating this content will continuously evolve. Our editors are working with authors and artists to incorporate new technologies into new properties. Production schedules will be shorter. There will be more distribution channels and distributors, and we will need to continually revise our content creation to take advantage of the evolving technologies.
Book marketing is also rapidly changing. Marketing in the digital world is a continuous effort that starts earlier than our traditional marketing efforts, giving bloggers and reading communities a chance to review and recommend our books. Marketing efforts will last longer as we find ways to make our content more accessible and discoverable through promotions, partnerships, pricing, and bundling.
All of these changes require staff training, continuous market analysis, and keeping up with advances in technology. We are encouraging our authors, artists, and editors to experiment with new technologies and formats. We are working with marketers in the digital space to help understand how best to make the transition. Digital marketing is organic, social, and continuous, and we need to stay ahead of the curve. Most of all, we are enthusiastically looking toward a digital future where we can continue to do what we do best: provide rich content in the most satisfying and accessible ways.