The (Publishing) House Is Burning, Part III

Tomorrow marks two weeks since a couple of surgeons cracked me open like a walnut. I return to the hospital for my checkup in the morning and am hopeful I'll be released to drive again.

I live near Dallas. Here in Texas, we talk about hogtying, which is a way to render steers and pigs helpless and immobile by tying their four limbs together.

I've been discussing the thinking biases that are holding the large New York publishers back. I believe that among the thinking errors that hogtie them is a steadfast belief that the traditional model of publishing will continue to be the dominant model. Instead of seeing digital technology as a part of a new digital model, they seem to regard e-books as simply another medium (like hardcover, trade, mass market and audiobooks). That's why they cannot get past the notion that e-books are only incrementally cheaper than other forms of delivering content . . . they still envision having all the other expenses they currently have.

So let's look at publishing from the standpoint of a business model.

In the traditional publishing model, the writer provides the artistic talent and the publisher provides the capital to turn the writer's work into a printed book. Since most writers don't have the financial resources to produce a printed book themselves, all the leverage is in the hands of the publisher. The power (and the game advantage) belongs to the publisher.

However, the Internet, digitization and POD technology are changing that dynamic. Instead of one publishing business model, the new technologies have splintered the market into three potential models. I'm going to call them the traditional model, the digital model and the self-publishing model.

We all know how the traditional model works, and I'm going to put self-publishing aside for the moment. If you want more information about self-publishing, go here and here. Right now I want to focus on the digital model.

Back on 6/25/07 here, I talked about the ownership of publishing houses becoming increasingly centralized into the hands of a few giant media companies. I said:

While ownership of publishing houses has been limited, the Internet has been fragmenting the book market itself. Consumer choice is increasing. Consumers can now buy physical books, audio books, e-books, or download podcasts.

I've repeatedly said that digitization and print-on-demand technology will break the stranglehold the large publishers have on the system. They will no longer be the only ones in possession of the technology to produce a printed book.

In that same post, I referred to a 6/26/2006 Publishers Weekly interview with Jason Epstein, one of the founders of On Demand Books, the company that produces the Espresso Book Machine:

"'In theory,' said Epstein, 'every book printed will be digitized, which means the market will be radically decentralized. A bookstore with this technology, without any expense to themselves [other than the machine] can increase their footprint.' Of course, that also means that Kinko's or Wal-Mart can transform themselves into mini-bookstores, especially given the machine's affordability."

In another story on a demonstration of the Espresso Book Machine, Publishers Weekly asked a rhetorical question: "But how realistic is this plan? When can we expect it to catch on? Certainly not until copyright issues are addressed . . ."

In my blog post I said the PW reaction was short-sighted and that I believed Epstein's comment to the effect that "the market will be radically decentralized" was on target. However, I added then (and still believe) that this decentralization will start from the ground up, not from the top down.

The PW comment neglected the fact that copyright belongs to the writer. The writer is the one who leases that copyright to the publisher.

Unless big publishing wakes up and begins to reinvent itself, it is going to find that it has become redundant in a world in which digital files, print-on-demand and e-books allow other players to enter the field and disrupt their game.

Does anyone seriously think that Amazon is NOT going to continue expanding its reach in the publishing arena? They now have both print and e-book publication capacity. They've built review sites and social networking opportunities into Amazon.com. What's to stop them from approaching popular authors and offering to better the deals big publishing currently offers?

And what about Google? Their original interest in copying the world's books was to increase the reach of their search engine. But as Aristotle said long ago, "nature abhors a vacuum."

Then you have the online boutique operations. I have good friends who make great money writing for the online publishers like Samhain and Ellora's Cave . . . in addition to their print books released through New York publishers. They aren't letting go of their online presence; they are writing for both markets.

New York keeps decrying the small numbers being racked up by e-books. But let's face it, they did nothing to support e-books. The e-book segment has grown virally despite big publishing, not because of big publishing. Remember the auto industry and the electric car.

There is literature related to the life cycle of a new technology. Here is a graph courtesy of the Nielsen Norman Group:

The graph is based on the work of two technology consultants, Everett Rogers and Geoffrey Moore, using the standard bell curve to illustrate the diffusion of innovations.

Rogers postulated that, in any new technology, you have innovators and early adopters who eagerly jump on board.

Moore, building on Everett's work, argued that a chasm exists between the visionaries and the pragmatists, based on their different expectations. According to Nielsen Norman, firms must use differing strategies to appeal to each segment's culture. In other words, targeted marketing is needed to create momentum that will build a desire to jump on the bandwagon (and across the chasm).

There have been dozens of e-reading devices over the past ten years. However, it wasn't until Sony and Amazon got into the market that people began to pay attention. Those two companies have the clout and the marketing expertise to cross the chasm.

Today, I got a survey from Barnes & Noble, asking whether I read e-books, whether I would consider joining an e-book club located inside a B&N site and whether I would be interested in getting discounted e-books. This from a bricks-and-mortar store.

I said on Saturday that failing to act and act quickly is a guaranteed death sentence for the large publishers. If they fail to act, someone else will. I see lots of possibilities:

• Internet giants like Amazon
• Hungry bookstores like B&N and Borders
• A wholesale distributor like Ingram
• Online publishing outlets
• Smaller print publishing houses

Or maybe a player we haven't yet seen.

One thing I'm certain of. If they don't act fast and decisively, New York will find their authors being plucked away by other players willing to share a bigger piece of the pie, if only to buy quick entry onto the playing field.

Go here to see the Nielsen Norman Group website and read more about the life cycle of new technology.

Tomorrow we'll talk about the writer's role in all this.