Wednesday, March 31, 2010

Random House And The Agency Model

Sorry for the delay in posting today. My cat knocked over a glass of water on my desk. While the glass was not next to my laptop, the momentum of Bob's leap sent water flying across my keyboard. Grrrrrr.

Last Thursday, Mike Shatzin had a post on his blog here titled "What's So Hard to Understand About Random House's Strategy?"

He was referring, of course, to Random House's decision not to join the other five largest publishers in moving toward the "agency model" associated with Apple's forthcoming iPad.

As I've explained before, in the traditional "wholesale" model, the retailer pays 50% of the list price of the book and then sets its own retail prices. By contrast, in the agency model, the publisher decides the retail price and pays Apple a 30% commission on each sale.

To compare the two models, let's do the math on a traditional $27.95 hardcover book like the current best-seller, Clive Cussler's The Silent Sea. Under the wholesale method, retailers pay the publisher $13.97 for that book and then turn around and sell it to the consumer for prices ranging from Walmart's $16.50 to the D/FW Airport bookstall's cover price of $27.95.

Of course, Walmart has more clout with publishers than other retailers because, at $16.50 (a 41% discount to consumers), they'll sell a whole lot more copies of The Silent Sea than their competitors. Amazon is selling The Silent Sea for $16.77 (a 40% discount) and, if the consumer spends $25, he'll get free shipping from Amazon.

Remember, that $13.97 to the publisher is not net. The publisher still has to pay all its expenses: print, distribution, warehouse, marketing and author royalties out of those dollars.

Now, let's apply the wholesale model to e-books to see why Amazon is making publishers so crazy. Amazon still pays the publisher $13.97 for the book. But Amazon is selling the e-book version of The Silent Sea on the Kindle for $9.99.

That's right. Amazon is taking a $3.98 loss on every e-book they sell. Jeff Bezos was willing to take that hit for two reasons: (1) By doing so, he built Amazon into the largest e-book retailer in the U.S.; and (2) He also convinced a whole lot of readers to buy a Kindle device.

Let's take a look at the agency model that Apple and the Apple 5 have embraced for e-books on the iPad. Remember: Apple agrees to let the publisher set the price and takes a 30% commission for each sale.

The rumor is that e-books purchased through the iBookstore will cost $12.99. That means Apple gets a 30% commission or $3.90 and the publisher takes $9.09. Of course, the publisher's expenses are much less when releasing an e-book although the author's royalties are higher.

The bottom line is the Apple 5 publishers are willing to take less money under the agency model in order to control the list prices for e-books. They don't want that $9.99 to become set in stone.

Meanwhile, Mike Shatzkin has an interesting observation about Random House:
By holding themselves out of the new channels, continuing the current policies of “wholesale” discounting, and allowing the retailers to set prices, Random House will be maximizing their short-term sales and profits ... Random House will collect more money for each ebook sold than their competitors do while the public will pay less for each Random House ebook they buy than for comparable titles from other publishers.
When you put it like that, why wouldn't they stick with Amazon and the wholesale model for e-books?

Crain's New York reported last Tuesday here
that Random House's 2009 revenue results were flat at "$2.3 billion, while operating profit reached ... $185 million—keeping the company even with its 2008 results."

As Mike said in his post, "for the foreseeable future, all the Random House position means to them is more revenue per copy and lower prices to the consumer."

Sounds pretty good to me.

Tuesday, March 30, 2010

Amazon UK Staking Out Its Territory

April 3 is the launch date of Apple's iPad. Apple seems to be going for a $12.99 price point on e-books. The question is whether Amazon will follow suit, raising their famous $9.99 price to meet Apple's.

Meanwhile, on the other side of the pond, Amazon UK is raising eyebrows. On Thursday, the UK's The Bookseller reported here: is bringing in new rules to ensure Marketplace sellers are offering their goods at the same price or lower than on other "non-physical sales channels."
I wandered over to Amazon UK's site to find the following here:
Price is one of the most important factors customers use when making buying decisions. And customers trust that prices and other terms on are as good as (or better than) those found on other shopping channels. In order to offer customers the best possible experience on, beginning 31st March, Amazon will require price parity for all sellers selling under the marketplace Participation Agreement. Price parity for these sellers means that the item price and total price (total amount payable, excluding taxes) of each product a seller offers on must generally be the same or lower than on the seller's other non-physical sales channels. We believe this practice will preserve our customer's trust in the marketplace, which in turn increases the value of the marketplace to sellers like you. Although the Participation Agreement will reflect this change on 31st March, sellers will have until 1st May to make the necessary price parity changes.
I was interested in what Amazon UK considered "other non-physical sales channels." The Q-and-A section that followed the announcement answered my question:
Non-physical sales channels specifically include any online channels, mobile device applications, catalogues, third party platforms or marketplaces (e.g.,, and other electronically-enabled channels or other means through which products are offered or sold by you or your affiliates, other than physical stores.
Note that Amazon specifies only, not The announcement also indicates that this policy will only apply to ",, and marketplaces." Amazon UK assures readers: "We are not rolling-out these requirements to other Amazon marketplaces outside of the EU at this time."

In a follow-up article yesterday here, The Bookseller reported:
The Booksellers Association has said it "encourage[s]" the Office of Fair Trading to look into complaints about Amazon, after it demanded that all Marketplace retailers offer their goods at the same price or lower than on other "non-physical sales channels".
The blog here says "The irony is that a similar provision already exists in the Amazon Terms of Service; there is nothing new here ..."

She's right. Amazon UK has bullied its partners before. In June, 2008, I reported here that, during annual contract negotiations with Hachette Livre (one of the Big Six of publishing), Amazon had taken the audacious step of removing the "sale" buttons for HL titles on in order to increase pressure on the publisher.

Amazon UK seems to be staking out its territory as the European Union etailer with the lowest-prices. Does that signal that won't raise its e-book prices to $12.99 to match Apple?

Monday, March 29, 2010

e-Book Prices Going Up

Last Thursday, in reporting on early strategies Apple was employing to convince consumers to buy an iPad, I said:
And, according to the App Advice blog, Apple is prepared to attract readers to the iBook store. That blog reports here that "... at the moment, out of the 32 eBooks featured in the New York Time’s Bestsellers section, 27, including the entire top 10 are priced at $9.99."
On Friday, that same App Advice blog reported:
For unknown reasons, following our announcement, almost all eBooks from the New York Time’s BestSeller list on Apple iBookstore have been give a major price increase. The old standard price-point of $9.99 has just been changed for most publications to $12.99.
The possible reasons App Advice gives for the rise in prices here are ludicrous. The real answer is probably much simpler.

When Steve Jobs initially announced the iPad on January 27, Kara Swisher caught a video clip of him in conversation with Walt Mossberg here.

Mossberg asked Jobs why a consumer would buy an e-book for $14.99 on the iPad when she could purchase an e-book on Amazon or B&N for $9.99.
Jobs responded: "Well, that won't be the case."

Mossberg asked: "You mean you won't be $14.99 or they won't be $9.99?

Jobs responded: "The prices will be the same."
It's no secret that publishers are pushing the agency model, which allows them to set the prices for their books. It's also no secret that they HATE the $9.99 Amazon price point.

I'm guessing App Advice got a peek at a early version of the iPad, intended to show the prices would be the same between the iPad and the Amazon Kindle.

But, on April 3 when the iPad goes live, its best-seller prices will be $12.99 and the Apple 5 will try to tell Amazon they need to match that price or not have access to the Apple 5's books.

Of course, Amazon may try to bluff its way out, claiming they already have a contract that permits them to use the $9.99 price. However, the way they folded when Macmillan pushed back suggests that the Amazon price will be $12.99.

Hoo-Hah, Linda!!!

On Thursday, the Romance Writers of America announced the finalists for their most prestigious awards: The Rita and The Golden Heart.

I was thrilled that my critique partner, Linda Lovely, is a finalist for The Golden Heart in the Romantic Suspense category.

And, yes, her real name is Linda Lovely. She uses her maiden name for writing. You'll understand why when I tell you her full married name is Linda Lovely Hooker.

Linda is a fabulous writer, and Counterfeit, her nominated manuscript, is a great read. Nexi Ketts, her heroine, is running from an ugly past. She's reinvented herself--with a new name, a new body and a new life. The story begins when the new man she invited into her bed tries to kill her. Nexi saves herself, but then has trouble convincing handsome detective Barry Gerton that she's in danger until a second murder attempt occurs.

Fingers crossed that Counterfeit will take The Golden Heart and find a publishing home.

Way to go, girlfriend!!

Friday, March 26, 2010

Apple Vs. Amazon--Early Strategies, Part II

Yesterday I posted on the early strategies in the war brewing between Apple versus Amazon to win the hearts and minds of the e-reading public. Today there's a new battlefront.

App Advice reports here that the Apple iBookstore now includes free offerings from Project Gutenberg.

I've posted on Project Gutenberg before. On June 2, 2006, I reported here:
Project Gutenberg is the oldest digital library. It was founded in 1971 and is manned by volunteers who type, digitize and archive works that are in the public domain. In 35 years of operation, they have assembled 18,000 items.
A visit to the Project's website here reveals that in the nearly four years since, they've made enormous progress in digitizing more books. They now claim "you can download over 30,000 free ebooks to read on your PC, iPhone, Kindle, Sony Reader or other portable device."

In addition, they say, "Over 100,000 free books are available through our Partners, Affiliates and Resources." I clicked on that hyperlink to see who the partners, affiliates and resources were and got this list:
1 Partners
--[Distributed Proofreaders and iBiblio]

2 Sister Projects
2.1 Project Gutenberg of Australia
2.2 Project Gutenberg of Canada
2.3 Project Gutenberg Consortia Center
2.4 Projekt Gutenberg DE
2.5 Project Gutenberg Europe
2.6 Projekt Runeberg

3 Affiliates
3.2 LiteralSystems
3.4 The Internet Archive
3.5 The Online Books Page
3.8 Wattpad

4 Links to locations that provide software, tools, or Project Gutenberg eBooks in different formats
4.1 Wikibooks
4.2 Munseys
4.4 The Early Canadiana Online Project
4.5 Andrew Sly's List of Canadiana in Project Gutenberg
4.6 GutenMark
4.8 Mobipocket
4.10 MobileRead
Amazon also includes e-books from Project Gutenberg for the Kindle. However, it appears Apple is poised to do Amazon one better. They're offering free downloads while, if you go to the Amazon bookstore, you'll have to pay $.99 to download the Project Gutenberg e-books. Here's The Prince and here's The Picture of Dorian Gray.

Nice play, Apple.

Back to your court, Amazon.

Thursday, March 25, 2010

Apple Vs. Amazon--Early Strategies

Nine days from now--on April 3--readers who pre-ordered the iPad will be able to pick up their new Apple devices.

Obviously the iPad is more than just an e-reader, but but for those consumers who want to read e-books on it, the New York Times pointed out yesterday here,
they will have to decide which online bookstore they want to give their money to. From the start, no one bookstore will come with an advantage: No matter which bookstore application iPad owners choose, they will have to download it first. Even the iBookstore, as Apple writes on its Web site, won’t come preloaded on the device.
The article's author Nick Bilton reminds readers that, with the new Amazon app for the Apple, they can download that app and access all the e-books they've previously purchased from Amazon.

I was surprised to learn that B&N did not yet have a similiar app ready for the Apple launch. With readers free to decide which bookstore to use, I would have expected all vendors to be prepared to influence that choice in their favor.

Many e-savvy readers already have libraries of dozens--or even hundreds--of e-books. They are going to want a device that allows them to access those e-books. Amazon recognized that desire when they announced their Apple app.

The other factor that will hugely influence readers as they choose their primary bookstore is, of course, price. And, according to the App Advice blog, Apple is prepared to attract readers to the iBook store. That blog reports here that "... at the moment, out of the 32 eBooks featured in the New York Time’s Bestsellers section, 27, including the entire top 10 are priced at $9.99."

It sounds like Apple recognizes the psychological importance of getting readers through the virtual doors of the iBooks store. And they are taking Amazon head-on by matching their prices. At least initially.

Tuesday's Motley Fool blog here addressed:
the flawed nature of [Amazon's] Kindle's current business model. Whereas game console manufacturers and wireless carriers often take losses on hardware sales to consumers, and make it up by profitably selling content and services, Amazon is trying to do the exact opposite.
The Motley Fool believes the Kindle is priced far too high at $259. They are supported in that assertation by a Forrester Research survey. CNET News reported on that survey here in September:
... consumers find e-book readers much too expensive. Extrapolating from the 4,706 U.S. consumers questioned, Forrester found that almost 65 percent of U.S. adults online would consider a price of $98 or less too expensive for an e-book reader but would still purchase one.
So ... it sounds like we may have Apple coming out of the starting blocks matching Amazon's $9.99 e-book pricing in order to grab early market share.

At the same time, Amazon is striving to become a platform for e-reading devices by offering an app that allows consumers to buy Amazon's books on the iPad.

What other surprises are in store for us?

Wednesday, March 24, 2010

How Long Can Growth in e-Books Accelerate?

On Friday, Richard Curtis did a post titled "January '10 E-Book Sales Almost Quadruple (Over) January '09." He said:
... January 2010 e-book sales posted a nearly 370% jump over the same month in 2009, according to the International Digital Publishing Forum and the Association of American Publishers. The numbers are $31,900,000 for January '10 compared to $8,800,000 for January '09.
Go here to read the entire post.

Curtis points out that the biggest month for e-books sales prior to January had been the month before: December, 2009. December's sales were about $19 million. January's sales were almost $32 million.

Hello? That's a 68% jump from one month to the next.

Mike Shatzkin picked up on Curtis' post on his blog on Monday here. Mike asks the question, "How long can this growth go on?"

A little over a year ago, I did a series I called "The (Publishing) House is Burning." In Part III on February 16 here, I printed a graphic from the Nielsen Norman Group on the life cycle of a new technology. Here it is again:

I suspect that, with the forthcoming release of the iPad and the new Kindle application for Apple, we are about to jump the chasm separating the early adopters of the new digital technology from mainstream acceptance. You can see from the above chart that the growth rate on the bell curve continues straight up for some period of time after that point.

Intent on protecting their print business, the Big Six publishers have treated e-books as a red-headed stepchild. Fearful that e-books would cannibalize print books, they've dragged their feet, behaved in a passive-aggressive manner, and done everything they could to slow down the growth of the e-book business.

Right now, I have no doubt the Apple 5 are breathing a sigh of relief. Through the deal they've struck with Apple to put e-books on the iPad at prices ranging from $13 to $15, they believe they've taken back control of pricing. And--when push came to shove--Amazon blinked, as I reported on Friday here.

Or so they think.

I believe the Apple 5 are victims of their own history. Everything about the way they've handled the emergence of the e-book suggests they still believe the publisher is the most important part of the publishing equation. They've had all the power for so long, they cannot envision a world in which they do not continue to maintain both their hegemony and control.

Sort of the way the Big Three auto makers once believed.

Take a look at this comment by the BBC in 2/2007 about Detroit:
While it was inevitable [the Big Three] would eventually lose their monopoly position, their failure to adapt their production methods and meet changing consumer tastes has accelerated their decline.
And this:
In the 1950s and 1960s, US firms failed to innovate in the design of cars, preferring to make money by increasing the size and weight of their vehicles by adding extras like air conditioning, power steering, and fancy sound systems ... And the mass production system discouraged innovation because it was so expensive to introduce fundamentally new models.

Meanwhile, Toyota was also making a virtue of adversity, changing its production system to become leaner and more efficient than its rivals.
I believe the Apple 5 are ignoring the most important part of the publishing equation.

The authors.

In my post of 2/16/09, I said the following:
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 What's to stop them from approaching popular authors and offering to better the deals big publishing currently offers?
The Apple 5 are wanting an average retail price of $14 for e-books. Random House and HarperCollins are offering authors a 25% royalty, or $3.50 per book.

Amazon's $9.99 retail price has done what it was intended to do. It gave the e-tailer 90% of the U.S. e-book market. However, that price was a loss leader, merchandise sold at a loss in order to attract customers. A more realistic price would probably be $12.

Let's say Amazon offers authors somewhere between 37% ($4.44) and 50% ($6.00). And promises to print and distribute p-books through their CreateSpace division.

Which deal do you think the authors are going to take?

Charles de Gaulle once said: "France has lost the battle, but she has not lost the war."

Don't count Amazon out just yet.

Tuesday, March 23, 2010

(Re) Negotiating Your Book Contract

In yesterday's post about the Digital Book World Conference, I reported that Evan Schnittman talked about the large number of trade authors with existing titles covered by contracts that never addressed e-rights because electronic books did not exist (or weren't considered valuable) when those titles were originally published.

Last Wednesday, The Authors Guild had this to say:
Random House and HarperCollins are sending letters to authors and agents seeking amendments to contracts regarding e-book rights. These letters, although some suggest that the author's work was "selected" for digitization, appear to be going to virtually all authors who have no stated e-book royalty rate in their contracts. In some cases, the letters have gone to authors who have never granted e-book rights to the publisher.

These amendments should be treated with extreme care.
The Authors Guild goes on to say that both publishing houses are trying to lock in a 25% rate while e-book rates are still low.

The Guild offers five suggestions for authors who did not give away their e-book rights when they signed their original contract. Go here to read the suggestions.

Monday, March 22, 2010

e-Book Tipping Point, Part II

On March 5, I posted about the video which Publishers Lunch made at the Digital Book World Conference. The panel was titled "The e-Book Tipping Point" and featured Mike Shatzkin as moderator with a panel made up of:
  • Ken Brooks--Senior VP for Global Products & Manufacturing for Cengage Learning
  • Michael Cader--Founder of Publishers Lunch
  • Larry Kirshbaum--Formerly headed Time Warner's Publishing Group and today is a literary agent
  • Evan Schnittman--VP for Business Development & Rights for the Oxford University Press
  • You can read my summary of the first half of the video here. I promised to return to finish the video, which is what we are going to do today.

    When I stopped, the panel was talking about Amazon and its future. Michael Cader said that the premise that Amazon had already reached its "peak market share electronically" and would now see its market share decline seemed a safe prediction. However, he wanted to point out a couple of wild cards.

    He began by reminding everyone that the initial thinking had been that "Internet book-selling ... was easy--anybody can do it ... we know where that story led us ..." I took that to mean that we should never underestimate Amazon because Jeff Bezos proved he knew what he was doing when no one else did.

    Wild card #1 is the "background attempts driven by Apple and Google and others for publishers to retake the business terms of how e-books are sold, priced and merchandised."

    Wild card #2 has to do with pricing. Cader warned that if the publishers' effort to retake the market share from Amazon:
    "happens in a world that still allows Amazon in parallel to pursue many of their pricing strategies ... against a completely different pricing strategy driven by publishers rather than consumers, it's going to be very hard ... to chip away at [Amazon's] market share ...

    "We should take to heart very seriously how much price has driven this market so far and how much price and the availability of pricing options is going to drive the next segment of this market."
    Cader offered a third wild card, saying the market for electronic devices was about to explode "with devices that aren't just about reading, where reading is secondary or tertiary ... [where] you didn't buy it as an e-book reader but you have it now for free ... so you don't buy something else ..."

    Schnittman picked up on that train of thought. He believes that explosion in multi-purpose devices that also permit e-reading will help Amazon. "The Kindle as a platform ... the Kindle on the Apple already announced ... [Amazon is] the retail platform for all devices ..." He suggested that this dynamic creates enormous potential for Amazon "to actually strengthen ..." its position in the market.

    Shatzkin led the panel to discuss the agency model introduced by the Apple 5. He identified the two main features of the model as allowing the publisher to control the retail price and allowing renegotiation of the division of spoils in the supply chain.

    Schnittman disagreed with Shatzkin's premise. He said he thought what the agency model was about was "the publisher as the direct distributor through Apple to a consumer ... the first direct line to a customer ..."

    Mike Cader talked about two of the most important "what ifs" today. First, the "agency model's really only going to work if pretty much everybody moves to it ..."

    And, second, "most publishers already have a contract with Amazon of some kind ... there's a whole lot of--at best--confusion or grayness over what those contracts say about moving to an agency model."

    Schnittman pointed out that we might not even be talking about the existing e-book. We might be talking about enhanced e-books and suggested that those might not necessarily mean just adding color and video to the standard e-book.

    Cader stepped in to say that "the enhanced e-book has been strategized not ... because there's a lot of research showing that's what consumers want out of the product ... The enhanced e-book was devised as a business concept ... to make the agency model work by saying, 'Well, it's not our existing product. It's this new thing so we need a new set of business terms to present it under. It's not covered by existing arrangements' ... Again, it's a way to package the thing that they want ..."

    Schnittman pointed out, "Let's not forget that technology ... marches forward at unbelievable speeds ... The Kindle device will have enhancements that make it enhanced e-book ready before you know it. This SDK announcement of Amazon could have been interpreted as a response to this agency model. 'Okay, fine. You want an agency model. We can run that agency model on our platform where we'll be selling the less expensive e-book against your higher-priced enhanced book. Good luck with that'."

    Larry Kirshbaum, the literary agent, raised a new issue, asking, "...What the relationship is going to be between the publisher and the author as far as e-book rights go? We've been reading [that] Apple is going to be giving 70% of the revenue under this agency model ... Now the question becomes what percentage of that 70% goes to the author? And, in my view, the proper model is going to be closer to a 50/50 share of e-book revenue."

    Shatzkin said, "I wanted to ask about whether e-rights being split off is something that is likely or not likely to happen. ... We also had last week the news that Amazon has a 70/30 offer on the table ... Amazon said, 'Authors bring us their books directly ... we'll divide the revenue 70% to the author, 30% for us of the sale price.' And the conditions were not onerous. The conditions were that the price we sell at has to be between $1.99 and $9.99. It has to be 20% less than any print book price that is in the market ... Does that create a temptation by which authors might say, 'You know what? Let's do that Amazon 70/30 deal and then we'll see what else sorts out?'"

    Ken Brooks said the print publisher might then threaten not to buy the book if the e-rights were separated from the print rights.

    Evan Schnittman brought up another issue: There are a large number of trade authors with existing titles covered by contracts that never addressed e-rights because electronic books did not exist when those titles were originally published. These authors have more reason to take advantage of that Amazon offer than to go to the Big Six. This dynamic is very different from that of authors bringing new titles not yet published to the table.

    Mike Shatzkin raised a new question: Will territorial rights survive the digital explosion?

    Schnittman said the technology of selling online "opens up the possibility that anyone, anywhere, can buy a product from anywhere."

    Mike Cader agreed. He pointed out that "we invented this new paradigm where just the judgment of territory is difficult. Is it where you reside? Is it where you bought the device? Is it where you are when you buy the book to go on the device? Which of those factors predominates?" He described this as an open market issue first and said the fight will be about e-book pricing and release dates.

    Shatzkin then offered another subject: Will the "big legacy publishers" need to begin to scale down over the next two or three years, eliminating warehouse space and other large costs?

    Ken Brooks responded that he believes there will be opportunities for the largest publishers to take on distribution for smaller publishers. He said "you want to get rid of fixed cost and turn them into variable costs wherever you can." He suggested publishers might plug in third-party vendors rather than owning the big facilities themselves.

    Brooks also talked about the shift from physical distribution to connecting with audiences. "The marketing focus becomes much more important than it has in the past."

    Larry Kirschbaum said something that caught my attention: "Publishers have never really had to deal ... with their ultimate consumer. They've gone through intermediaries--whether it's retailers or distributors. Now they're in the game of dealing with their ultimate consumer ..."

    Michael Cader reminded everyone that the big publishers are the last ones left still investing in the careers of authors, investing money up front in bringing new works to the marketplace.

    Cader responded to a question about how he built Publishers Lunch--both building something from nothing and managing to challenge Publishers Weekly: "Every business problem has a business solution. It often requires thinking differently than you have in the past and redeploying your resources and strategy in a new way."

    That response could have been the tagline for the entire panel. And the Big Six would do well to remember that David did manage to defeat Goliath.

    I was enormously impressed by Evan Schnittman's grasp of the industry. I've added his press' blog to my list of blogs-to-read.

    And, as I've said before many times, if you are not subscribing to Publishers Lunch, you should think about doing so (go here to subscribe).

    Friday, March 19, 2010

    More News From the Amazon/Apple Front

    The New York Times reported on Wednesday that is demanding that publishers sign a three-year e-book contract containing "a detailed list of concessions" or face the threat that Amazon will no longer sell their e-books.

    Does this sound familiar?

    It should.

    On January 29, Amazon pulled Macmillan's books off their website after the publisher approached Amazon to discuss the "agency model" deal they had cut with Apple for the sale of e-books. At that time the New York Times reported here:
    Under this [agency] model, the publisher sets the consumer book price and takes 70 percent of each sale, leaving 30 percent to the retailer. Macmillan said Amazon could continue to buy e-books under its current wholesale model, paying the publisher 50 percent of the hardcover list price while pricing the e-book at any level Amazon chooses, but that Macmillan would delay those e-book editions by seven months after hardcover release.
    Amazon's $9.99 pricing for e-books has long aggravated publishers, who believe that electronic books should be priced in the $13-$15 range. It has been widely reported that Amazon chose to take a loss on e-book sales in order to subsidize sales for their Kindle e-reader. Amazon's approach certainly helped make the e-retailer #1 in the U.S. in e-book sales (with 90% of the market according to the New York Times).

    To date, five of the Big Six publishers (Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster) have signed agency model deals with Apple, ensuring that the publishers are the only ones able to set e-book prices. Random House, the largest of the Big Six, is the sole house among the Big Six not to have reached terms with Apple.

    Ten days after the Amazon/Macmillan showdown, the Wall Street Journal reported that Amazon had backed down, reaching agreement with Macmillan and putting the publisher's books back on sale.
    By agreeing to accept a new pricing model, Amazon has publicly acknowledged the sudden emergence of a rival that may not only threaten its highly popular Kindle franchise but also its total domination of e-books.

    Specific terms of the Macmillan agreement couldn't be learned. However, they are expected to include higher prices for e-books, mirroring those offered by Apple on its coming iPad device.
    Thus far, Macmillan is the only one of the so-called Apple 5 to actually have agreed to a deal with Amazon. Apparently Amazon has spent the 5+ weeks since that report, planning their next move. Wednesday's New York Times reported:
    Amazon has agreed in principle that the major publishers would be able to set prices in its Kindle store as well. But it is also demanding that they lock into three-year contracts and guarantee that no other competitor will get lower prices or better terms.
    Meanwhile, on Wednesday, Publishers Lunch reported that Amazon is not willing to consider agency model deals with independent publishers:
    At least one independent publisher of scale was told categorically by Amazon in a recent phone call initiated by the etailer that Amazon would not negotiate agency selling terms with any other publishers outside of the five initial Apple partners. This publisher was told that if they switched to an agency model for ebooks, Amazon would stop selling their entire list, in print and digital form.
    Given the uncertain publishing landscape, no publisher is going to be eager to sign on to a three-year contract with Amazon.

    So to summarize, five of the Big Six have signed agency deals with Apple with Random House sitting out. One of the Big Six (Macmillan) has signed a similar deal with Amazon.

    I have to say I suspect readers who have ordered the iPad are going to be surprised to learn that they'll be paying $14 on average for Apple e-books when they've grown accustomed to the $9.99 Amazon price point. Of course, the iPad is not solely an e-reading device so it may not matter to the majority of the iPad's users.

    Thursday, March 18, 2010

    Bob Miller Leaves HarperStudio

    Almost two years ago (Sunday, April 6, 2008), I did a post here which I titled "What's Going On at HarperCollins?"
    On Thursday, HarperCollins surprised the industry with an announcement that Bob Miller, the founder and president of Hyperion (an imprint of the Walt Disney Company) would be taking a new job at HarperCollins.

    Publishers Weekly (PW) said, "Miller will be heading up a 'publishing studio' that will do 25 titles a year." He will report directly to Jane Friedman, the HarperCollins CEO. For her part, Friedman was quoted as saying, "I can't think of anyone better to build a new publishing model for today."
    Of course, by now, everyone in the industry is familiar with HarperStudio, the name given to Bob Miller's new imprint. The New York Times quoted Miller saying: "Let’s take all the things that we think are wrong with this business and try to change them.” The Associated Press said: "In an ever-uncertain market for publishers, HarperCollins is looking to resolve two of the industry's major concerns: High author advances and the high rate of returned books."

    Yesterday, less than two years later, the industry was shocked by an announcement that Bob Miller was leaving HarperStudio to become the group publisher of Workman Publishing's Workman, Algonquin, and Artisan imprints effective May 3. According to Publishers Weekly, "Peter Workman will remain president and CEO and will collaborate with Miller."

    GalleyCat published both the Workman press release and the HarperCollins' internal memo to employees in response. According to the Workman release:
    In its first two years, HarperStudio--just named one of the ten most innovative media companies of the year by Fast Company--has had three New York Times bestsellers and has signed seventy authors...

    Commenting on the move, Miller says, "I am very proud of what we have accomplished at HarperStudio, and I am sorry to leave this exciting venture behind, but the opportunity to play such a significant role at Workman Publishing is impossible to resist."
    According to the HC memo:
    HarperStudio and its staff will continue under the leadership of Michael Morrison, President and Publisher U.S. General Books and Canada.
    Responding to the news, the New York Times here quoted Peter Workman as saying "(Miller) 'replaces me...I am not going anywhere, but it’s the beginning of a form of succession.' Mr. Workman will remain chief executive." The Times reminded readers that HarperStudio limited advances to a max of $100,000, but then offered authors "half the profits from book sales."

    Debbie Stier, Miller's Associate Publisher at HarperStudio took the unusual step of creating a question-and-answer format at the imprint's blog The 26th Story here yesterday. She was obviously trying to reassure HarperStudio authors, proming no contracts would be cancelled and that the HarperStudio imprint would continue through the Fall, 2010 releases.

    More interesting to me were her responses to questions about the HarperStudio vision: "Of our ORIGINAL goals, I'd give us a 6 [out of ten]. But there were other goals that cropped up along the way that were unintended benefits."

    Asked to define those original goals, Stier answered: "The original goals were advances capped at $100,000 and a profit share with the author; selling to accounts non-returnable; direct selling."

    And in response to which goals were not met, Stier said: "The non-returnable didn't work (Please don't ask me to go into the why right now :) and the direct selling we never really got to try for various reasons. The profit share has been great."

    Marion Maneker, another former HarperCollins publisher, did an article for Slate's Big Money yesterday here, which he cleverly titled "Miller's Crossing." He says:
    No one should blame Miller for wanting his own fresh start. HarperStudio was never going to solve publishing's problems, because it was saddled with the corporation's costs. Touting a 50-50 profit share sounds impressive only to the uninitiated. Anyone with a half-decent sense of publishing's financials knows that 50-50 is no bargain when you have to subtract the dead-hand costs of a publishing conglomerate.
    Sarah Weinman writing for Daily Finance here said:
    ...HarperStudio's utopian visions didn't pan out. The imprint has had bestselling authors...who thrive on the profit-sharing model. But booksellers rejected the non-returnable model and forced HarperStudio to back off.
    Weinman believes HarperCollins will absorb HarperStudio's staff and return to more standard publishing terms that will "keep more of the company's money in its own pockets, and not in the hands of authors."

    Wednesday, March 17, 2010

    The Price of Progress

    Publishers Weekly (PW) had a couple of items yesterday reminding us that, in addition to new e-reading devices, the evolving publishing landscape creates casualties.

    First, PW reported Peter Smith Publishers, "one of the last remaining reprint houses," will close down at the end of April.

    The company's president, Mary Ann Lash, gave the following reasons for why PSP was closing:
    The primary reason, she said, is Google's plan to make books available electronically. The economy has also taken a toll, especially on PSP's main customers, libraries.
    In addition, PW directed readers to a New York Times article on Monday titled "Death of the Bookplate?" Author Alex Beam, writing for the Yale Alumni Magazine, mourns the passing of the bookplate:
    “This books belongs to . . . no one.” Welcome to the future, a less intimate and a less ornamented place.
    Go here to read the Yale article.

    Tuesday, March 16, 2010

    Is The iPad Taking On The Kindle?

    Last Friday Apple began taking pre-orders for its iPad, scheduled for release in the U.S. on April 3. Depending on which story you read, as many as 150,000 pre-orders have already been received for the devices, priced to sell starting at $499.

    While the iPad is obviously more than just an e-reading device, it's that e-reading function I want to talk about today.

    Apple will now have its own iBooks store. As of this date, five of the Big Six publishing houses have signed on to support the iPad and the iBooks store: Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster. The lone holdout is the biggest of the Big Six: Random House.

    I'm not sure how many of the enthusiastic iPad buyers are aware that the business model for their new e-reading device is not the retail model they've been accustomed to when buying from Amazon.

    John Sargent explained the change in a post on the Macmillan blog earlier this month:
    Starting at the end of March, we will move from the “retail model” of selling e-books (publishers sell to retailers, who then sell to readers at a price that the retailer determines) to the “agency model” (publishers set the price, and retailers take a commission on the sale to readers). We will make this change with all our e-book retailers simultaneously...Generally e-book editions of hardcover new releases will be priced between $14.99 and $12.99; a few books will be priced higher and lower.
    Michael Cader expanded on that definition at Publishers Marketplace:
    The key for most publishers is...the opportunity to change the basic selling terms of ebooks with at least one major trading partner in a way that lets publishers take back control of pricing and reassert their vision of the value of an electronic version of a book...

    In the agency model, the publisher is considered as keeping possession of the actual goods (the ebook files) and it pays a commission to its authorized selling partners. So the publisher sets the retail price of the ebooks, and the commissioned agents have no ability to change that price. Ebooks sold under the agency model would be offered to any established trading partners who agree to the commission and other particulars.
    I've seen a lot of bloggers complaining that "price fixing" is illegal. However, there is a difference between "price fixing" and "resale price maintenance." A Supreme Court decision on June 28, 2007 (Leegin Creative Leather Products, Inc. v. PSKS, Inc.) established the difference between the two.

    Jeffrey A. Trachtenberg, who writes about publishing for the Wall Street Journal, did an article here in January in which he said:
    Amazon created the e-book market by making the $9.99 price for best sellers an integral part of its introduction of the Kindle e-book reader in November 2007. But the Kindle lacks color and video capabilities, two elements that are likely to be crucial to the future of enhanced e-books. Amazon could be shut out of enhanced e-books until the Kindle offers those features.
    There's a possibility that Apple and the Apple 5 (so called by Kindle Nation Daily) may go head-to-head with Amazon and Random House. Obviously, the five publishers are not going to sell new releases at the iBooks store for $14 and allow Amazon to sell those same books for $9.99.

    Last month I was very intrigued when Teleread quoted Daithi here, talking about the ABA Winter Institute meeting on 2/5/10:
    The only bright spot for Amazon, and Kindle owners, came from Madeline McIntosh, the President of Sales, Operations, and Digital for Random House. She pointed out that publishers “have no real experience at setting retail prices.” She also revelaed (sic) that one of the reasons Random House had not been party to the iBook Store at launch was because of the pricing issues.
    Michael Cader also quoted McIntosh at Publishers Marketplace:
    ...McIntosh took on pricing control directly as one of the reasons Random House has "not acted quite as quickly as others." She expressed a series of concerns that publishers "have no real experience at setting retail prices." And she admitted that "we in New York are very disconnected from the price at which our goods are sold in this country, and that can be different in Miami and Kansas City and Portland."'s possible the match-up could be described this way: In one corner we have the flashy Apple iPad and five of the Big Six publishers with a $499 iPad and enhanced e-book new releases at an average price of $14...and in the other corner we have the world's biggest e-book retailer (Amazon) and the world's biggest trade publisher (Random House) with a black-and-white $259 Kindle and new e-book releases priced at $9.99.

    Winner to be determined by the reading public.

    Grab yourself some popcorn and pull up a chair to watch the duel.

    Monday, March 15, 2010

    Jason Epstein Speaks Out

    Jason Epstein, long-time Random House editorial director and co-founder of The New York Review of Books (NYRB), had an op-ed piece in the NYRB last Thursday. Despite the fact that Epstein is now 81, he is more clear-eyed about the future of publishing than men forty years his junior.
    The transition within the book publishing industry from physical inventory stored in a warehouse and trucked to retailers to digital files stored in cyberspace and delivered almost anywhere on earth as quickly and cheaply as e-mail is now underway and irreversible. This historic shift will radically transform worldwide book publishing, the cultures it affects and on which it depends.
    Epstein freely admits that his interest in digitization grew out of his own obsession in the backlist--previously published books still in print. The combination of the digitization and the Internet allows books to remain "in print" indefinitely. He has empathy for publishers:
    With the earth trembling beneath them, it is no wonder that publishers with one foot in the crumbling past and the other seeking solid ground in an uncertain future hesitate to seize the opportunity that digitization offers them to restore, expand, and promote their backlists to a decentralized, worldwide marketplace.
    Read the article here.

    Friday, March 12, 2010

    Writing Scams and Scammers

    A message from a writer in Japan changed my plans for today's post. It's been a while since I posted a warning about all the scams out there that capitalize on a writer's desire to be published.

    Back in October, 2006, I wrote a post titled "Red Flags For Writers." In that post, I listed a series of warning signs that should make a writer slow down and look for more information.

    Every couple of years, a writing scam will surface. The big "reveal" usually begins on a writing loop with a writer asking a question about a publisher or agent s/he has been working with. Initially, some writers will come forward with reassurance, saying they are also clients of ABC Agency or XYZ Press. Others will argue that they've heard bad things. Occasionally a sock puppet will pop up, insisting the company is entirely legitimate.

    Over time, the writers who started out just asking questions or suggesting there was some kind of misunderstanding begin to realize they've been scammed. Gradually their protective wall of denial crumbles, their confidence wanes and their hope diminishes. Almost all of them eventually acknowledge there were red flags they ignored.

    Hindsight is, of course, 20/20. We're going to look at some red flags here:

    1) Everything you read on the Internet is not gospel. As an example, don't forget that anyone can post to Wikipedia. It sometimes takes a while for the overseers there to catch and edit the false entries.

    If you are going to search for information, it is up to you to be an informed consumer. Scam artists plant people in loops and chat rooms to talk up their services. Sometimes the scam artist himself acts as a sock puppet, using a pseudonym to praise his own operation. A common ploy is to pretend to be a writer and give rave reviews to a site that is really run by a rip-off artist.

    Ads in magazines should always be viewed with suspicion. Ads are paid for. Most magazines DO NOT screen for the validity of the ad; they just take the money and run the ad. Just because you see a company in an ad in Writers Digest or Publishers Weekly doesn't mean it's legitimate. I quit subscribing to Writers Digest years ago because of my disgust over some of the ads they continued to run from scam artists.

    You should ALWAYS check Preditors and Editors here and Writer Beware here. You should ALWAYS Google for information on any recommendation you receive. Google it in several ways: first with the word "complaint" in the search string. Again with just the name of the agency. And finally with just the name of the agent or acquiring editor.

    2) Examine the agent, editor or publisher's website carefully. Look for obvious problems. Poor grammar, poor spelling, a lack of professional voice--all of these are warning signs. If the agent, editor or publisher is claiming to be a legitimate member of an industry in which words are her business, she should be able to write a coherent, error-free sentence.

    3) Examine the website's claims. At a minimum, they should list the writers or the books they represent. But don't stop there. I recently received an email from a newbie asking about an "agent." He hadn't found anything alarming in a Google search; actually there was very little at all on the Internet about this agent beyond her website address. She wasn't listed on any of the warning sites either. I went directly to the site, looked up the authors listed and did a search on each of their books. ALL were printed by vanity presses or a print-on-demand press like Lulu. No one needs an agent to self-publish. That's a big red flag.

    4) If you don't subscribe to Publishers Marketplace (PM), make friends with someone who does. A search of that database will turn up deals made by the agent. Granted, this is not foolproof. Some agents don't report on PM. However, when you are investigating an agent, you are looking for both positive and negative feedback. A list of deals made can go in the "positive" column.

    5) If you can't find deals listed on the agent's website or on Publishers Marketplace, ask them directly to give you a list of the books they've sold. Then follow up to make sure these were REAL deals and not more self-published stuff. If they claim to be a new agent without deals yet, this can be a red flag. Ask where they worked previously and google that. Lots of editors go out on their own to become agents. However, you should be able to find information on the publisher they worked for and the books they edited. You also need to decide if you want to be the first client of a new agent. It may work out; it may not. The skills sets needed to be an agent or editor are similar, but not identical. My own agent is a former editor, but she's been an agent for a long time.

    6) If the agent demands an upfront fee, RUN. No matter what they call it--retainer, reading fee, advance--RUN. Legitimate agents do not request money from clients. They earn their income from the deals they make and the royalties and advances paid to the writer by the publisher. Money should ALWAYS flow to the writer, not from the writer.

    7) Occasionally a writer will be approached by someone claiming to be an agent who read the writer's blog and is interested in representing the writer because of the marvelous quality of his work. While this might happen, it is less than likely. Most agents have their hands full with submissions. They don't need to go trolling for clients.

    8) Another red flag is fulsome praise. Everyone wants to be validated. However, when the praise goes over the top, red flags should be raised. Any time a writer is told he is the next Mark Twain, Stephen King, Nora Roberts, or John Steinbeck, he needs to take a deep breath and consider the source. I know your mother thinks you're a good writer, but come on. Try to stay in the real world. I suspect the people who get taken by this scam write in isolation and are not in critique groups. Good critique partners will teach you humility. Mine do every day.

    9) Beware of anyone who pushes you for an immediate decision. A legitimate agent is looking to build a relationship. Someone who threatens that the offered contract will be withdrawn in eight or forty-eight hours (usually coupled with a claim that they are working with a publisher who needs an immediate decision) is trying to get you to ignore those warning bells in the back of your head.

    10) If you hear warning bells, slow down. Talk to writers you personally know and trust. DO NOT go back on the loop where you found the agent and ask there. There are likely to be sock puppets lying in wait to reassure you. The other problem is you may find writers who are being scammed, but who haven't realized it yet. Go to Absolute Write here and post a query. Jenna Glatzer and Victoria Strauss give great advice.

    11) If the agent says he will take your manuscript if you have it professionally edited, take a deep breath--especially if they give the names of specific editors. Legitimate agents DO NOT refer to editors by name; they say you need editing. I blogged several months ago about a writer who thought an agent was on the up and up because she was given three names of potential editors. Turned out all three names had the same IP address. Go back and read my blog for 12/08/05 here ("Anatomy of a Writing Scam") about the "agent" who scammed writers by using different names for herself as agent, editor and publisher.

    Remember: publishing is a business. Agents are business people who do not take on clients unless they believe they can sell the work. Publishing houses are business operations. They do not take on manuscripts that they don't believe will sell.

    Advice for wannabe writers. Stop blaming agents and publishers for not contracting your work. They don't owe you anything. Saying they are only in it for the money makes you sound like an idiot. Would you say a doctor is only in the business of healing for the money?

    There are NO shortcuts. If you are going to get impatient or depressed during your search for an agent or publisher, maybe writing isn't for you. Real writers keep writing UNTIL. They have no choice. They can no more stop writing than they can stop breathing. They plug away, year after year--taking workshops, getting critiques, attending conferences, and learning about the industry. Remember what Joe Konrath says: "What do you call a writer who won't give up? Published."

    Impatience and arrogance won't help you get published. They will only make you a target for scam artists. Crooks prey on people who are too impatient to wait or too unwilling to subject their own writing to a critical eye. I see examples of this every day. The writers start out with the right mindset but, after four or five rejections, they get impatient and angry and start talking about self-publishing.

    Four or five rejections? Try a hundred. Lots of well-known writers racked up triple-digit rejections before they finally were published. If you want to be a published writer, you need to pay the dues. There's no other way. Write, write and write some more.

    Finally, to any writer who has been taken in by a scam, I know you feel awful. I know a few of you may even be thinking about walking away from the business altogether.

    Don't do it. Take a break. Write something new, or give yourself some time to recover.

    Scammers take advantage of your eagerness to be published. That doesn't mean you will never be published. It just means the time (or your manuscript) isn't right yet.

    Never give up. Never give up. NEVER GIVE UP.

    Thursday, March 11, 2010

    YA Literature's Growing Popularity

    On Monday, the Los Angeles Times (LAT) had an article titled "Young Adult Lit Comes of Age."
    YA is one of the few bright spots in an otherwise bleak publishing market. Where adult hardcover sales were down 17.8% for the first half of 2009 versus the same period in 2008, children's/young adult hardcovers were up 30.7%.
    The article's author, Susan Carpenter, points to the Harry Potter books as being "largely credited with jump-starting this juggernaut of a trend." The first of the seven Potter books was released in 1997.

    Carpenter talks about the crossover appeal that has many adults reading YA literature. And that also has adult writers now writing for the YA market.

    I have an 18-year-old niece. When she was in kindergarten, I introduced her to a Dallas restaurant called Simply Fondue. She was entranced by the booths with tables of burners topped by pots of hot cheese and other sauces into which she could dip skewers of fruit, meat and marshmallows.

    Simply Fondue became her #1 choice for going out to eat. It was during one such meal together in 1998 that she spent the entire meal describing the first Harry Potter book to me.

    Her enthusiasm for Harry Potter and the Sorcerer's Stone prompted me to buy the novel so I could stay in touch with her interests. That one meal spawned a pattern we followed for the next six years from the time she was six until she turned twelve. We spent hours discussing the series, arguing over how to pronounce Hermione (she clung to Her-me-one; the debate wasn't settled until the first movie came out) and playing trivia contests about all things Harry Potter moderated by my brother.

    Over the past decade, I've tried other YA books she and her younger cousin have recommended to me. While I was impressed by the sales of the Twilight series, all that virginal yearning got pretty boring after a while and I quit soon after beginning Stephenie Meyer's third book.

    The YA books I have continued to read include the House of Night series by P.C. and Kristin Cast (see my review here).

    Most recently I read The Hunger Games by Suzanne Collins and its sequel Catching Fire. The third book in the planned trilogy, Mockingjay, is due out this August, and the first film is scheduled for release next year.

    I strongly recommend The Hunger Games. The novel combines an extreme version of today's reality TV with a post-apocalyptic world ruled by an indifferent totalitarian government. The book's protagonist, sixteen-year-old Katniss Everdeen, lives with her mother and younger sister in District 12, among the poorest of the dozen districts ruled by the Capitol. As a reminder that rebellion comes with a price, the Capitol holds an annual televised series of games to which each district must send one boy and one girl randomly selected by lot. The twenty-four "tributes" then fight to the death. The last tribute standing is declared the winner.

    When her younger sister is picked for the 74th Games, Katniss volunteers to take Prim's place. The other participant from District 12 is Peeta, who once saved Katniss' starving family by slipping her two loaves of bread from his family's bakery. During televised interviews promoting the upcoming games, Peeta reveals to viewers that he has been desperately in love with Katniss most of his life.

    Katniss is torn between suspicion that Peeta is just trying to gain audience support and anger over having the burden of an obligation to him because of his kindness years before.

    The book is a terrific read; fast-paced and full of sly political wit. I finished it in two sittings over 24 hours.

    The LAT article has an interesting take on adults reading YA lit.
    "I think part of the reason we're seeing adults reading YA is that often there's no bones made about the fact that a YA book is explicitly intended to entertain," said Lizzie Skurnick, 36, author of "Shelf Discovery"..."YA authors are able to take themselves less seriously. They're able to have a little more fun, and they're less confined by this idea of themselves as Very Important Artists."
    Read the article here.

    Wednesday, March 10, 2010

    The New World of Self-Publishing

    The Huffington Post is doing a very interesting series on self-publishing in the modern world of publishing. Sometimes the stories are original with THP and sometimes they link to another article elsewhere.

    Here are some I'd recommend:

    2/23/10 Breaking Down Doors: My Self-Publishing Story
    3/3/10 Self-Publishing Options Explode
    3/4/10 John Edgar Wideman, Literary Lion, Chooses Lulu Over Traditional Publishers
    3/8/10 Publishing: Taking the Power Back
    3/9/10 Amidst eBook Frenzy, Print-On-Demand Is Quietly Thriving

    Tuesday, March 09, 2010

    Spirits For Sale...Or For A Visit

    Okay, I had planned to talk about the growing YA market today, but came across an article that was too weirdly entertaining to resist.

    On Monday evening an auction closed on the New Zealand equivalent of eBay, a site called Trade Me here. The auction was titled "Two Captured Ghosts" and here's a partial (if poorly spelled) description:
    Captured ghosts from our house

    Captured by an exorsist from a spiritualist church

    one spirit we believe is a man by the name of Les Graham...but he is not a very strong spirit.

    The other spirit came from when me and my partner stupidly did an Oujia Board. We believe it is a little girl who likes to move things and turn things on and off. Exorsist says she is VERY strong and if left will get stronger.

    We have had no activity since they were bottled on July 15th 2009 . So i believe they are in the bottles.

    They are bottled with holy water as aparantly the water dulls the spirits energy, sort of puts them to sleep.

    To revive the spirit, i have been told that you pour into a little dish and let it evaporate into your house.
    Avie Woodbury, the seller from Christchurch, claims that the proceeds (after the exorcist's fee is deducted) will go to the SPCA.

    Now here's the kicker. The lot sold for $2,830 (U.S. equivalent = $1,983).

    You can go here to see the items.

    Or--if you want to get in on the action--bid for your own ghost; this time in a Thriftee bottle with "more powerful red holy water." That auction is here and has another week to run.

    It's easy to laugh off stories like these as scams or silliness. I certainly do--at least 96.9% of the time.

    But it's that last 3.1% that makes me hesitate.

    Back in the spring of 1979, I spent five days visiting my aunt and her husband in their large apartment in a brownstone in Queens, New York. During that time, I encountered something that I still cannot explain. And, believe me, I've tried.

    After my first night in the guestroom, my aunt shrugged off my report of being awakened at 2:00 AM by a loud, bizarre noise. "It's an unfamiliar place. You were tired and probably dreaming. Don't worry about it."

    Side note: I knew my uncle liked to tipple (as did every other male in my family tree). The night before, I'd figured he was drunk and stumbling around so I'd stayed in my bed and eventually fell back asleep. In the light of day, I decided my aunt didn't want to explain his late night peregrinations. I let the matter drop...until the second night when it happened again at 2:00 AM.

    It sounded like someone was beating together pots and pans directly outside my bedroom door.

    This time, I turned on the light, got out of bed and opened the door, prepared to confront my uncle.

    Nothing. There was no one there.

    The noise immediately stopped. No echoes. No footsteps. I turned on the lights outside my room and searched for a tape recorder or some evidence someone had been there and was playing a joke on me. I even tiptoed through the apartment to check that the front door was locked and then sneaked to the doorway of the master bedroom where I could hear my uncle snoring and see the outline of my aunt next to him in the bed.

    I was young and seriously creeped out. I wanted an explanation...or alternatively a plane ticket home.

    The next day another of my maternal relatives took me to lunch, and I told her the story. I suspect she could see I was alarmed because she was very matter-of-fact. "Your aunt doesn't want to scare you. It's the ghost. Don't worry about it. It's been around for twenty years and hasn't hurt anyone yet."

    What???? What was wrong with these people?

    I questioned her, and she gave me a quick sketch of odd happenings: things disappearing and later showing up in strange places, seat cushions and bedspreads disturbed when no one had been in the room, noises like the ones I had heard.

    After lunch, I found a public phone booth and called my mother in Florida to ask what kind of a place she'd sent me off to. Mom confirmed what I'd been told, saying that the "hauntings" had been going on for more than twenty years. My maternal grandmother (Irish and sensitive) had refused to spend the night in the apartment.

    When I asked why the hell my aunt and uncle had stayed, Mom responded, "Rent control."

    My first reaction was to be majorly ticked off that--while my trip was being contemplated and then planned--no one thought to mention I was going to visit a haunted house. Mom said said the problems had been the worst during the time my cousins were growing up. Since they'd moved out, no one had mentioned the ghost in years. Full of knowledge gleaned from fiction, I immediately responded, "Maybe it's a poltergeist. Supposedly they're associated with teenage girls."

    You can tell my second reaction was--now that I had an explanation (even a weird one)--this was kind of cool. I wanted to collect more information on the phenomenon.

    So I set out to go mano-a-mano with the household's ghost or poltergeist--without informing anyone else of my plans. On my way back to my aunt's I visited a nearby Catholic church and purchased a rosary and a scapular. Not taking any chances, I hunted around for a priest and got him to bless them for me. The poor man was so pleased a young person wanted to wear a scapular I felt a twinge of guilt.

    I had three nights left in my visit. The first night, armed for combat with my holy tools, I waited until 1:45 AM, then turned on the lights both inside and outside my room and moved a chair to the doorway where I could sit and wait.

    I sat there until 2:30 AM. Nothing.

    Undeterred, the second night I put the chair outside the room, closed the door behind me and waited. I didn't quite have the courage to sit in the dark so I left the lights on. Again, nothing.

    My last night in the apartment, I was desperate. I had a noon flight home the following day. I purchased a flashlight and sat in the semi-darkness (with my fingers covering most of the flashlight's illumination). At 2:40, I gave up and went to bed.

    About two hours later, my bed began to shake violently, and my comb and hair dryer fell off the dresser across the room. I screamed and--for the first and only time in my life--I peed on myself in fear.

    Retribution. The ghost was coming for me.

    My uncle opened the door and shouted, "It's okay. It's an earthquake!"

    An earthquake in Queens????

    You can check the records. On March 10, 1979 at 4:49 AM, there was a 3.2 magnitude earthquake on the Richter scale in New Jersey, which was felt in New York.

    I can tell you, it was hours before I stopped shaking.

    It's been over thirty years since that spring. I have nothing more to report than I've already told you. I know what happened to me. I can't explain it.

    So I still have that 3.1% open mind.
    And therefore as a stranger give it welcome.
    There are more things in heaven and earth, Horatio,
    Than are dreamt of in your philosophy.

    Monday, March 08, 2010

    AAP Session Addresses Copyright

    The Association of American Publishers (AAP) held its general annual meeting last Wednesday at the Hyatt Regency Washington. The 2:30 PM session was titled "The Future of Copyright" and, according to the AAP's website, featured the following:

    • Marybeth Peters, Register of Copyrights for the U.S. Copyright Office
    • Pamela Samuelson, Richard M. Sherman Distinguished Professor of Law Professor of Information Management and the Director of the Berkeley Center for Law & Technology at the University of California Berkeley
    • Mark Helprin, Author of Digital Barbarism: A Writer's Manifesto

    Publishers Weekly did a story on the session on Thursday:
    ...Mark Helprin urged publishers to take a very aggressive to getting the message out about the importance of copyright, saying that whether they know it or not publishers are in a war with technology companies and other parties over the value of copyright...Pamela Samuelson...disagreed that framing the issue as a war [was] the correct approach, saying that would turn customers into enemies. She said publishers should experiment with pricing and different business models to meet the changing expectations of consumers.
    As I read the article, I realized that--despite being a writer--I am much closer to Dr. Samuelson's side of the continuum than I am to Helprin's. It's been about six months since I posted my opinion on the copyright debate. I'm going to repeat what I said then:
    Efforts by companies or cultures to suppress technology have almost always failed. Technology wins in the end. Trying to stop technological progress never works.

    And I guess that sums up my thinking on the state of publishing today. I believe the following:

    1) U.S. copyright law is antiquated and needs to be overhauled.

    2) Writers and publishers need to stop trying to stop the new technology and figure out how to make it work for them.

    3) The developed world needs to move outside its own egocentric needs and recognize how the new technology can advantage those who are not as well off as we are...The prohibitive costs of printing, shipping and warehousing books for underdeveloped nations limits the amount of printed material that can be provided to poor areas of the globe.

    While I acknowledge that the ground under the publishing world is shifting, instead of working on stopping the earth tremors, I'm focussed on learning how to locate the footholds and practicing how to hop nimbly from rock to rock.
    According to Publishers Weekly, Marybeth Peters of the U.S. Copyright Office "also acknowledged that it is getting close to the point, with all the changes in technology, that Congress may need to look at revising copyright laws."

    Friday, March 05, 2010

    e-Book Tipping Point

    Publishers Lunch yesterday highlighted another of the videos from the Digital Book World Conference. This one was titled "The e-Book Tipping Point" and featured Mike Shatzkin as moderator with a panel made up of:

    • Ken Brooks--Senior VP for Global Products & Manufacturing for Cengage Learning
    • Michael Cader--Founder of Publishers Lunch
    • Larry Kirshbaum--Formerly headed Time Warner's Publishing Group and today is a literary agent
    • Evan Schnittman--VP for Business Development & Rights for the Oxford University Press

    They began by estimating if the e-book and p-book of a best-seller were released simultaneously, what percentage of books sold would be e-books. Michael Cader estimated between 6% and 17%. Evan Schnittman specified 10% in the immediate present, but 35% over the lifetime of the book. Ken Brooks agreed with Michael, but narrowed the range from 6% to 15%. Larry Kirshbaum said 10% during the first six months of release.

    As the group grappled with the question of how publishing will "morph" from print to digital, Cader clarified the issue by saying publishing is facing "two different evolutions": the upramp of e-reading and the downramp of physical bookstores--"with or without e-books."

    I really liked Cader's distinction because it takes into account the Internet selling phenomenon. Amazon became a force to reckon with in the publishing industry by FIRST selling p-books online. e-Book retailing followed; Amazon was already a major player before they got into electronic book selling.

    Schnittman picked up where Cader left off:

    "...there's a blurring line between distribution and publishing on the e-side. Traditional retailers...are venturing towards what we would consider publishing."

    The man is singing my song. On April 28, 2007, I said,

    What I suspect is going to happen is that the lines between publisher, distributor, bookstore and author are going to start blurring. Unusual contracts among the different parties are likely to emerge.

    Larry Kirshbaum talked for several minutes, saying: look at the question of really want to look at perhaps a broader issue...the future of proprietary systems...Digital publishing can be like your television set...When you want to watch a program, you turn it on...whatever goes on behind the curtain is not of significance...Let's look at this from the consumer's point-of-view rather than from our own parochial point-of-view...I think this idea that the consumer is being forced to adapt himself or herself to different formats is really a tremendous waste...Long term, I would like to see a non-proprietary world evolving where the content...competes across broad platforms.

    Ken Brooks pointed out that Amazon has offered an "easy and painless" experience for consumers and that, by introducing the SDK, which permits people to program for the Kindle, Amazon is moving toward an open platform.

    I need to stop here. I'll return to this again later.

    Thursday, March 04, 2010

    The Last Train Departs

    On January 19, Henry Holt and Co. released a non-fiction book titled Last Train From Hiroshima by author Charles Pellegrino.

    The Publishers Weekly review on the book said:
    Using a combination of firsthand accounts of Japanese A-bomb survivors, American aviators, and classified documents of government officials, Pellegrino...
    reconstructs two horrifying days and their aftermath when the age of atomic warfare was introduced over Japan. The stories of the few Japanese survivors includes a group of 30 civilians fleeing from Hiroshima to Nagasaki where they arrived to endure the second bomb, are heart-stopping. Pellegrino dissects the complex political and military strategies that went into the atomic detonations and the untold suffering heaped on countless Japanese civilians, weaving all of the book's many elements into a wise, informed protest against any further use of these terrible weapons.
    Director James Cameron had used Pellegrino, who claimed to have a PhD in Zoology from Victoria University of New Zealand, as an advisor on Avatar. According to The Huffington Post, "Cameron said he has long sought to do a movie on the 1945 bombings of Hiroshima and Nagasaki..." In January, prior to the book's release, the director optioned The Last Train From Hiroshima.

    But a month after the book's release, rumors were circulating about the book's authenticity. On February 20th, The New York Times (NYT) published an article titled "Doubts Raised On Book's Tale of Atom Bomb" here.

    The book described an accident with the atomic bomb that supposedly killed an American. This incident plus "other technical details of the mission are based on the recollections of Joseph Fuoco, who is described as a last-minute substitute on one of the two observation planes that escorted the Enola Gay." (NYT).

    However, many historians and veterans insisted Mr. Fuoco was an imposter, and Pellegrino acknowledged in the article that "he was probably duped."

    Atomic historian Robert S. Norris told The NYT, “The publisher should recall it, issue an apology and fix the parts that endanger the historical record.”

    On Monday of this week, the Associated Press reported on a statement from the publisher:
    "It is with deep regret that Henry Holt and Company announces that we will not print, correct or ship copies of Charles Pellegrino's `The Last Train from Hiroshima..."
    In the ten days since that first New York Times story, more doubts had surfaced about the book. In a second article dated March 1 here, The New York Times reported:
    Nicole Dewey, a Holt spokeswoman, said it questioned whether the Rev. John MacQuitty, a priest quoted in the book, and another priest, a Father Mattias, named by Mr. Pellegrino, actually existed. Ms. Dewey said the publisher also had questions about Mr. Pellegrino’s doctorate.
    Pellegrino's response was that he used pseudonyms to protect the priests and that Victoria University had stripped him of his PhD "because of a disagreement over evolutionary theory." here reports: "But in response to a query from the AP, the school said it had no proof that Pellegrino had such a degree." continued: "The book's fate not only means the likely demise of the film deal with Cameron, who provided a blurb for "Last Train," but complicates the long history of collaboration between the director and Pellegrino..."

    The Associated Press reported:
    Holt publicist Nicole Dewey said 18,000 copies of the book, published in January, were in print...

    As of Monday afternoon, 'Last Train' was ranked at 244 on the best-seller list. According to Nielsen BookScan, which tracks around 75 percent of industry sales, the book has sold 7,000 copies.
    But as I write this, the book is now #93 on Amazon, which also has the book ranked as #1 in the following categories:

    #1 in Books > History > World > 20th Century
    #1 in Books > History > Asia > Japan
    #1 in Books > History > Military > Weapons & Warfare > Nuclear

    Wednesday, March 03, 2010

    More On e-Books and p-Books

    Many thanks to Angela James (Executive Editor for Carina Press), who responded to my post yesterday with the digital royalty rate for her new publishing venture. Using her 30% figure, I'm reposting the information from yesterday, plugging her royalty rate into the worksheet in place of the 25% reported by the New York Times. I've also adjusted the publisher's overhead/profit figure downward to re-balance the equation again:


    Cover Cost---------------------$26.00------------$12.99

    Retailer's Share--------------($13.00)------------(3.90)
    50% on Hardcover
    30% on e-Book

    Net to Publisher---------------$13.00-------------$9.09

    And here's how they say they spend that money:

    Design, typesetting
    & copy-editing------------------$0.80------------$0.50

    Printing, storing
    & shipping----------------------$3.25--------------n/a


    Author's Royalty
    15% on Hardcover
    30% on e-Book-------------------$3.90-----------$3.90

    Overhead & Pub-
    lisher's Profit-----------------$4.05--------------$3.91

    Total Costs--------------------$13.00------------$9.09

    An interesting picture, isn't it? On the e-book side, my heart was really warmed by the symmetry between the retailer's share, the author's royalty and the overhead/publisher's profit. Each gets about $3.90.

    Reminder: I'm not jerryrigging this. All the numbers above are straight from the New York Times' article with the exception of the 30% Carina e-book royalty rate and the overhead/publisher's profit rate, which I had to lower to accommodate the 5% higher royalty.

    Of course, the more streamlined and efficient the publisher is, the more profit the house can make.

    And, this scenario is based on a retail price of $12.99 for the e-book, and we don't know if Carina is using that price point. Angela: If you're feeling generous, would you share the retail price for your e-books?

    It wasn't all that long ago--about twelve weeks, in fact--that three of the Big Six announced they would deliberately withhold the e-book release of best-sellers in order to support their hardcover format. These numbers help to explain why.

    At the time, Mike Shatzkin said on his blog: "...this is really about the agents and publishers trying to take control of ebook pricing, and value perception, back from Amazon."

    Regular readers of this blog know that I am no fan of Amazon. I regard them in the same light I do Wal-Mart. You can read about the Wal-Mart Effect here.

    I am, however, rapidly becoming a fan of Carina Press . . . and any other innovative and forward-thinking publishers.

    Any Hope For the Big Six Publishers?

    A friend and I were discussing via email the e-book vs p-book issue. She asked if I saw any bright spots for the Big Six.

    A year ago on February 11, I posted the following comment on the HarperStudio blog about the economics of e-book publishing here:
    I'm going to echo the words of a turnaround expert, Dr. James B. Shein of Northwestern University. In addressing fifty of the top newspaper industry execs in November, he said: "'The biggest hurdles to progress [are] the industry's senior leadership, including some of the people in this room . . . I am not sure you can take a look at your industry with fresh eyes'."

    When Bob speaks of all the costs remaining the same, I find it ironic. HarperStudio was begun on the premise that it was the returns system (and large advances) destroying publishing. Manufacturing, warehousing, returns and pulping is an enormous drag on the system. All of that goes away with e-publishing.

    As far as the rest of the costs remaining the same, that's ONLY if you continue to maintain huge offices, power lunches and all the other accoutrements of big publishing today. To say otherwise is either incredibly cynical or further support for Dr. Shein's premise that the industry cannot look at itself honestly.

    Advances originally grew out of the long waits to release date. Those waits can be greatly abbreviated by e-publishing. Advances can begin to shrink, too.

    It's time to reinvent yourselves. Take a look at what benefit you DO offer authors and readers and capitalize on that. Quit wasting energy in needless DRM arguments and recognize that Amazon is positioning itself to destroy you. Their vertical integration model frightens the hell out of me.

    Instead of nattering on about $3 less cost for e-publishing (an argument only industry insiders buy), publishers need to figure out what they offer that no one else (at the moment) does. I see two things: (1) You vet for quality. E-publishing is improving, but its eye for quality is still not quite what it needs to be; (2) You have marketing and sales expertise. This is huge. Capitalize on it.

    Realize the benefits of e-publishing. They take more risks because they can. Their investment isn't as great as yours. Start taking some of those chances.

    And take a hard look at your costs. I suspect the industry will begin to unravel into a more decentralized one in which editors and artists can work from their own studios, providing services to multiple publishers. When work is handled digitally, there are lots of ways expenses can be cut.

    Bite the bullet. You need to offer higher royalties (and lower advances) to your writers. They are not going to buy the argument that they should continue to be paid 7% to 15% when e-publishing offers so much higher royalty rates. Of course, if you started offering the same level of marketing support to mid-level writers, they might be willing to forego those higher percentages in order to build their careers.

    Your house is burning, guys. Stop talking about whether the fire was started by bad wiring or a dropped match. Go find the extinguisher.

    Tuesday, March 02, 2010

    e-Book vs. p-Book

    Sunday's New York Times (NYT) addressed an issue that has been the subject of a lot of arguments: the cost of publishing a p-book versus the cost of publishing an e-book.

    The numbers the NYT describe look like this:


    Cover Cost---------------------$26.00-----------$12.99

    Retailer's Share--------------($13.00)------------(3.90)
    50% on Hardcover
    30% on e-Book

    Net to Publisher---------------$13.00------------$9.09

    And here's how they say they spend that money:

    Design, typesetting
    & copy-editing------------------$0.80------------$0.50

    Printing, storing
    & shipping-----------------------$3.25-------------n/a


    Author's Royalty
    15% on Hardcover
    25% on e-Book------------------$3.90------------$3.25

    Overhead & Pub-
    lisher's Profit-------------------$4.05------------$4.56

    Total Costs--------------------$13.00------------$9.09

    The NYT comments:
    At a glance, it appears the e-book is more profitable. But publishers point out that e-books still represent a small sliver of total sales, from 3 to 5 percent. If e-book sales start to replace some hardcover sales, the publishers say, they will still have many of the fixed costs associated with print editions, like warehouse space, but they will be spread among fewer print copies.
    And therein lies the problem. The Big Six cannot even envision a world without print. Like the mariners of old, they believe if they steer toward the horizon, they'll fall off the edge of the earth.

    They are also being very coy with these numbers. There's a lot of room to maneuver in that blended overhead and profit number. The NYT refers to the publisher's overhead as paying "for editors, cover art designers, office space and electricity before taking a profit." However, I'm betting there's a whole lot of other costs related to the infrastructure of a large publishing house included. Electronic publishers don't have the same huge salary and bricks-and-mortar expenses.

    I believe they are burdening the e-book side of the equation with all of the overhead for the p-book side. Overhead costs should go down when you're no longer operating a traditional book factory.

    I have to say I'm disappointed in The New York Times. I would have expected them to ask harder questions. The publishers gave a range of royalties on e-books with a ceiling of 25% so that the max return for an author on an e-book still fell below the max return on a hardcover. If a publisher presents the above numbers to an author, writers are likely to zero in on that $.65 difference between the p-book and the e-book royalties.

    In actuality, a more reasonable number for that e-book royalty would be 30%, making it exactly the same $3.90 royalty shown for the hardcover.

    It would be very interesting to know what royalty Carina Press (the new separate e-book imprint from Harlequin) is offering their authors. Since Carina is independent from the traditional Harlequin operation, they will not be burdening their e-books with the p-books' overhead. I'm betting Carina authors are not facing that 25% ceiling.

    One of the reasons e-books only constitute 3% to 5% of total sales is that the Big Six are doing everything they can to impede the growth of e-books. The NYT quotes Mike Shatzkin in the article saying:
    “If you want bookstores to stay alive, then you want to slow down this movement to e-books,” said Mike Shatzkin, chief executive of the Idea Logical Company, a consultant to publishers. “The simplest way to slow down e-books is not to make them too cheap.”
    Note: Shatzkin is talking about protecting bookstores. I promise you, the Big Six are not protecting bookstores as much as they are protecting their own bottom line.

    To be fair, I'm taking an extreme position. The Big Six cannot release multiple formats without some mixing of costs. However, their stance that the e-books must carry all the costs of the p-book is also extreme.

    There are three main players in this game: The author, the publisher and the consumer. New York publishing is not yet playing fair with either the author or the consumer. That's understandable because publishing houses have not yet accepted that their power position is no longer as secure as it once was when they owned the only means of production.

    Consumers are pushing back, and the Big Six have started to blink. The fact that they are considering a $12.99 e-book price is a big change from even a year ago. The fact that they are no longer insisting authors should accept traditional p-book royalty rates for e-books is another enormous change.

    Keep your eyes and ears open. Innovative new players are going to enter the publishing business offering lower pricing to consumers and better royalties to authors than described in the scenario above. When consumers and authors begin moving away from the Big Six, things will really start to change.

    Go here to read the NYT article.