Monday, May 31, 2010

God Bless the U.S.A.

I've been trying to think of an appropriate Memorial Day sentiment. This will do it. We should all be able to get emotional about our country.



Thank you to all the soldiers--both living and dead--for their service and sacrifice for this country. You made us what we are. And thanks to their loved ones for their bravery in letting their soldiers leave and for keeping a candle in the window for their safe return.

God bless each and every one of you. And God bless the U.S.A.

What Value Does the Publisher Bring to the Table?

On Friday, Stephen Page, CEO of Faber & Faber, wrote an article for the UK's Guardian. Faber & Faber is a British independent publishing house that can boast of having once employed T.S. Eliot.

Page begins by asking the question, "Will the iPad lead a reading revolution?" But he quickly abandons that train of thought for a question that interests me far more: "What will ebooks mean to publishers?"
It's clear that publishers must move faster to establish our compelling and useful role in the modern life of reading. While acquiring new expertise, we must assert the best of our traditional strengths ... But that's not enough. Publishers also have to explain what value they are bringing to the relationship between writers and readers ...
Three years ago, on April 28, 2007, I asked this question in a post here: In a digitized world, what value does the publisher bring to the table?

At that time, I suggested the following:
The answer could be in the marketing and distribution chain. While anyone may be able to produce an e-book, the failure of most self-published books is evidence that merely having a book is not enough ... a system for vetting books is still needed ...

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.
Page points to six principles to help publishers survive. His first principle is "Creating the greatest value for writers should lie in keeping their print and digital publishing in one place."

I can understand why this would be important to the publisher. I'm just not as certain of the importance to the writer.

I'm going to suggest a different first principle for publisher survival. Publishers need to start aligning their goals more with those of the writers they represent. Unfortunately, that is not presently the case.

When the consolidation of the publishing industry began in the '70s, books became widgets to the mega-corporations who bought out the various publishing houses. The focus moved from the product to the bottom line. Keeping the profit-and-loss sheet clean took precedence over other considerations. Taking risks suddenly became dangerous because print books that fail are costly experiments. We've all watched as publishing houses chase trends ... and already established authors. Why take a chance on a young, new writer when you are virtually guaranteed a sure thing with a best-selling author like Stephen King or James Patterson ... as long as you don't get carried away when writing the advance checks.

If a publisher wants to stay alive in the new publishing industry, he had better recognize that the reader--not the bottom line--is king.

Instead of trying to juggle ebooks versus p-books, publishers need to realize that the different mediums exist for the convenience of readers. Stop thinking in terms of one medium cannibalizing another and start thinking about helping authors build their brands. The way to do that is to reach as many readers as possible in as many venues as possible.

Offer the p-books alongside the ebooks on the release date. Quit worrying about which one the reader picks. Make both available everywhere as fast as possible. Instead of huge print runs, use POD technology to fill the p-book demand.

Did anyone wonder why Charlaine Harris sold 199,732 copies of Dead in the Family during the six days following its May 4 release? Sure, I'm certain the tie-in to the cable show True Blood had something to do with it. But I'm dead certain (no pun intended) that the fact that Amazon was selling the hardcover for $9.99 (plus shipping) had a lot to do with it.

And, yes, I know that Amazon was taking a huge loss on those books. However, it wouldn't have been a loss if those books were ebooks, instead of p-books. And the demand was there for the book at that price.

Obviously, no publisher will want to sign a contract for a book that does not include all the various mediums in which it will be offered (p-book, ebook, and audio book). However, I'm convinced most writers understand the need to build their brands. And writers are readers. They know that they only get one shot at pushing their new releases before hundreds of other new books come along to wiggle their sexy little covers in front of readers.

In the new publishing world, publishers need to focus on three things: (1) The widest possible distribution on the day of release; (2) The best possible price on that first day of sales; and (3) The fairest possible royalty to authors.

If the New York publishers continue to dick around with trying to suppress ebook sales to support the p-book sales, they're going to find their writers moving elsewhere ... perhaps to smaller publishing houses ... or perhaps to companies like Amazon and Google, who can as easily become book publishers as booksellers. Don't forget what I said in 2007 about the lines between publisher, distributor, bookstore and author blurring, leading to "unusual contracts among the different parties."

Read Page's article here.

I'm pleased he's asking the question. I'm just not certain that the Big Six are ready for the answer.

Friday, May 28, 2010

Amazon and Penguin Bury the Hatchet

On Wednesday we learned that Penguin and Amazon have finally reached agreement in their contract dispute.

I reported previously that, since Amazon could not come to terms with Penguin over electronic books, any new e-books released starting April 1 would not be available for sale in the Kindle bookstore. The older e-books continued to be available for the $9.99 Amazon price.

Amazon then took an interesting negotiating tactic. On May 3, I reported here on a story in the Wall Street Journal:
... Amazon.com Inc. has begun selling a number of new hardcover books published this month by Pearson PLC's Penguin Group (USA) for only $9.99 amid a dispute between the two companies over electronic books ... Since Amazon can't sell the digital editions of Penguin's books, it is, in effect, showing its customers that Amazon is still the place to go for discount pricing. The low price also serves to put pressure on Penguin ...
Now, nearly a month later, Publishers Marketplace reports:
Ebooks for the company's titles released since April 1 .... are in the process of being restored to Amazon's site, though it will likely be a matter of days before all of those titles are available.
It's, of course, likely that the new releases will be priced at $12.99 rather than Amazon's preferred $9.99 price point.

Publishers Weekly reported:
Penguin['s] ... frontlist e-book titles should begin appearing in the Kindle bookstore no later than Monday ... With the agreement with Amazon, Penguin’s e-book titles are available for all major devices ...

Thursday, May 27, 2010

Joe McGinniss' Newest Endeavor

About the same time I started graduate school, I developed an interest in true crime. As a result, I have a collection of books that take up about eight shelves of my study with accounts of all kinds of murders and swindles. There are half a dozen that I consider la crème of the 250-book collection. Among these is one titled Fatal Vision by journalist Joe McGinniss.

Fatal Vision was published in 1983 and tells the story of the 1970 murders at Fort Bragg, North Carolina of Colette MacDonald, her five-year-old daughter Kimberley and her two-year-old daughter Kristen. Colette was pregnant at the time of her death, and her husband Army Green Beret Captain (and physician) Jeffrey MacDonald was convicted of the murders in 1979.

There are several features which set the MacDonald case apart from the run-of-the-mill family murder. One is the sheer brutality. Pregnant Collette was both clubbed and stabbed, and two-year-old Kristen had been stabbed forty-eight times ... with both a knife and an ice pick.

Another notable point is that--more than thirty years later--MacDonald is currently on his fourth appeal of his conviction; two of the previous three appeals were heard by the United States Supreme Court.

Another feature of the MacDonald case that makes it memorable is the unusual level of access Joe McGinniss had to Jeffrey MacDonald while writing Fatal Vision. Wikipedia describes it this way:
MacDonald chose Joe McGinniss to write a book about the case. [McGinniss] was given full access to MacDonald and the defense during the trial. MacDonald expected that the book would be about his innocence in the murders of his family. However, McGinniss' book ... portrayed MacDonald as a sociopath who was indeed guilty of killing his family ...

MacDonald subsequently sued McGinniss in 1987 for fraud, claiming that McGinniss pretended to believe MacDonald innocent after he came to the conclusion that MacDonald was guilty, in order to continue MacDonald's cooperation with him ... McGinniss and MacDonald settled out of court for $325,000.
McGinniss faced a fair amount of criticism for what amounted to a cynical decision to hoodwink MacDonald into cooperating with him after he knew that the book would not be favorable to MacDonald. He had insisted that MacDonald sign a release prior to their collaborative effort. However, according to the website law.jrank.org here, MacDonald's attorney added a clause to the release: "provided that the essential integrity of my life story is maintained." That clause led to the out-of-court settlement after the breach-of-contract lawsuit ended in a mistrial.

I'm sure by now you're wondering why I'm nattering on about an old case. Let me start by saying I agreed with McGinniss' assessment of MacDonald as occasionally charming but narcissistic and amoral. Here's a clip of MacDonald appearing on Dick Cavett's Show ... just ten months after the brutal murders of his wife and young children.



But the real reason I'm rehashing ancient history started with a notice I saw in Publishers Marketplace about six months ago about a new book deal that had been inked:
Author of Selling of the President 1968 and Going to Extremes, Joe McGinniss's investigative narrative of Sarah Palin's significance as both political and cultural phenomenon and as an embodiment of the contradictory forces that shaped Alaska as it moved into its second half-century as a state, to Charlie Conrad at Broadway, for publication in Fall 2011, by David Larabell at the David Black Literary Agency (World).
Then on this Tuesday (May 25), there was an article in the Huffington Post here:
Lots of different journalists choose to cover the ever-evolving celebrity of sometime-Alaska Governor Sarah Palin in lots of different ways, but only one man -- author Joe McGinniss -- has gone so far as to actually rent the house next door to the Palin's residence in Wasilla, Alaska. From that perch, McGinniss will study the Palin family's comings-and-goings for a book he's writing on the subject, which I guess has sort of taken a "Northern Exposure meets Rear Window" turn?
Buckle your seatbelts, it's going to be a bumpy night.

Wednesday, May 26, 2010

Signing in the Waldenbooks by Parnell Hall

Okay, every newbie writer needs to watch this video ... at least three times before their first book signing.



Thanks to Brenna Lyons for pointing it out.

A Bookstore Timeline

I'm going to try something different today. A timeline of sorts.

"In 1993, the American Booksellers Association (ABA) had 4,700 member stores." (Source: Huffington Post)

"Jeff Bezos founded Amazon.com, Inc. in 1994 and launched it online in 1995." (Wikipedia)

"By 1995, Wal-Mart had 1,995 discount stores, 239 Supercenters, 433 Sam's Clubs and 276 international stores with sales at $93.6 billion ..." (Wikipedia)

"Founded in 1995 by two couples from Victoria, AbeBooks.com went live in 1996 and immediately began to transform the world’s used book business by making hard-to-find books easy to locate and purchase." (AbeBooks.com)

"A lawsuit filed [in March, 1998] ... by the American Booksellers Association and 23 independent bookstores alleg[ed] that [Barnes & Noble and Borders took] ... unfair advantage of their market dominance to exact discounts from publishers." (Wired)

In 2000, the ABA reported the number of its member stores as 2,794 (Publishers Marketplace)

"Amazon persevered, and finally turned its first profit in the fourth quarter of 2001: $5 million, just 1¢ per share, on revenues of more than $1 billion ..." (Wikipedia)

In April 2001, discouraged by the capital costs of setting up an online website, the former CEO of Borders made the decision to turn the company's Internet business over to Amazon to run. (Maya's blog)

In 2001, the ABA reported the number of its member stores as 2,191 (Publishers Marketplace)

In October, 2003, "Amazon.com unveil[ed] a new technology called 'Search Inside the Book' that allows consumers to preview text of 120,000 books." (Seattle P-I)

In 2003, the ABA reported the number of its member stores at 1,908 (Publishers Marketplace)

"When Google announced in December 2004 that it would digitally scan the books of five major research libraries to make their contents searchable, the promise of a universal library was resurrected." (New York Times)

"In March 2007, Borders Group announced it would scale down the number of Waldenbooks outlets it had by half, to about 300, in the next year." (Wikipedia)

In 2007, the ABA reported the number of its member stores at 1,580 (Publishers Marketplace)

On March 19, 2009, Barnes & Noble held their Fourth Quarter earnings conference call. "Comparable stores sales declined 7.3% for the quarter ... Store traffic was down throughout the quarter ... For the full year comparable sales at Barnes & Noble stores declined 5.4% ... Sales at BarnesAndNoble.com were ... a 1.3% comparable decline compared to last year’s 13.4% increase." (Seeking Alpha)

In 2009, the ABA reported the number of its member stores at 1,401 (Publishers Marketplace)

On Sunday, May 23, 2010, Publishers Marketplace reported:
But this year, for the first time since we've been following the numbers, the [ABA] actually gained members--nine to be exact--with 1,410 registered stores. (That gain does not necessarily reflect a change in the entire store landscape, since not all independent bookstores are members of the national organization.)

Tuesday, May 25, 2010

Critique Partners: Respect, Trust and Laughter

Back on March 29 here I reported that one of my critique partners, Linda Lovely, is in contention for the Golden Heart, one of the two most prestigious awards RWA offers.

The Golden Heart and the other award, the Rita, will be presented on the night of July 31st at RWA’s 30th Annual Conference in Orlando, Florida.

In the meantime, Linda is a guest blogger today on author Elisabeth Naughton's blog. She is talking about her nominated novel Counterfeit and about "Critique Partners--Respect, Trust and Laughter."

Linda is a writer's dream as a critique partner. She is unfailingly honest, unbelievably loyal and incredibly funny. I treasure her friendship and her wisdom.

Go here to read Linda's guest blog. And know that Counterfeit is a terrific read, which deserves the Golden Heart!

Monday, May 24, 2010

And Now a Word on Copyright (and DRM)

Publishers Marketplace directed me to an article on Friday in the Financial Times.

The article quoted Dame Gail Rebuck, chairman and CEO of The Random House Group, who said illegal copying of e-books was "engrained culturally." She said that, while e-book sales represent only a small part of the industry today, when those sales become significant, "that is going to be a huge cost for the publisher."

The Financial Times' article didn't give any more information about Dame Gail's opinions than that so I went a-Googling. On The Bookseller's blog, I found her speech to the Stationers’ Company Annual Lecture on March 10, 2008. Here's an excerpt:
We need, in a globalising, digital world, to continue to think globally and this means facing global challenges, particularly in the area of copyright protection and territorial copyright ...

But the security of electronically captured text is difficult to protect – a book in digital form can travel from a New York house to the Far East in seconds, then be illegally duplicated at the push of a button.

Piracy threatens to erode the copyright protection that is the cornerstone of our creative industries and their successful exports. Vigilant policing and joined-up legislation across all countries is essential. Education is vital, too, to show that these crimes are in no sense ‘victimless’, however harmless they may seem. Indifference to copyright protection and copyright worth will prove highly destructive. It threatens to stifle creativity altogether, by making it no longer worthwhile to be creative ... I am saying the need for copyright protection has never been greater, or more complex.
I respectfully disagree with Dame Gail. And I'm going to repeat what I said back on February 28, 2009 on this blog:
I'm dead serious about the need for the publishing industry, including authors, to reexamine itself and rethink some of their hard-and-fast stances on copyright and DRM.

Power is shifting from publisher to reader. Readers will control the future of the industry. Authors stand to gain in that shifting of power . . . if they can accommodate a concomitant shift in attitude.
I was encouraged to see that The Financial Times also quoted another member of the Big Six fraternity ... and even more pleased to see that the comments came from someone at Penguin, my own publisher, although from the UK side of the pond.
Tom Weldon, deputy chief executive of Penguin, ... said: "The only way to fight piracy is to publish digital content across as many formats as possible, through as many channels, at a fair price. If we go for exclusive or proprietary formats, we're completely screwed."
You tell 'em, Tom. I just hope they're listening.

Go here to read the Financial Times' article.

Go here to read the entire speech by Dame Gail to the Stationers’ Company Annual Lecture.

Sunday, May 23, 2010

Cute kittens sliding down a slide

Saw this on Yahoo this morning and had to share.

The best part was while I was watching it, Bob the Cat jumped up on my desk, drawn by the sound of the kitten's cries. He nosed all around my laptop, looking for the baby in distress.

Friday, May 21, 2010

Checking Back on LibreDigital

I've been blogging for nearly five years now. One of the unexpected side benefits of posting for so long is that this blog has become a repository of information. I frequently use the search feature at the top of this page to find data on a company or subject.

I took advantage of that function yesterday to check on what I'd written about a company called LibreDigital. In a moment, I'll tell you what triggered my interest. However, first, a trip down memory lane. I've pulled excerpts from previous blogs that mentioned LibreDigital:

August 24, 2006: [From Publishers Weekly (PW)]: "The developer of the technology behind HarperCollins' newly launched Browse-Inside is now offering the service broadly to all book publishers."

The company, LibreDigital announced a service called the LibreDigital Warehouse "that allows publishers to offer their catalogs and titles to online consumers for browsing while maintaining control over the display and access to content."

Does this sound like a company poised to take advantage of publishers' mistrust of Google's book scanning program? PW thought so, and Craig Miller, the general manager of LibreDigital, freely admitted it. "We saw the discussion going on between Google and publishers." Miller implied that his company will give publishers greater control and better quality than Google.

January 13, 2007: Today's post comes from this morning's Wall Street Journal (WSJ):
Eager to tap into what it thinks will be a growing market for the digitization of books, News Corp.'s HarperCollins Publishers has bought an equity stake in a company that digitizes, electronically warehouses and distributes books via the Web.

HarperCollins has also decided to license its internally developed digital technology for use by rival publishers, giving HarperCollins the ability to influence the digital revolution sweeping the book industry.
The developer of the technology behind Browse-Inside, Libre Digital, also offered the service to all book publishers." Now HarperCollins has announced it purchased "an equity stake in NewsStand, Inc., a closely held Web concern whose businesses include LibreDigital" (WSJ).

Publishers Weekly also addressed this story in their Friday edition:
Through the alliance, HarperCollins and LibreDigital will offer publishers end-to-end digital services in discrete, modular segments, including digital typesetting, production, digital warehousing, Internet distribution and online marketing. Publishers can select a combination of HarperCollins proprietary electronic typesetting and digital workflow tools with LibreDigital's proprietary digitization, digital warehousing, and Internet display and distribution technologies.
May 13, 2007: Yesterday, I reported on [a] conference ... held in New York this week to discuss emerging digital technologies ... "Making Information Pay," which was sponsored by the Book Industry Study Group (BISG). The BISG introduction to Mike Shatzkin's comments said:
In recent months, about a dozen companies have moved to become the content distributors in a digital world ... These companies are becoming known as DADs -- Digital Asset Distributors -- and understanding their services will be essential not only for exploiting new economic models like ebooks or page pay-per-view, but also for facilitating online marketing of physical books.
Shatzkin is saying that publishers online will need Internet distributors in exactly the same way they now use distributors when publishing traditional books.

According to Publishers Lunch (PL), Shatzkin has identified ten or twelve DADs, including Accenture, Bibliovault, CodeMantra, CPI, Donnelly, Harper/Libre Digital, the Bookstore (Holtzbrinck/Macmillan), Ingram Digital, Random House and Value Chain International (Gardners).

May 16, 2008: Regular readers of this blog know that one of my heroes is Mike Shatzkin. Mike is the CEO and founder of Idea Logical, a consulting company. He is a frequently sought speaker, especially on the impact of digitization. Shatzkin says:
In the 20th century, successful consumer media enterprises almost always shared two characteristics: they were horizontal in their content coverage and format-specific. In the US, that means companies like Random House, CBS, and The New York Times. They all embraced a very wide span of subject interest, but very seldom strayed from books, broadcast, or newspapers, respectively.

But in the 21st century, the net is flipping this on us. The net tends to self-organize us by subject niche, so the eyeballs and human bandwidth are linked to the niches, which are vertical, not horizontal. And because web interaction is about file exchanges, format specificity is meaningless . . . So we’d expect the successful 21st century consumer media entity will be vertical in subject interest and format-agnostic.
He also refers to DADs or Digital Asset Distributors--distributors of digital content in the same way that Ingram is a distributor of physical books. In this speech, Shatzkin says "it looks like Ingram Digital and LibreDigital are the market leaders on our side of the Atlantic" in digital asset distribution.

Okay, Maya back in real time. Fast forward to Wednesday and an article in the Austin Statesman:
Austin-based LibreDigital said Wednesday that it has raised $8.1 million to accelerate its electronic book publishing services ...

"This year, sales of e-books are expected to double to more than $700 million in the U.S. alone, and this funding will let us accelerate the delivery of e-books and expand our technology," [Russell]Reeder [LibreDigital's CEO] said.
Reeder says that the company currently has 125 employees and the new influx of cash will permit them to buy more engineers plus sales and marketing staff.

The article points out that LibreDigital supplies content for the iPad and for Sony's digital reader and is working with at least three of the Big Six publishers. The company is competing with Ingram's digital division.

It's also interesting to look at the company's Board of Directors, who are a pretty high-powered group for such a small company. A number of them certainly represent the interests of investors in the company:

Russell P. Reeder
President and CEO of LibreDigital, Inc.

Martin Neath
Chairman and General Partner of Adams Capital Management

David L. Pesikoff
President of Triangle Peak Partners

Scott Heekin-Canedy
President of The New York Times Company

Jeremy Halbreich
CEO of Sun Times Media Group

Brian Napack
President of Macmillan

Keep an eye on LibreDigital.

Thursday, May 20, 2010

Arrest Ordered in Copyright Infringement Case

Yesterday's Publishers Weekly (PW) reported:
A bench warrant has been issued for the arrest of Andrew Amue by the High Court in London after Amue failed to appear at a hearing to enforce a March 2008 order that he cease copyright infringement on hundreds of Christian books.
The Evangelical Christian Publishers Association (ECPA) said it first learned of Amue's infringement activities in 2004. Amue operated a website at www.biblecentre.net where, according to Christian Writing Today, he posted "full texts of hundreds of copyrighted Christian theological works displayed without permission."

Amue also began charging subscription fees to access his site so that he was wrongfully benefiting from the works of others.

I've referred to the Digital Millennium Copyright Act (DMCA) before. The DMCA was passed by the U.S. Senate in October, 1998, and was intended to expand the penalties for copyright infringement on the Internet. The new law went beyond copyright protection by criminalizing creation of techology intended to circumvent rights protection.

Title II of the DMCA, "the Online Copyright Infringement Liability Limitation Act ('OCILLA') creates a safe harbor for online service providers . . . against copyright liability if they adhere to and qualify for certain prescribed safe harbor guidelines and promptly block access to allegedly infringing material (or remove such material from their systems) if they receive a notification claiming infringement from a copyright holder or the copyright holder's agent." (Wikipedia)

In other words, as long as your ISP takes down material after receiving a notice that the copyright holder has not granted permission for the post, the ISP is safe from liability.

For four years, Mr. Amue ignored all requests from member publishers of the ECPA to take down the copyrighted material. Finally in 2008, a coalition of publishers obtained a court order that required Amue to cease the infringement. Mr. Amue then began a cat-and-mouse game of moving around and using false names in order to avoid service of the order. It took more than a year to locate him. His current sites are www.evanglibrary.info and www.evanglibrary.com.

Recently the attorney for the coalition of publishers approached Amue to give him one last chance to cease his copyright infringement. According to Christian Writing Today, Mr. Amue said he would not comply "with laws that he implies are 'ungodly, and anti-Christian, and against the Holy Bible'.”

The coalition then requested that the High Court issue a bench warrant ordering Mr. Amue's arrest.

Go here to read the entire article in Christian Writing Today.

Wednesday, May 19, 2010

Summing Up the Strategies

Last week, we spent some time looking at the strategies of Amazon, Apple and Barnes & Noble, three providers of electronic reading devices. I promised to return to the subject and talk about Google, who is shortly expected to debut their own Google Editions, a new browser-based e-book sales platform.

Interestingly enough, The Bookseller had an article yesterday, talking about the strategies of Amazon, Apple and Google. We'll compare my comments to theirs as we go along:

Amazon: I said that, on the surface, Amazon's strategy of selling products at a loss makes no sense. But I reminded readers that Amazon is vertically integrated as a manufacturer, wholesaler and retailer. They can take a hit in one part of their supply chain while benefiting another part of the chain. So selling e-books at a loss promoted the sale of the Kindle and helped make Amazon the largest e-book retailer in the United States.

The Bookseller said much the same thing, indicating that e-books are a way of attracting consumers to the site. "If you buy low-priced e-books on one Amazon visit, you may return to purchase a much more expensive item."

Apple: I said that Apple is very clear that their main business is the sale of electronic devices, not electronic books. Their entry into publishing is intended to enhance their iPad sales. Reading is an incidental function to their multi-function device.

The Bookseller agreed, saying "Apple's strategic objective is ... 'to create a great content experience to drive sales of consumer electronics...'"

Now we come to Google. The Bookseller said that Google is an advertising business. "It makes sure all content is available on Google so that you start your purchasing journey there and Google can sell ads on it. Therefore its objective is for everything to be free."

I absolutely agree that Google's focus to date has been to promote its search engine business because that's how they are able to make money selling ads. However, I'm not convinced that the company's ambitions stop there.

Back on September 17, 2009, here, I said:
And what about Google? Google’s ambition to copy every book in the world could lead to its becoming the biggest bookstore in the world.

Thus far, Google has stuck to its plan to remain the largest search engine in the world. Copying the world’s books is a strategy to strengthen Google's search engine business. The company provides links to buy the books it displays. It remains to be seen whether Google has larger ambitions in the publishing world.
I'll stick with that opinion.

You can read the entire article in The Bookseller here.

Tuesday, May 18, 2010

A New Survey And Konrath Goes With Amazon

On Thursday, Publishers Marketplace drew my attention to a survey, which indicates that "An impressive 28 percent of respondents expect to buy an ereader or tablet in the next year."

The survey by the Boston Consulting Group (BCG) encompassed nearly 13,000 people in fourteen countries (including the U.S., the U.K., Australia, China, India, France and Germany). According to Slate's Big Money here:
"... e-readers are poised to take off provided the price comes down and the feature sets go up."
I have to say I'm with the survey respondents. I don't even carry a purse. There's no way I'm going to buy two or three different electronic devices, each dedicated to a different purpose. Give me one reasonably priced and lightweight device on which I can read, write and respond to emails. Thanks to blog reader Peter Winkler, I've been looking at netbooks, but haven't been moved enough to buy one yet. Until I find the right device, my cell phone helps fill in the mobility gaps.

And I'm in good company. The BCG site here indicates that the survey found that:
Consumers clearly want to do more than just read with these devices ... Globally, 66 percent of respondents would prefer to buy a multipurpose device, whereas only 24 percent prefer a single-function device, such as the Kindle ... However, mass acceptance of e-readers and tablets is not guaranteed unless prices drop dramatically.
Slate's Marion Maneker (former publisher of HarperCollins' business books imprint) was right on the Big Money when he talked about what the survey means to publishers and e-books:
The good news is that there's more demand for the product. The bad news is that they've got to give up their battle with e-book prices and start restructuring their costs even further to make new titles priced at $10 profitable for themselves and the authors. Otherwise it will be easy for authors to jump ship and publish themselves or with other promotional partners.
And in a case of excellent timing, go here to read Amazon's press release regarding mystery author Joe Konrath:
AmazonEncore, Amazon's publishing imprint, will release the newest book in bestselling author J.A. Konrath's Jacqueline "Jack" Daniels series, "Shaken." The AmazonEncore Kindle edition of "Shaken" will be available in the Kindle Store ... in October, and the print version of the book will be available in February 2011.
Joe Konrath's blog, A Newbie's Guide to Publishing, here was enormously helpful to me when I was first trying to figure out how the publishing industry operated. Joe is a master at self-promotion and is willing to take risks to move his writing career forward. He began posting his unpublished works for sale on Amazon a couple of years ago. By last year, he'd become a top-selling author in the Kindle bookstore. Now he's taking the next logical step.

Joe answered questions about his new move on his blog yesterday. Here's the one that interested me most:
Q: Is Amazon going to sell the Kindle version for a lot of money?

A: Amazon is smart, savvy, and pays attention to my suggestions. The Kindle version of Shaken is going to be released for $2.99.
Are you listening, Big Six? If you are, here's one more finding from the BCG survey:
Consumers are willing to pay only $5 to $10 for digital books, ... below the price that book publishers are targeting.

Monday, May 17, 2010

Sookie's Latest Outing

The UK's The Bookseller had an article on Thursday in which it listed the two fastest-selling books thus far this year. No. 2 was Laura Bush's memoir Spoken From the Heart, which sold 147,003 copies in its first partial week according to Nielsen's BookScan.

The #1 fastest-selling book thus far this year is Charlaine Harris' Dead in the Family. The novel, the tenth outing for her protagonist, Sookie Stackhouse, sold 199,732 copies during the six days beginning with its May 4 release.

I suspect Amazon's sales price of $9.99 for the hardcover probably provided a boost to the book's sales.

I'm a voracious reader as well as a faithful follower of the series novels I like. However, it is very rare for me to come in on the first novel in a series. Generally most series are on their second or third books before I discover them.

One deviation from my usual pattern was the Sookie Stackhouse series. I picked up the first book Dead Until Dark shortly after its release in 2001 to read during a plane ride to Florida. With all the time I spent in the airport and on the flight, I finished it before arriving in Tampa.

I remember being so tickled by its dry humor that I dragged my mother to Haslam's Bookstore in St. Petersburg to buy a copy for my younger brother. Although he and I usually have the same taste in books, Sookie's breezy chick lit voice just did not appeal to him.

If you are not familiar with the series, maybe you know it by its television title: True Blood. The books are set in an alternate universe where vampires have gone mainstream, all the while assuring the human public (understandably fearful of becoming munchies) that a diet of artificial blood suits them just fine.

Sookie Stackhouse is a waitress living and working in the little town of Bon Temps, Louisiana. Sookie is a psychic being slowly driven crazy by the chatter in her head from all the minds she cannot block out. She is thrilled to realize that she cannot "read" a vampire's thoughts. That alone is enough to tempt her into an affair with Bill the Vampire, tiny Bon Temps' only vamp. At the same time, the vampires' power structure is delighted to learn of the existence of a psychic whom they can employ for their own purposes. Sookie's life becomes a balancing act as she is introduced to the underworld of other paranormal creatures existing secretly alongside humans and vamps.

Harris' series was the first vampire novel with a chick lit voice I'd encountered, and I adored the understated humor. Three years later, MaryJanice Davidson created a straightforward chick lit vampire with her "Undead" series. The difference between the two is that Harris' series are vampire stories with a chick lit voice while MJD's series are chick lit novels that just happen to be about vampires.

Dead in the Family is much darker in tone than previous outings in the series. It begins after the short but horrific Fae War in which both Sookie and her ex-lover, Bill the Vampire, were badly wounded. Sookie is healing faster than Bill, who appears to be suffering from his own brand of depression because of the ending of their relationship.

Meanwhile, Sooke and her current boyfriend, Eric the Viking, are having relationship problems, and he's not there to protect her from the growing threat hiding in the woods behind her house.

Yes, it's true. I was one of the readers who helped create that 199,732 sales figure.

Friday, May 14, 2010

Barnes & Noble's Coming of Age

This week we've been talking about the publishing strategies of Amazon, Apple and Barnes & Noble. Today's it's B&N's turn.

B&N is the largest book retailer in the United States. At last count by Wikipedia, it operates 777 bookstores and another 636 college bookstores.

During the '70s and '80s, B&N rapidly expanded across the U.S. By taking advantage of volume buying, the mega-chain was able to offer discounts to their customers on the best-selling books. The competition they provided led to the closing of many independent bookstores.

B&N also began publishing books in-house during the '80s, mostly releasing books that are in the public domain, no longer under copyright.

At the same time B&N was growing, Wal-Mart and other large retailers like Target were expanding. In an ironic twist, B&N found itself being squeezed by the big box stores in exactly the same fashion they had earlier squeezed the indie bookstores. The buying power of the big box chains permitted them to offer even deeper discounts on best-selling books than B&N could.

The growing power of the Internet put additional pressure on all bookstores. First you had Amazon, which offers enormous discounts and convenience. And then you had online used booksellers like AbeBooks (bought out by Amazon in 2008), which make it incredibly easy to locate and purchase a used book from your home or office--right at the time that gasoline prices were going up.

B&N made a few good moves. In 2000, the chain instituted a rewards program for repeat customers. In May, 2008, B&N announced they would begin selling digital and print magazine subscriptions on www.BN.com. They also announced that "more than 12,000 back issues of hundreds of magazine titles will be available digitally for purchase as single copies." [Note: If they are, I haven't found them yet. Whenever I click on the single copy icon, I get a "sorry" message].

At the same time, some B&N executives exhibited the very thinking flaws we currently see in the top execs of the Big Six publishers. The B&N leaders remained in a cocoon of denial about the future of e-books for far too long. Two months prior to that magazine announcement, the CEO of B&N.com said: ". . . e-books have been around for a long time. It still remains a very small market, albeit obviously growing but when you look at the percentage growth, remember it’s growing off of such a very small base. We continue to look and evaluate and we’ll make decisions about when and if to jump in at the appropriate time."

Five months later in August, 2008 she "resigned" from the company.

Solid evidence that B&N was finally getting a clue appeared in March, 2009, when B&N acquired e-book seller Fictionwise for $15.7 million. That same month, exactly a year after the www.bn.com CEO made her unfortunate comments, B&N was singing a different song: ". . . as electronic book devices and mobile platforms emerge, it’s . . . opening a new door for us, enabling us to sell lots of content that we’re not even currently offering . . . we think that this is a whole new exciting area for us and the range of content that we can sell is actually much large (sic) than that we’re currently offering within the four walls of the store or for our website." (From the Seeking Alpha transcript here).

B&N announced in April, 2009:
Barnes & Noble.com has launched its Audiobook MP3 Store, featuring audiobook MP3s available for instant download and transfer to iPods, iPhones, MP3 players and other portable devices. The Barnes & Noble.com Audiobook MP3 Store offers easy downloads of more than 10,000 titles across all genres, from new releases and bestsellers to classics and timeless favorites. The average price per download will range between $10 and $20.
While the announcement signaled recognition that B&N needed to expand its worldview, the pricing of the audiobooks suggests to me that they were artificially inflating the audiobook prices in order to protect their p-book sales.

In July, 2009, B&N opened its much anticipated e-bookstore. Then in October they unveiled their proprietary e-reader, the Nook, priced at $260 to match Amazon's Kindle. On a visit to B&N last week, I noticed that the Nook display has moved forward from the middle of the store to right inside the front door, displacing the new releases table.

B&N is also seeking strategic alliances. They've formed a content partnership with online magazine Salon.com. The April 21st press release said:
As part of the agreement, selected articles from the Barnes & Noble Review will be shared with Salon.com on a daily basis ... Salon.com will in turn share selected elements of its content on the Barnes & Noble Review site. All content will include links to corresponding information on both websites. Additionally, Salon.com will include affiliate links to BN.COM, allowing its readers the opportunity to purchase books, eBooks and more from BN.COM.
B&N also formed a partnership with Plastic Logic, whose QUE ProReader is expected to be released this summer. The Plastic Logic website says:
Barnes & Noble is powering the Store, which offers a wide range of business and leisure content geared to business professionals. Barnes & Noble is also Plastic Logic's first distribution partner, and will sell the QUE ProReader in its retail locations nationwide and online at bn.com later this year.
During a conference call on March 18, 2010 when asked if they would be growing or shrinking the bricks-and-mortar stores, B&N Chairman Len Riggio responded that he expected the number of stores would remain flat for the next few years while they watch what happens in the industry.

On the same call, William Lynch, the CEO, said B&N wants their content available on the widest number of platforms possible which is why they are developing a B&N app for the iPad.

There is another fly in B&N's ointment. Six months ago on November 18th here I reported that B&N had created a "poison pill" strategy to stave off billionaire investor Ron Burkle, who at that point owned 17.8% of B&N's stock. The poison pill would be "exercisable if a person or group, without Board approval, acquires 20% or more of Barnes & Noble's common stock or announces a tender offer [hostile takeover] which results in the ownership of 20% or more of Barnes & Noble's common stock."

Earlier this month Burkle filed a lawsuit in Delaware, complaining that the company's directors have "breached fiduciary duties of loyalty, care, and good faith."

According to Sarah Weinman in Daily Finance here, Burkle now owns a 19.62 stake in B&N, which brings him dangerously close to the 20% trigger point for the poison pill.

Stay tuned ...

Thursday, May 13, 2010

A Bite of the Apple

Today we're going to look at Apple and its publishing strategy.

We begin on January 27 of this year with Steve Jobs' announcement about the forthcoming release of the iPad and the launch of the iBookstore.

The first thing to note about Apple's publishing strategy is that--unlike the Kindle or the Nook--the iPad is not a dedicated reading device. According to Apple's press release here, the iPad is a "device for browsing the web, reading and sending email, enjoying photos, watching videos, listening to music, playing games, reading e-books and much more."

Apple's iPod is a dedicated music device so why didn't Apple release an e-reading device? The answer lies in Steve Jobs' famous comment to the New York Times in January, 2008. Jobs said Amazon's Kindle "would go nowhere":
"It doesn’t matter how good or bad the product is, the fact is that people don’t read anymore,” he said. “Forty percent of the people in the U.S. read one book or less last year. The whole conception is flawed at the top because people don’t read anymore.”
Given that mindset, it makes perfect sense that reading would be relegated to an incidental function for the iPad.

And Apple is very clear that their main business is the sale of electronic devices, not electronic books. Their entry into publishing is intended to enhance their iPad sales.

Apple approached the Big Six publishers about contracting with the iBookstore. The New York houses indicated an interest, but with a twist.

As I've explained before, in the traditional "wholesale" model of publishing, the retailer pays 50% of the list price of a book and then sets its own retail prices. Five of the Big Six publishers expressed a willingness to partner with Apple, but only under a new business model. The proposed a new "agency" model, under which the publisher would decide the retail price of a book and pay Apple a 30% commission on each sale.

Apple agreed to a one-year contract. Only Random House sat out.

Under the agency model, the plan was to price most best selling e-books featured in the iBookstore between $12.99 to $14.99.

So the question remains: Will serious readers prefer to buy a $499 multi-function Apple device on which they can load a free Amazon app which will permit them to shop on Amazon ... or will those serious readers prefer to buy a $259 dedicated e-reading device from Amazon? Or will they opt for another direction altogether?

Will both Apple and Amazon continue to prosper in the publishing arena? Apple has already announced that they sold 1 million iPads by in just 28 days. If only 10,000 of those million iPads sold were for the $599 version that has more memory, Apple could already have half a billion dollars in iPad gross sales.

And with a million iPads in circulation, that new Amazon app makes it likely that at least a few of those users purchased e-books from Amazon.

The real revolution will begin when the technology advances to the point that color graphics and photos can be cost effectively reproduced in an e-reading device. Then textbooks, picture books and children's books will all be available for sale on e-books.

Wednesday, May 12, 2010

Taking a Look at the Big e-Tailers

In my blog for Tuesday, I talked about the upcoming launch this summer of Google Editions, the new browser-based e-book sales platform.

For the next few posts, I thought we might explore the strategies the biggest e-book retailers (Amazon, Apple, and Barnes & Noble) are currently employing.

A couple of notes: I'm going to address the three companies in alphabetical order and, at the end, I'll tackle the upcoming Google Editions, too.

Today we'll talk about Amazon.

Amazon: There's an interview online here on David Overfield's blog that Jeff Bezos, the founder of Amazon, gave back in January in which he describes "everything I know." Among the things Bezos says he knows is that "you need to obsess over customers ... When given the choice of obsessing over competitors or obsessing over customers, we always obsess over customers."

The second thing he knows is to "invent ... any time we have a problem ... we try to figure out a solution ... you can invent your way out of any box." He points to the Kindle as an example of Amazon's inventiveness.

Bezos goes on to say the third thing he knows is, "Think long term ... most of the initiatives we undertake may take five to seven years before they pay any dividends for the company ... if we think we're right, then we continue ... it's important ... never to buckle to sort of standard kind of pressures that ... force short-term thinking."

I think this interview is key to understanding Amazon's strategy.

About a year ago, on April 13th, I said the following:
Amazon has moved to position itself vertically in the publishing market. Vertical integration means owning pieces of all parts of the chain. Amazon started out as a retailer. Then it moved into wholesaling others' products. And finally into manufacturing (BookSurge). Not content to own a part of the manufacturing business, it is now using its clout to gain further advantages. This is a case where the sum of all parts is worth far more than the individual parts alone.

Amazon owns pieces of all parts of the chain leading to the consumer:

Manufacturer => Wholesaler => Retailer => Consumer

Vertical integration is about cost and control. Companies who vertically integrate are trying to assert greater control over their business. The obvious benefit is that they can capture the profit margins at each step along the chain. They can also make it harder for competitors if they can gain access to a scarce resource ...

Amazon owns a print-on-demand operation, a distributor, an online retail operation for both p-books and e-books, several important retail sites for used or rare books, two audio book operations, produces a wireless e-book reader, and operates several important social networking sites for books.
Amazon has driven the publishing industry crazy with its willingness to sell e-books at a loss. As an example, Bloomberg pointed out here that Amazon will pay a publisher $12 to $13 for a book on the New York Times best-seller list and then turn around and sell the e-book for $9.99 ... a loss of between $2.01 and $3.01 per book. The Big Six have been terrified that Amazon is habituating customers to an e-book price point of $9.99 when they believe the price should be $12.99 to $14.99. Of course, regular readers of this blog know that I believe the Big Six's preferred price is an artificial construct.

On the surface, Amazon's strategy of selling products at a loss makes no sense. But remember Jeff Bezos' comments about obsessing over customers and thinking long-term. Amazon's strategy is in line with those core principles.

Additionally, remember that Amazon is vertically integrated. They can take a hit in one part of the supply chain while benefiting another part of the chain.

(1) The strategy benefited sales of the Kindle, its proprietary e-reader. Serious readers have been willing to fork over $259 for an electronic reading device when they know they can buy books for it at $9.99 each. Buy enough books and the Kindle pays for itself.

(2) The strategy also made Amazon the largest e-book retailer in the United States.

In his interview, Bezos said that Amazon has made some mistakes, but that they are willing to admit when they are wrong and move to make corrections. Turning off Macmillan's "buy" button during contract negotiations back on January 29 was one such wrong move. It made Amazon look like the bad guy. I suspect Steve Jobs' announcement two days earlier about Apple's iPad had something to do with the misstep.

At any rate, ten days later, Amazon backed down and reinstated Macmillan's "buy" button.

Instead, consider Amazon's current move during the negotiations with Pearson (Penguin, Putnam and Viking among other imprints). Since Pearson is refusing to allow them to sell e-books because of the $9.99 pricing, Amazon turned around and started selling the hardcover books for $9.99. This time, instead of looking like the bad guy, Amazon appears to be true to their motto of taking care of the customer. If they can't sell the e-book, well, here's the hardcover.

Right now you can pre-order John Sanford's forthcoming book Storm Prey for $9.99 ... 64% off the cover price of $27.95.


Watch Amazon carefully over the next few months. The one-two punch of Apple entering the e-book market followed by Google doing the same thing will probably lead Amazon to take further action. I'm counting on some big gesture intended to attract attention ... and insure consumer loyalty to the Amazon brand.

Stay tuned ...

Tuesday, May 11, 2010

Here Comes Google Editions

Sorry for the delay in posting. The high winds knocked out my electricity for more than twelve hours, creating a cascade of other problems.

When we left off on Monday, I was revving up to talk about Google Editions, announced last Tuesday in Manhattan by Chris Palma, Google's manager for strategic partner development. Google Editions is due to go live in late June or July of this year.

For a couple of reasons, Google Editions has the capacity to be a game-breaker (or game-maker) for the publishing industry. First of all, Google has been digitizing books for a long time. The New Yorker article I referenced on Monday indicated Google has accumulated 12 million digitized titles. While they obviously cannot sell books without the rights-holder's permission, those 12 million titles include an enormous storehouse of public domain books which would be immediately available for download.

Monday's Japan Today reported here:
If books with expired copyright are included, Google will handle over 4 million books, including about 2 million handled by the publishers that have agreed to join what is set to be the world’s largest virtual bookstore.
Compare those 4 million titles with USA Today's estimates of Apple's 60,000 titles available through the iBookstore or Amazon's 450,000 titles available through the Kindle store. SlashGear reported here that Barnes & Noble's Nook has "somewhere over one million titles."

The second reason Google has the capacity to be a game-breaker is because Google Editions will operate on a browser-based
e-book platform. This means--unlike Apple, Amazon or B&N's proprietary devices--Google Editions can be read on any device AND can be purchased from any seller. Users not only have a wider selection of titles, they are no longer tied to a specific device and/or its pricing policy.

When we talk about pricing policy, I'll admit to some curiosity. There seems to be a discrepancy between The New Yorker's story dated April 26 and the The Wall Street Journal's article on Chris Palma's announcement last Tuesday.

The New Yorker story here quoted Dr. Daniel J. Clancy who will be running Google Editions. Clancy's PhD is in artificial intelligence. Most recently, he has been the Engineering Director for the Google Book Search Project. Clancy told The New Yorker that "Google Editions will let publishers set the price of their books ... and will accept the agency model."

On the other hand, Chris Palma told The Wall Street Journal here that "Google is still deciding whether it will follow the model where publishers set the retail price or whether Google sets the price."

Last October in Frankfurt, Google spokesperson Amanda Edmonds talked about the various business models Google Editions would offer. The Bookseller reported here:
Google Editions has three business models: to allow the consumer to buy the e-book via Google Books; to buy it from a partner retailer; or from a publisher's own website. Payment will be split 63/37 in the publisher's favour through the first route, while if the book is bought from a retailer, the publisher will take 45%, with the remaining 55% split between retailer and Google ... no split had been decided on for books bought via a publisher's site.
I'm going to quit for now. I'll return to this later.
In the high winds yesterday, I lost my electricity for more than twelve hours. Today's post will be delayed.

Monday, May 10, 2010

The Worm, She is a-Turning

About two weeks ago, the New Yorker had a terrific article titled "Publish or Perish." The article by media critic Ken Auletta summarized the state of publishing today:
The industry’s great hope was that the iPad would bring electronic books to the masses—and help make them profitable. E-books are booming. Although they account for only an estimated 3% to 5% of the market, their sales increased 177% in 2009, and it was projected that they would eventually account for between 25% and 50% of all books sold. But publishers were concerned that lower prices would decimate their profits.
And therein lies the rub. I've said it before. The publishing industry did everything it could to slow the growth of electronic books: starting with delaying an e-book's release relative to the print version and continuing with pricing e-books higher than paperback books ... all in an effort to maintain the present system and their present profit margins.

But--no matter what they do--it's a losing battle.

About eight months ago, on September 22, I said the following:
Technology will out.

By that I mean that efforts by companies or cultures to suppress technology have almost always failed. Technology wins in the end. Trying to stop technological progress never works.
Did the Big Six listen?

No.

Instead of taking a hard look at everything they do and reinventing their work flows to accommodate the new e-book technology and a resulting lower price point, five of the Big Six developed the new "agency model," which permitted them to artificially set the price of e-books.

These guys have not figured it out yet. They have been running things for so long, they can't envision a world in which they do not continue to rule. Instead of examining their operations and cutting unnecessary costs, they convinced Apple to go along with a deal that allowed the publisher to control the book price.

This is a doomed strategy because it fails to take into account the most critical part of the equation: the author.

The Big Six were slow to accept the fact that they had to offer more than a 15% royalty on e-books. When they finally yielded, they continued to see this as an e-book issue rather than a larger, systemic industry issue.

These publishers failed to recognize that, once they no longer controlled the sole means of production, they lost their biggest bargaining chip with authors. They no longer ran the game.

The door to publishing is now much wider than it once was for writers.

Of course, there have always been alternatives to the Big Six for writers. They could go to the smaller publishers, the indie presses, the university presses and the self-publishing operations. But these alternate routes were seen as stepping stones to New York. When an author gained credibility (and an audience) in publishing's outer rings, s/he might finally be offered a contract by the Big Six.

The difference between then and now is that I believe the momentum is going to shift in the other direction. The big authors are going to demand more than their New York publishers are willing to offer.

And when the authors don't get what they want from their current publisher, Amazon and Google will be waiting. We'll talk about that more tomorrow.

Go here to read The New Yorker article.

Sunday, May 09, 2010

Friday, May 07, 2010

Vanishing Words

There were three different stories I thought about writing today. "Vanishing Words" won out over both Google and Forbes.

I am a huge fan of NPR. It's the music of my life. I listen to it in my car, in my office at the university and in my home. National Public Radio is the reason why I've never seen an episode of Everyone Loves Raymond, Friends, or American Idol.

One of the more interesting programs on NPR is called RadioLab. The show is co-hosted by Jad Abumrad and Robert Krulwich. RadioLab is produced by WNYC Radio, which describes it this way:
Radiolab is a special event. Unlike daily and weekly shows, we don't have a regular slot on the broadcast schedule. We produce five new episodes each season. Asking when a season will air is like asking when the monarch butterflies will migrate. Year to year, it depends on the weather.
"Vanishing Words" addresses "what scientists uncover when they treat words like data." Ian Lancashire, a professor of English at the University of Toronto with a computer lab courtesy of IBM Canada, has been doing interesting things with computers and words. For example, he fed all 960,243 words of the King James version of the Bible into a computer to see which ones appeared most frequently.

In the 1990's, Lancashire decided to feed a cross-section of 17 of Agatha Christie's detective novels into his computers. Christie wrote 80 detective novels over fifty years and sold over a billion copies. Yes, I did say a billion.

The first 72 novels were remarkably consistent in her use of language and the size of her vocabulary. However, Novel #73 showed a remarkable difference. Lancashire reports that her use of indefinite words--words like thing, anything, something and nothing--increased sixfold. In addition the number of different words, essentially the size of her vocabulary, decreased by 20%. Somehow one-fifth of her vocabulary had vanished.

Lancashire postulated that his data showed the beginnings of Alzheimers disease in Christie.

Although there was never any public revelation of such a diagnosis, Lancashire says that several of her biographers suspected such a possibility.

RadioLab goes on to talk about a long-term study about aging over time. In 1990, David Snowden began a study popularly called "The Nun Study" of 678 nuns in the School Sisters of Notre Dame order in Connecticut. Snowden used nuns because he wanted a healthy lifestyle (no smoking or drinking) combined with a similar lifestyle in older people. The conditions of the study permitted him to examine their brains following their deaths. His study subjects were at least 75 years old when he began following them. Now, twenty years later, there are only 40 or 5.9% of the participants still living.

Snowden accidentally stumbled across a treasure trove: essays written by all the nuns almost 60 years earlier when they were 18 years old. His review of the idea density and grammatical complexity in those essays predicted with 85% accuracy what the slices of their brains would show about Alzheimers after their death.

The answers will surprise you.

Go to RadioLab's website here to listen to the results of The Nun Study.

In a final irony, the name of that Agatha Christie novel in which her writing skills dramatically deteriorated is Elephants Can Remember. It features a recurring character, mystery novelist Ariadne Oliver, and a recurring protagonist, Hercule Poirot. In an additional ironic twist, Ariadne is losing her memory.

Christie only wrote one other novel after Elephants Can Remember. That novel was titled Postern of Fate and featured my favorite of her characters: Tommy and Tuppence Beresford.

I never finished reading that novel.

Thursday, May 06, 2010

Harlequin Reports on First Quarter

Yesterday Torstar Corporation, the parent of Harlequin, reported on their financial results for the first quarter ending March 31, 2010.

The press release said:
Book Publishing operating profit was $22.7 million [Canadian] in the first quarter of 2010, up C$2.1 million from C$20.6 million in the first quarter of 2009, including a positive C$0.4 million from the impact of foreign exchange. Operating results were up in the North America Direct-To-Consumer division and down in the North America Retail and Overseas divisions.
That operating profit of C$22.7 million represented a 10.2% gain over the same period last year. That gain is all the more impressive when you realize that actual revenue from sales was down 9.4% for the same period.

Pay attention to that line about operating results being up in the North American Direct-to-Consumer division while down in the North American Retail division. That means Harlequin's e-book sales are strong while the bookstore sales are not.

I reviewed the Seeking Alpha transcript of the earnings call yesterday. Here is the first reference to Harlequin's performance in that call by David Holland, the president and CEO of Torstar, confirming the strong e-book sales:
Lower costs were the main contributor to the growth experienced. On Harlequin, Harlequin continued to perform very well aided in the quarter by a strong North American digital performance.
In reviewing the Harlequin results, Publishers Weekly reported:
Sales in the North American direct-to-home market rose in the period due to “significant” growth in digital revenues while traditional sales were flat ... Despite the sales decline, operating profits rose ... Lower promotional spending was cited as one reason for the profit improvement. Lower retail sales in North America were attributed to lower unit sales and higher returns [of books to publishers].
Scott Cuthbertson, analyst from TD Newcrest, asked three questions: (1) about the outlook for this year versus last year; (2) about the impact of e-reading devices and (3) about the relative contribution of an e-book sale versus a traditional sale.

Donna Hayes, CEO of Harlequin, responded:
... the outlook is to be pretty much matching the results we had from last year which were pretty strong as you know and probably what we’re looking at is digital on the positive side of that and some softness in the US retail market that we’re seeing which will offset that to some degree. And of course foreign exchange [rates' negative impact].

... On digital itself we had a terrific first quarter in digital largely driven by North American digital and really based on the release of all of these new E-Readers ... So we certainly see that as a real positive ... around how to promote and sell eBooks to consumers in North America.

I don’t think we’re going to comment on the relative contribution ... but it's certainly great for the revenue picture and we feel good about where it will be by the end of the year. I would caution that in Q1 we do think that a lot of E-Readers got sold as Christmas gifts in December so there was a lot of buying around those devices.
I was very interested in Ms. Hayes response to a later question from Randal Rudniski, analyst from Credit Suisse, who asked what was different in the Direct-to-Consumer segment because Retail was obviously down. Ms. Hayes responded:
The reason that it's up is primarily the digital business ... so I’d say .... that the traditional book club is doing very well and kind of matching last year and then we’re adding, which is great, and we’re adding on top of that this digital growth which really explains why it was the star division of the quarter.
Her comment about the traditional book club business doing very well is somewhat at odds with my reading of the situation.

During the same period last year (First Quarter), Harlequin reported North American Direct-to-Consumer sales were down C$1.4 million. Harlequin's press release said they'd made the decision to close their direct-to-consumer distribution center in the U.K. and to outsource that function. That move cut C$600,000 in expense as well as 16 jobs.

Since Torstar does not break out the digital and book club performances, there's no way to know for sure if my reading of the situation is on target or not.

When Ms. Hayes was asked about possible price increases, she responded:
I wouldn’t expect one this year ... when we think about pricing, we really think about splitting the business into two: our series business and then our single title business. When you think about single titles, we’re pretty much at the maximum market price for single titles in the US which is $7.99, so you won’t really see much movement there.

On series, we did take a price increase in our book club business last year which contributed quite nicely to results. The last retail increase was the prior year and we would not anticipate a series increase at retail until at least next year ...
Seeking Alpha allows me to quote 400 words from their transcript, so I've done a lot of editing to keep the above quotes below 400 words. You can read the transcript yourself by going to the Seeking Alpha website here.

Wednesday, May 05, 2010

Dangers of "The Gap"

Publishers Weekly had an article yesterday titled "Authors Guild Says Watch the Gap."

The gap the story refers to is the one that exists in the termination of rights clauses in the Copyright Act of 1976:
The Authors Guild along with the Songwriters Guild of America filed a joint statement Friday with the U.S. Copyright Office asking that Congress act to eliminate what the two groups see as a potential “gap” in termination rights granted under the Copyright Act.

According to the filing, if the gap is not addressed as many as 100,000 creators may not be able to exercise termination rights they thought had effectively been granted to them under the law in 1976.
According to the Music Row blog for February 26, the gap was discovered about a year ago by an intellectual property and copyright law attorney named Casey Del Casino:
The gap deals with Section 203 and Section 304 of the Copyright Act and could affect many songwriters and publishers in Nashville, said Del Casino, as he released his findings in a recent presentation to the Nashville Bar Association Intellectual Property Section ... at the offices of the Nashville Songwriters Association International (NSAI).
Section 203 covers works where rights were transferred after 1/1/78:
§ 203. Termination of transfers and licenses granted by the author

(a) Conditions for Termination. — In the case of any work other than a work made for hire, the exclusive or nonexclusive grant of a transfer or license of copyright or of any right under a copyright, executed by the author on or after January 1, 1978, otherwise than by will, is subject to termination under the following conditions:
The section which caught Mr. Del Casino's attention was this one:
(3) Termination of the grant may be effected at any time during a period of five years beginning at the end of thirty-five years from the date of execution of the grant; or, if the grant covers the right of publication of the work, the period begins at the end of thirty-five years from the date of publication of the work under the grant or at the end of forty years from the date of execution of the grant, whichever term ends earlier.
Section 304 covers works where rights were transferred prior to 1/1/78 and says:
(c) Termination of Transfers and Licenses Covering Extended Renewal Term. — In the case of any copyright subsisting in either its first or renewal term on January 1, 1978 ... the exclusive or nonexclusive grant of a transfer or license of the renewal copyright or any right under it, executed before January 1, 1978, by any of the persons designated by subsection (a)(1)(C) of this section, otherwise than by will, is subject to termination under the following conditions:
Compare the earlier phrasing in Section 203 to this wording in Section 304:
(3) Termination of the grant may be effected at any time during a period of five years beginning at the end of fifty-six years from the date copyright was originally secured, or beginning on January 1, 1978, whichever is later.
You can see the problem. BusinessWire summed it up this way:

... there may be an inadvertent gap for works governed by pre-1978 contracts that were not published or registered for copyright until 1978 or later.

The comments submitted by the two creative guilds say that because of the gap:
... the possibility exists that the right to terminate transfers of some works will never become available ...
The guilds urge Congress to correct the problem via legislation.

There are many well-known works (both music and books) where the author signed a contract granting the copyright before 1/1/78 and then the work was published or registered for copyright after 1/1/78. According to the comments submitted by the two creative guilds:
Charlie Daniels 1979 signature song, "The Devil Went Down to Georgia," could be subject to agreements signed before 1978--making it unclear when or if Daniels is legally entitled to take back ownership.
Likewise, since most book contracts are signed more than a year before publication, the comments indicate that nearly all the books published in 1978 and many, many books published in 1979 and 1980 may be impacted by the gap. Well-known works include The World According to Garp and The Right Stuff.

You can read the Music Row blog here and the BusinessWire blog here.

You can read Section 203 of Chapter Two of the Copyright Act here. You can also read Section 304 of Chapter Three here.

You can read the comments by the Authors Guild and the Songwriters Guild here.

Tuesday, May 04, 2010

Appeals Court Sends Salinger Case Back

About seven months before he died, J.D. Salinger filed suit in Manhattan's U.S. District Court against the anonymous author who used the pseudonyn John David California when releasing a sequel in the U.K. to Catcher in the Rye.

Salinger sought to prevent 60 Years Later: Coming Through the Rye from being released in the United States. The new novel had a 76-year-old protagonist called Mr. C and also features Mr. Salinger himself as a character. Where the original novel had a teenage Holden Caulfield wandering around New York after being expelled from prep school, the sequel has the aged Mr. C. escaping from a retirement home and wandering around New York.

Publishers Lunch described the lawsuit: "The complaint declares, 'the sequel is not a parody and it does not comment upon or criticize the original. It is a rip-off pure and simple'."

On June 17, 2009, U.S. District Judge Deborah Batts temporarily blocked publication of the new book. A few weeks later, the judge granted a preliminary injunction barring the unauthorized sequel from being released in the U.S.

According to Publishers Weekly, the judge ruled that the sequel "would harm the market for 'sequels and other derivative works' from Salinger ..."

In early September, I reported that the anonymous author of the sequel was actually Swedish author Fredrik Colting. He appealed the July injunction to the Second U.S. Circuit Court of Appeals in New York.

Many writers are familiar with the U.S. Copyright law's Fair Use test. The test has four factors which determine whether the use of another artist's work qualifies as fair use. Those four factors are:
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;
(2) the nature of the copyrighted work;
(3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and
(4) the effect of the use upon the potential market for or value of the copyrighted work.
Under the second factor above, if the artist creating a derivative work "transforms" the original work into something new and different, he has a better chance of winning a fair use case.

During the J.K. Rowling infringement case, I cited an article by attorney Jonathan Band titled "Educational Fair Use Today," which argued that, even when a work is derivative, "repurposing" it or "or placing it in a new context may be sufficient to render a use transformative."

The lawyer for Colting was quoted in an Associated Press article saying his client's new work was "highly transformative with enormous amounts of commentary and criticism."

Salinger's lawyer argued for the fourth factor, saying the sequel would impact her client's ability to publish his own sequel to Catcher.

According to the Associated Press, "The three-judge panel of the 2nd U.S. Circuit Court of Appeals expressed doubts about whether a lower-court judge heard enough evidence before blocking the U.S. publication this summer of '60 Years Later: Coming Through the Rye'."

The AP proved prescient. On Friday, the Second U.S. Circuit Court of Appeals ruled, sending the case back to the U.S. District Court Judge Batts. According to SF Gate, the appeals court ordered Judge Batts "to revisit the legal basis for her decision."

SF Gate said that the appeals court pointed out: "... a plaintiff had to show the likelihood of irreparable harm to get an injunction, not just the probability of succeeding on the question of infringement."

The order read: "Although we conclude that the district court properly determined that Salinger has a likelihood of success on the merits, we vacate the district court's order ..."

Stay tuned ...

Read the SF Gate story here.

Monday, May 03, 2010

Amazon's New Negotiating Tactic

When last we left Amazon.com, the e-retailer was negotiating electronic book rights with the Big Six publishers.

As a reminder, in mid-January before the release of the i-Pad, Apple and five of the biggest publishers agreed to a new publishing sales model for e-books. To distinguish it from the traditional wholesale model, the new model was called the "agency model." Under it, the publisher retains control over pricing of the e-book, and retailers such as Apple receive a commission for acting as the publisher's sales agents. Apple and other authorized retailers cannot set the price of the e-book as they did under the wholesale model.

A month ago, Publishers Weekly had this to say:
Predictions that the move to an agency model would be messy have proven correct with the most serious consequence being the inability of Penguin and Amazon to reach an agreement over terms of sale. As a result, Penguin e-books released beginning today [April 1] will not be available at the Kindle store. E-books released prior to April 1 are still for sale at the $9.99 price.
On Friday, Teleread summed up the problem here this way:
Penguin is the only one of the "agency pricing five" not to have come to an agreement [with Amazon] yet, and so after thirty days, Penguin’s e-books still are not available via Amazon.
Amazon decided to resort to a rather unique and unilateral approach to breaking its impasse with Penguin.

On Friday, The Business Insider reported here that "In the middle of negotiations over e-book pricing, Amazon is taking an aggressive swing at Penguin Books."

The Wall Street Journal (WSJ) described Amazon's new negotiating tactic here:
... Amazon.com Inc. has begun selling a number of new hardcover books published this month by Pearson PLC's Penguin Group (USA) for only $9.99 amid a dispute between the two companies over electronic books ... Since Amazon can't sell the digital editions of Penguin's books, it is, in effect, showing its customers that Amazon is still the place to go for discount pricing. The low price also serves to put pressure on Penguin ...
As an example, the new Sookie Stackhouse "True Blood" novel goes on sale tomorrow.


A reader can pay $12.99 over at Apple iBookstore for the e-book version or s/he can pay $9.99 [plus shipping] at Amazon for the hardcover version.

That ought to liven things up a bit around the Penguin conference table.