On The Certain Economics Of Relegating Paper Books To The Margins Of The Business

Time to get my hands a bit dirty. Last week I posted an eBook forecast with a brief explanation of why the book business may complete its digital revolution more quickly than other media businesses have. Turns out this assertion was more difficult to hear than I anticipated and I got some very insistent (and worth reading) comments. The discussion that ensued both on the blog and outside of it was very complex, this is not a simple matter. However, there are parts of it that are very simple that I have to clarify, even though it means rolling up my sleeves a bit. Allow me to draw into this discussion John Thompson of Cambridge University who gave a very worthwhile interview to the Brooklyn Rail this month to discuss his recently published analysis of the book industry,  Merchants of Culture. I will refer to just one of his specific comments:

"There are many people who just love books and they love the ideas that are expressed in books; they love the stories that are told through books and all of it. They’re very attached to it.... They cherish the book. And they believe that this is an artifact that they want in their lives. And some of the technological commentators in this industry just completely miss this point."

I'll start by saying that Thompson's perspective goes far beyond this statement and I welcome his analysis. However, on this point he is both right and wrong, with the difference between the two being very critical to the future of an entire industry.

First, let me confess that I'm a bit weary from hearing people claim that the book industry is uniquely resilient to change. I've had three examples brought to my attention recently that supposedly show how the book industry cannot be so easily transformed: audiobooks, CD-ROM books (Thompson invokes this one), and early eBooks a decade ago. Somehow, we're supposed to believe that these three things are at all similar to what's happening now with eBooks. I won't destroy this illusion in this post, but it's very easy to do so since none of these prior examples provided an easier way to access book content in more places, at more times, and at less ultimate cost, than paper. They were all doomed to be minor players (or failures) from the start.

But one problem that arises from repeating these examples as a hex to ward off evil digital spirits is that people erroneously conclude from them that books are somehow a special artifact (Thompson's word) that can never be supplanted. This is a mistake. I wish I had a dime for every time someone in the newspaper industry said to me over the past 15 years that you would never replace the daily ritual of reading a paper, that a broadsheet was somehow uniquely capable of delivering news. I have had that conversation as recently as a year ago; I can appreciate how easy is it to slip into that fallacy. But it is a simple matter to detail how we have forsaken media habits and artifacts time after time (vinyl, anyone?) in pursuit of cheaper, more convenient alternatives. This is true with any physical artifact that humans think they value -- including the shift from horses to automobiles or the change from being at Fenway to watching the Red Sox on TV. Both of my examples are illustrative because people still ride horses and pay a king's ransom to watch the Sox play live. But only a minority of people in motion and a minority of Red Sox Nation do either.

But my examples are weak because they imply a simple act: the replacement of one artifact (or format) with another. Oh, that it were so simple! Ultimately, we're talking about a change in economics, not formats.  In fact, paper doesn't have to go away or even become the smallest share of revenues to be neutered economically. In the music business, for example, digital sales still only account for just under 40% of total revenue in the US, but it is very clearly the dominant driver of the business: the music labels design for digital release and use all other aspects of talent management (appearances, endorsements, concerts) to help sell CDs and concert DVDs as follow-on revenue boosters. CDs, though still the biggest chunk, have fallen to a third of what what they were at their peak. Once the industry used to base all of its economic planning on the release of the CD as a tentpole in terms of promotion and revenue, now the CD is just another trinket to sell behind the digital release. It's a glorified tour t-shirt.

The same thing is going to happen in print publishing. When the dust settles, publishers will think of their eBook strategy first. Paper decisions will be made as an adjunct to digital decisions. Many, many books will be published without paper versions at all, at least until they get enough critical mass to justify going to paper. Bestsellers from proven authors will always get both, launched simultaneously, and certain niches (travel, cookbooks, etc.) will always have heirloom paper editions. Subject to such reduced fortunes, books will no longer dictate industry process or outcomes. We'll only get to this point once publishers start losing print revenues and are forced to scale back their operations to focus on the more efficient digital market. They'll edit less, promote less, and generally reduce the luxurious time they used to feel was necessary between when a book was written and when it was released.

This isn't because they want to make this change, it will be because the whole industry will find itself quite suddenly left with no alternative. Just as what happened in music, when the dominant retailers suddenly find their economic model drying up, they'll cut shelf space (music did it in 2007 and again in 2008, resulting in 40% less shelf space at major retailers like Best Buy and Walmart not to mention the complete end of Tower Records before that). This will mean an automatic retraction in how many books are printed because publishers won't get the massive bulk purchases they used to get for as many titles. It also means they won't be able to give as many large advances. Meanwhile, authors won't like that advances are going down, marketing spend is plummeting, and royalties are shrinking (especially now that 30% of the eBook price goes to the bookseller in most cases). Suddenly, self-publishing seems a real alternative for anybody with even a modest Twitter following, especially when Amazon is offering 70% of the retail price of eBooks -- paid monthly, not twice annually.

I said above that Thompson was both right and wrong and I owe him an explanation. He is right that people love books. But what he (and they) really mean when they say that they love books is that they love the ideas that books convey and the feelings they get from reading books. This is where I have news for the industry: the ideas and feelings books provide can be evoked digitally -- in some cases even better than before, and in all cases, more cheaply than before. Some readers with a thing for technology will get there first (shifting a majority of book reading to digital, as today's eReader owners have) while others will take some time to catch up -- indeed, large numbers will never read digitally. They will not have access to the same pool of literature that eBook readers do, but they won't care. Does this seem a dreary future? Not to me; I see a world with more books, more ideas, and more feelings available to more people, more easily than ever before. And yes, it will hurt to get there.

In the end, all this sturm und drang will not be caused by technology nor prevented by love. It will be forced by economics. 

 

Comments

E-books in the developing world

Your analysis is wonderful. People love paper books, and will forever. But they love instant access, low prices, and easy portability even more... as long as the ideas are as compelling as ever.

There's another impact of e-books that is worth investigating: that of digital books in the developing wold. Short-term, it's not an economic issue, it's a social one: instant access to the world's literature over GSM networks, using devices with a long battery life, is a very powerful agent for social and educational change. Our non-profit, worldreader.org, is working with e-reader manufacturers and with publishers like Random House to put e-readers into the hands of children in the developing world. We're currently running a pilot in Ghana, and are finding that the potential for impact is absolutely enormous.

Again, in the short term, this won't make anyone any money. But in the long-term, publishers (both international and local) will find there's an enormous new audience ready to buy e-books in parts of the world to which paper has never arrived. Look at cell phones, roll the clock forward a few years, and you're looking at e-books and e-readers in the world's poorest countries.

Have a look at www.worldreader.org for more.

Thanks for the tip

David, I was not aware of your initiative. I think it's genius. And I do believe it when you say it ultimately has an economic upside to it -- widespread literacy has only ever proven to lead to economic development and the flourishing of a culture, usually outside of its previous bounds, which explains why it is sometimes actively suppressed! Good for you, I will keep an eye out for news of your growth.

putting that love to an economic test

> But what he (and they) really mean
> when they say that they love books is that
> they love the ideas that books convey and
> the feelings they get from reading books.

well, no, i believe some people actually _do_
mean that they love the physical, tangible
experience of that bound sheaf of pages
with words represented by ink-splotches...

it's a fetish, to be sure, but sometimes
those can be the basis for a solid love...

but publishers will be testing that love
in the coming seasons, you are correct,
because when large print-runs become
untenable, the price of paper-books will
absolutely positively go through the roof.

so the question will soon take the form of
"exactly how much do you love p-books?"

with the answer expressed in dollar terms.

here's how it might develop, over time...

"will you pay $20 for this paperback?"

"how about $30?"

"what about $50?"

"that comes to a total of $75."

"that book? that one costs $99.95".

"it's on sale today, $50 off, for just $149."

"if you have to ask, you can't afford it..."

just how much do you love your p-books?
because someone will exploit every ounce.

-bowerbird

In the developed world, we've

In the developed world, we've got lots of options for getting our hands on books. It's really hard to know whether in 10 years printed books will feel a bit quaint, like a vinyl record, or whether they're more durable than all that. I very much hope for the latter... I love printed books, and want them to be a part of my life forever, even if I see a huge role for digital books. (Maybe a good analogy is that of going to the movies: as a society, we still love going to see a film in the theater, even if there are plenty of other ways to watch movies today.)

In the developing world, I think it'll be a different story, both because there's far less of a printed-book tradition, and because it's so much easier to transport "bits" than "atoms." There, it's not so much an issue of efficiency as it is just plain possibility
.

I love covering the publishing industry...

...because I get such thoughtful comments. Trust me, cover videogaming for a while and you'll find that intelligent comments are rare. You put this perfectly. I am willing to agree that some people will continue to love the book itself (I made the same point when I said that some people will never read digitally), but I also explained that they will not have access to a lot of what is published, nor will they care. Instead, they will continue to subsidize their fetish, just as you suggest.

"In the end, all this sturm

"In the end, all this sturm und drang will not be caused by technology nor prevented by love. It will be forced by economics."

True. But most changes are forced by economics.

"And they believe that this is an artifact that they want in their lives."

Semantics maybe but I object to the word "believe" in that sentence the way I would object to it in the sentence, "She believes she would dislike getting punched in the face, or stepping in dog sh*t." Believe is a misplaced qualifier. I do want books in my life for the rest of my life. Just like I won't ever like getting punched in the face. It doesn't alter the truth in the above statement about changes forced by economics, it just subtly misunderstands the perspective of print book lovers. We know what's coming. We just don't like it.

"They'll edit less,"

I'm not sure that this is true. I hope it isn't, because unlike convenience, and lower costs, and the unstoppable force of economic changes, EDITING MAKES BOOKS (those soon-to-be more conveniently formatted, available, low cost products) BETTER. Cut editing from the publishing equation and eventually you'll be left with crappy books in every genre.

In the end I'm still not sure why convenience has been elevated to the highest value status in our culture. Ease as the ultimate value will eventually turn around and bite us in the ass.

My point exactly!

When you say that most changes are forced by economics, you are joining me in the chorus. The settling of America, the elevation of women, the end of slavery, even -- these are all significant social (and moral) issues which had economics at their core. The changes in the book industry are no different, no matter how much we wish to romanticize the value of literature or the sacredness of the printed and bound tome.

The line about believing books are an artifact people want is actually from Professor Thompson, and I believe he was speaking in an interview, not writing, so we should give him some slack on his use of the language, though your overall point remains valid -- many know this is coming and they are not obligated to like it.

The point about editing is, in fact, an economic reality. It has happened to every other medium: newspaper, magazine, TV show (think reality shows vs scripted dramas). There is no medium in which digitization does not reduce the role of editor. Though I agree with you (as a bibliophile) that editing is crucial, I also know that much of what sells today is already poorly edited. Really, what can you do with a presidential memoir to make it literary? What will happen -- and what has happened elsewhere -- is that people who are remarkable writers/editors will emerge. The way JJ Abrams in film is a spectacular writer, producer, director, and editor all rolled into one genius. Similarly, the best journalists in our current age are those that can write, self-edit, and even (or especially) self-promote. We'll find that the best work will come from the amazing few who can do it all.

Oh man, it's not that I don't

Oh man, it's not that I don't think you're right about coming changes I just find them profoundly depressing. (Maybe after coffee they will only seem depressing but...). I don't think romanticizing literature and understanding its inherent value are the same thing. But I also don't believe the digital format will kill literature. I think the need to tell and hear or read stories is stronger and has always been stronger than any delivery system.

Not for nothing though, a print book is already an effective delivery system. Unlike CDs, or MP3 players a book only needs a human reader in order to work. I know you can't take your whole library with you or instantly own and have access to a new book whenever you want, but in the long view I don't think those abilities will permanently or even substantially change the numbers of books that are purchased. Not in the big picture. It certainly will change the publishing model, but I don't think the numbers of book readers will increase.

"I also know that much of what sells today is already poorly edited." Dude, I feel like you're trying to kill me this morning. Maybe you're right in the big picture. I really hope not. In my experience (genre fiction, especially romance) editors still work hard with writers to deliver books that satisfy their core audience.

At the end of the day my issue is not with digitization as a format or as a delivery system for information or art or entertainment, what concerns me is the potential for insidious economic, social, and cultural decline that could grow out of a system that values convenience and instant gratification above everything else. There will always be genuine artists and geniuses, but every sustainable society needs a reasonably competent populace that can do something other than gratify every impulse.

The problem with the economic engine now is that it's focused entirely on entitlement to the perfect pleasurable instant, "I deserve this, and I deserve it now." Any sustainable economy must be built in part on a foundation that makes meaningful progress possible. Instant gratification creates nothing but a shallow satisfaction and a perpetual desire to feed itself. It creates nothing.

Had to tweet that one

"Every sustainable society needs a reasonably competent populace that can do something other than gratify every impulse."

I sustain that sentiment for soooo many reasons beyond just this discussion. And I love that it came from a romance author, makes me elevate your genre just a bit. Thank you!

I copyedit/edit for a living,

I copyedit/edit for a living, so my reply is definitely biased, but here goes:

But it's the editing that makes people want to watch “reality” shows. I mean, not that I watch Ghost Hunters -- OK, I do -- but it’s Pilgrim films and their editors that boil down the three days Jason, Grant, and crew spend at the Winchester mansion to an hour of spooky creaks, disembodied voices, and moving silverware. Given the controversy over whether reality shows are scripted or not, some would argue that it’s the writers that aren’t necessary for these reality shows, and it shows the supremacy of the editor -- there are 19 people listed in the editorial department for “The Hills.”

But, I’d also note the resurrection of the scripted drama (and one dramedy) with Mad Men (and just about anything on AMC), True Blood, Boardwalk Empire, Glee, etc. Also, while JJ Abrams did direct and produce StarTrek, there was a separate film editor, two credited writers, and an editorial staff of 13 (there were 17 on Cloverfield), not including a long list of sound and visual editors -- thank you IMDB! While JJ Abrams may be a jack of all trades, for any one project, he still looks to a wide array of additional talents to help bring his vision to fruition.

Yes, this is the digital age, and even the venerable Gray Lady needs to get information out there faster than an army of Internet bloggers, but in researching blog editing, I found out that the NY Times aims to have at least two editors review copy before or after launch and everything is run by at least one editor before launch. They don’t allow anyone; reporters or editors, to self publish work.

You may need a different set of skills to survive as an editor today, but if anything, it’s such an easy way to set your brand that much above all of the, poorly edited, noise out there in the digital world.

This makes me think of "The

This makes me think of "The Shop Around the Corner" folding to the almighty "Fox Books" in "You've Got Mail." It's going to happen, but good things will come out of it.

I'm sorry, but I still think you're wrong

Well, first off, I'm honoured that my comment played a role in bringing out some further analysis. However, I still think that you've missed some very important things, and that your prediction of what will happen in publishing regarding e-books is based on at least one faulty assumption.

Now, just to start off properly here, I don't believe for one minute that the printed book survives because of sentimental book buyers - and I'm a confirmed bibliophile. If something that was better on the level of a basic object came along than the printed book, the printed book would be an endangered species within 5 years, and you would see a repeat of the DVD vs. VHS. As you said, it is all economics, and I would add to that the "rule of simplicity" - for one thing to gain dominance over another, it must make things easier for the consumer on just about every level.

As far as the book industry being resilient to change, and speaking as somebody who has been dealing with it since 2000, I think I can say with some authority that the book industry is quite adept at change. You talk about digital concerns being a driving force in the future tense, but at this point a lot of the industry is driven around online distribution through websites such as Amazon.com (which, last I heard, controlled 40% of book sales). It's not an upcoming revolution - it happened years ago. By the time I started my own publishing company in 2007, this was already in place.

As far as how the digital and the printed page interact, a great deal of it has to do with simplicity, and that has to do with how people interact with the words on the page. Take newspapers for example - any newspaper that doesn't have a heavy online presence is asking to go out of business, but why is this? Well, part of it is that people engage with the news in a very active manner - you don't just read a news story, you discuss it and argue about it. With an online presence, people can do this with greater ease than with a newspaper. Another example of where the electronic format has already overtaken the printed format is technology reference books - here the consumer needs to be able to do word searches, and that is easier with an e-book than a printed book.

But, take fiction, for example. Fiction is consumed in a very passive manner - people don't tend to go online to argue and debate over a fiction book chapter in the same way that occurs with a news story. And, people don't need to be able to conduct word searches - so, the printed page, being self contained and having no digital issues, tends to be dominant there. So, whether the e-book strategy comes first (and yes, at this point it already warrants the present tense) depends a great deal on what corner of the market is being discussed.

But, one of the problems with talking about the e-book as eventually driving the market strategy of a publisher is that it makes the assumption that the e-book is part of the overall book market. This assumption falls apart the moment one does a month-by-month analysis of the sales figures - there is not a single market force impacting the printed book that impacts the e-book too, and vice versa. Simply put, the sales figures for the e-book do not make any sense if you consider them as part of the overall book market. They SHOULD have peaks and valleys that map onto the peaks and valleys of the rest of the market. They don't. They take the shape of a straight line that has the occasional upwards step. The only way these figures make any sense is if the e-book is not part of the book market as a whole, but a brand new, and mostly separate, market that has now been opened up. So long as the primary product of the publishing industry is the printed book, the smaller and separate e-book market cannot be a driving force in it. It would be like the sledgehammer being a driving force behind the sales of screwdrivers.

But, nobody seems to want to talk about this anomaly with the sales figures, despite the fact that it has massive implications. If it is a separate market, as it does seem to be, than what is the trend going to be? What market IS it a part of? My own suspicion is that it's a part of the mobile phone app market, although at this point I don't know where I could find the sales figures to check that.

Now, I'm sorry, but while I have no doubt that online distribution of product is going to continue to be a driving force - it's no more a thing to come in the future than the microchip - the e-book is a separate market, and will not be driving the rest of the publishing industry. What will drive the publishing industry is the economic changes that occur over time when it comes to moving their core product of printed books.

Separate markets

Mr. Marks,

Apologies, this trail my be cold, I was only just introduced to this blog.

Very interesting comment (to an interesting original post) - particularly with regard to the data on e-books. I think you may be right that currently, ebooks are a separate rather than a substitute market, but I don't believe that will be the case in the long run – or medium. Two examples:

First, I like to read biography. Unfortunately I travel and am relatively time-constrained. For the pockets of time I wished I'd had a good book to read, I didn't have one to hand, so my reading (and print revenues) decreased. I have a pile of books at home, given at Christmas, which I would love to read, but simply haven't. However, since purchasing an iPad, my reading has shot up - it's good enough in terms of screen quality, battery life etc. (I still prefer the print experience), but more importantly, it's easy to take with me. Moreover, I can quickly and easily source books from the UK from here in the US - clicking through from a Spectator book review before I forget the title, author etc. - less about instant gratification than about convenience and simplicity. So, in your data, I would show up as incremental ebook revenue for now - I wasn't buying many books, I'm now spending again. However, roll the clock forward and people will be less inclined to give me print books for Christmas – I've already asked them to give me ebooks this year – so traditional print spend will migrate – and start to follow more normal cycles and patterns.

Second, there are parallels in the B2B world. Take Legal Publishing. In the very early stages, online access to Westlaw or LexisNexis was not particularly cannibalistic of print revenues and showed straight line growth. However, as more and more content became available online, familiarity took hold, enhanced features and functionality developed and the use-cases broadened beyond narrow case research, to include secondary / analytical content, print revenues started to drop sharply and migration occurred. Print isn't dead today, but it doesn't drive the economics, per the original blog entry. By and large, the print and online markets behave as one, although they don't completely move in lock-step (print tends to have more dramatic negative lurches when the economy turns, as lawyers look to cut costs).

I think the secret here in deciding whether it is one or two markets long run is to understand the nature of the use-case: does the print customer have a fundamentally different objective in mind than the online customer – be it entertaining themselves, researching etc. - I would argue not, even if the method of consumption is different.

Alastair

Finally, somebody who will talk about it!

Alastair,

I can't tell you how happy I am to read your comment - I've been pointing this issue of the market figures on e-books and printed books out for ages, and it tends to get met with silence. I am at the point where I'd give my eye teeth for a serious discussion of it - thank you so much for obliging.

Well, first of all, I don't know how much legal publishing in the case of Westlaw and LexisNexus can be compared to e-books as a whole, due to what I mentioned above about means of consumption (I work part-time as a writer and editor for the PR section of a law faculty at a university, so I have some inkling of what those are). It seems to me that in the case of a lot of reference material, the electronic version is already ascendant. In fact, in some sectors of the reference market, there just isn't much point in print publishing anymore - the need to look things up quickly as though it's a database trumps the simplicity of the printed page every time.

That said, I find what you noted about the sales pattern incredibly interesting, and food for thought. It also makes a pretty decent amount of sense - the early adapters will be those who need the service more regularly, and they'll be followed by those who are more casual in their needs - and that would explain the e-book sales pattern to a degree too. The people using e-books the most are those who need books in that format for regular travelling, and if you are travelling, you would have a higher income that is not as heavily impacted by the forces that impact the regular book market.

That said, I still have some level of skepticism about the idea that one market would cannibalize the other, and here's why: we tend to look at these things in terms of the content, rather than the format. For most media, this is exactly the right way to look at it. Taking movies as an example, the movie is going to be watched on a screen (TV, computer, etc.) - the competition between formats is in regards to how that content gets to that screen. Therefore, a digital download can cannibalize sales from a DVD.

But, when it comes to the printed book, we have a situation where the the content and the medium/format are one and the same. It is completely self-contained. The e-book, however, is an electronic file. So, while various e-books versions of a book are competing to get onto a screen, the printed book is not. It's the difference between a technological object and a non-technological object.

Now, only time will tell just how much of a difference this makes. As I mentioned above, there are areas of publishing where the electronic has already cannibalized the printed format. But, there are also areas where the needs of the consumer are better served by a non-technological object rather than a technological one (and I think that does cover most types of books - if you look at where the electronic has been really revolutionary, it's been in sales and distribution of printed books rather than in regards to e-books). So, I think it is a situation where the needs of the consumer will be the determining factor in the end.