Digital Publishing

The Wall Street Journal, June 3, 2010

Edited by Andy Ross

Digital self-publishing is creating a powerful new niche in books that's threatening the traditional industry. Once derided as "vanity" titles by the publishing establishment, self-published books can now thrive by circumventing the establishment.

Fueling the shift is the growing popularity of electronic books. Apple's iPad and Amazon's Kindle have made buying and reading digital books easy. In 2009, U.S. book sales fell 1.8% to $23.9 billion, but e-book sales tripled to $313 million, according to the Association of American Publishers.

Many big publishers dismiss self-published titles, noting that they may be poorly edited and are almost never reviewed. But online self-publishing and newcomers such as Amazon could mark a sea change in publishing.

Amazon provides service tools for authors to self-publish and has created an imprint to publish promising authors in print and online. Amazon is increasing the amount it pays authors to 70% of revenue for e-books. A self-published author whose e-book lists for $9.99 on Amazon's Kindle e-bookstore will receive about $6.99 for each book sold.

Traditional book-industry players and tech companies are jumping on the digital self-publishing bandwagon. In May 2009, Apple announced a digital self-publishing program for its iPad giving 70% of revenue to authors, and Barnes & Noble announced a service called PubIt!, allowing authors to post and sell e-books online.

In May 2009, Amazon launched its own publishing imprint, Amazon Encore. From a sea of self-published titles, Amazon plucks a few with promise, then edits and distributes them online and through print retailers.

More than 90% of sales still come from physical books. In addition to the editing and marketing support for their manuscripts, many writers depend on the advances they get from their print publishers. Self-published authors only generate revenue when their books are sold to consumers.

As more authors self-publish their work, publishers' control weakens over how titles are distributed and which books are offered for sale. Some publishers fear that one of the big technology companies now distributing e-books will compete for the best-known authors by offering advances.

Mainstream publishing houses have long depended for much of their profit on selling backlist titles, books in print for more than a year. In coming years, there will be adequate substitutes for many of those works at a quarter of the price.

The proliferation of cheap digital books concerns even publishers who don't think readers will defect to self-published titles. Amazon had been retailing most top e-books for $9.99. Publishers worried that such prices could devalue the industry's cash cow, hardcover books. Amazon has now adopted an agency model, in which publishers set prices for books and Amazon takes a cut of the proceeds.

Amazon uses its technology to merchandise the "long tail" of niche books. While traditional publishers rely on name-brand reviews, Amazon has millions of customers posting reviews. Amazon offers free, instant, sample chapters to hook readers. And it makes computer-generated recommendations based on other readers' purchases. For new writers, Amazon levels the playing field.

AR  I'm riding on this revolution. May the smug and snobbish old-boys-club world of traditional publishers go down the tubes with the flush of pee and poo that it deserves!

Random House CEO on E-Books

Der Spiegel, August 4, 2010

Edited by Andy Ross

SPIEGEL interview with Random House CEO Markus Dohle

SPIEGEL: Your rise to the top at Random House was met with disdain in New York. You were seen as an outsider from Bertelsmann in Germany. Did you get an icy reception?

Dohle: The book industry is about making money with books.

SPIEGEL: How much of your turnover comes from e-books?

Dohle: Around 8 percent in the US right now.

SPIEGEL: Analysts estimate that in 10 years' time only a quarter of all books will go to readers in printed form. Do you think that's realistic?

Dohle: I don't agree. The market share for electronic books, even in the United States, will more likely be between 25 and 50 percent by 2015.

SPIEGEL: When Apple introduced its iPad in January, five of the six biggest U.S. publishers were partners in Apple's online iBookstore. But Random House is still not part of the effort in the United States. Do you really believe you can do without Apple?

Dohle: We believe that we have to proceed in a very thought-out way, in order to find a sensible business model that will hold up in the coming years.

SPIEGEL: Amazon is the dominant vendor in the e-book business. Is the book turning into a bargain-basement item?

Dohle: Pricing pressure is just as prevalent in the print world.

SPIEGEL: Amazon stopped being just an online bookseller a long time ago, and now it acts as a publisher itself. Who even needs publishing companies anymore?

Dohle: There is a risk that publishers will go under, but we are very self-confident in that regard.

SPIEGEL: It's also a question of how you can ensure that authors remain loyal to your company.

Dohle: Trust plays a very important role. And being patient is also part of it.

SPIEGEL: Amazon sometimes pays authors a 70 percent share of sales, while classic publishing houses often pay only 10 percent. Do you have to up the ante to keep your authors from leaving?

Dohle: That's an issue we address in talks with authors and agents.

AR  I narrowly escaped becoming an employee of Bertelsmann in 1998-99 by moving on to SAP.
Dohle's complacency — "we are very self-confident" seems about right for a tube flush.