Whether in christian book publishing, ebook publishing or children’s book publishing, the American book publishing industry is rushing headlong into the digital future, a process that is changing everything about how books are acquired, manufactured, sold, and read. In creating not one but rather several new business models, all members of the publishing industry are aware that they are establishing precedents that are likely to last well into the future, making each negotiation something to be carefully considered and, at times, fought over. The increase in sales of digital titles is certain to create winners and losers as established brands and businesses give way to new companies tapped into the new needs of the reading public.
As technology has changed the book business over the past few years, publishers have experimented—with mixed results. In 2010, Children’s Book Publishers and HarperStudio shuttered its low-advance, 50/50 profit-sharing imprint after just two years. Meanwhile, Jonathan Karp’s success with Twelve landed him an opportunity to run Simon & Schuster’s flagship imprint. In 2011, with almost every part of the book business in flux, expect publishers to address how they do business, not with experimental imprints, but by adopting practices once considered alternative into their mainstream practices. With the digital world reshaping the very foundations of the book business, the traditional book deal will also change, and so too must the organizations that make those deals.
Despite seismic shifts in everything from consumer behavior to production schedules, there has been relatively little change to most major publishing companies. Yes, there have been staff cuts at christian book publishers, reorganizations, imprints consolidated, even a smattering of new, “digital” positions created. But most of those changes have addressed inefficiencies in traditional publishing. With digital now a significant part of revenue even at book fairs and poised for the greatest growth period yet in 2011, publishers must begin to fundamentally address the way books are acquired, managed—even conceived. “ is the year when deep organizational change will be ever more necessary,” says Richard Nash, whose new digital venture, Cursor, will launch its first list this spring. “But I’m skeptical that can happen on the necessary scale. The story of 2011 is the story of the startups.”
The pressure to adapt has never been greater. This year, book publishers will face competition from a growing cast of digital upstarts, such as Open Road, OR Books, and Nash’s Cursor, all with very different visions of the book business. In addition, there will be more competition from authors themselves. Seth Godin has inked a deal to publish directly with Amazon, and midlist mystery writer J.A. Konrath has blogged about the financial success of his direct-to-consumer e-books. It remains to be seen how successful these ventures will be. But with new digital sales channels, devices, self-publishing solutions, and competition from nimble, born-digital businesses—often led by talent ejected from the traditional publishing world—book publishers in 2011 will recognize the need to retool their organizations to compete in the next generation—a generation that will be characterized by abundance, convenience, multimedia, direct-to-consumer sales, and creativity. “The big houses have been living off their backlists for many years now, with occasional blips: a Harry Potter here, a Diary of a Wimpy Kid there,” observes John Oakes, cofounder of upstart OR Books, “but everyone knows the system is broken. The peculiar combination of returns, high discounts, rotten inventory, and separation from your customers is just so… pre-electronic.”
In her year-end memo, S&S CEO Carolyn Reidy called 2010 the year “publishing changed irrevocably.” And S&S has already begun to adapt. Hiring Jonathan Karp, for example, signals more than a desire to refresh the company’s editorial direction—Karp is a reformer. Already he has reorganized the imprint into small “teams,” each responsible for the performance of their list, much along the lines of his April 2009 PW essay, “12 Steps to Better Book Publishing.” We expect more changes to come in poetry book publishing at S&S—and at other houses as well,
It’s impossible to have a conversation about fiction book publishing without hearing the term “social media,” a batch of related Web-based technology platforms that have come to be virtually synonymous with contemporary book marketing and promotion. Look for much more in 2011 as the industry continues to redirect its marketing efforts away from business-to-business to business-to-consumer. It’s a measure of the ever growing popularity and effectiveness of a range of Web publishing platforms like blogs, Twitter, Facebook, Flickr, and Tumblr (as well as social media–driven ventures/writing communities like Figment, Copia, Wattpad, and Cursor) that accounts for their quick absorption into the day-to-day operations of book publicists, marketers, retailers, and many authors. Even the so-called battleships of New York trade book publishing companies have managed, for the most part, to embrace social media, and the reasons are simple. Social media platforms attract readers and potential readers, many millions of them, to discuss what’s important in their lives—from books to pets to politics. And publishers have followed them online.
“Media is even more plural today,” says independent book publicist Lauren Cerand. “Twitter breaks news. There are opportunities for publishers to be involved in the ongoing cultural conversation.” In addition to providing publishers with the ability to host interactive dialogues about pretty much anything directly with consumers, social media has provided book marketers and publicists with a new crop of rough metrics—from the number of “friends” and “likes” on Facebook to collecting followers on Twitter—giving them for the first time a measure of the effectiveness of their campaigns. Social media also gives publishers a slew of online strategies to get books in front of the people most likely to be interested in them, particularly in the case of younger readers who have always read on screens, notes Nina Lassam, marketing director at Wattpad, an online community of writers and readers that attracts as many as two million visitors a month (split 80% readers and 20% writers), aggregating and distributing reading content for mobile phones. “Every campaign here at Scholastic has a social media component, from Twitter parties to blog tours, widgets to Facebook pages,” adds Scholastic marketing v-p Stacy Lellos, who says to look for a “massive Scholastic teen campaign on Facebook” in the spring. “[Social media] gives us data we can track, feedback on what’s working. It’s wonderful.”
The future of Borders Group, not only for 2011 but for the long-term, will likely be decided early in the new year. The struggling retailer is looking for new financing to protect it from the very real possibility that it will be in violation of its lending agreements in the first quarter of 2011, resulting in a liquidity shortfall. There are reports that Borders is close to landing a new deal that will give it more financial breathing room, a remarkable achievement considering the company has not reported net income since 2005, racking up losses of $786 million since the beginning of 2006.
Eager to keep the number two bookstore chain afloat, publishers have continued to ship product to the company, but that could change, one book publisher said, if Borders fails to show some signs of a turnaround in the first part of 2011 or fails to find a financial lifeline. While publishers for the most part are being paid on time, most have been unable to get insurance for their receivables, meaning that if Borders does file Chapter 11, they will almost certainly lose most of what they are owed. At the end of the 2010 third quarter, Borders had $445 million in trade accounts payable.
If Borders does survive for another year, it will certainly be selling fewer physical books. Book sales fell 13% in 2009, to $1.8 billion, and the company has reported that its core book business continued to be under pressure in the first nine months of 2010. Its strategy moving forward is to put more emphasis on the sale of digital reading devices and e-books, and adding more educational toys and games, sometimes partnering with other companies. But there is widespread skepticism about Borders becoming a serious player in the e-book field, having gotten a late start in selling devices and e-books. One thing that won’t happen in 2011 is Borders acquiring B&N, despite an offer by one of Borders’s largest shareholders to finance a $16 per share bid.
Digital is the catchword these days throughout the color book publishing industry, and children’s books is no exception. Will 2011 be the year of the e-book for children’s divisions? Some but not all publishers think so. Already the market is growing for book-based (as well as nonbook-based) apps, and this year the space will certainly be more crowded, both in terms of product and the number of companies involved in its output. E-book publishing, of increasing importance to adult publishers’ bottom lines, will take a larger share of consumer spending for children’s and teen books as well.
So there’s plenty of opportunity, but there’s still a big question mark about electronic, be it apps, e-books or enhanced e-books. “No one’s admitting to being confused, but everyone is trying to figure out what to do,” one publisher tells PW. The biggest digital successes so far on the app side have been with brand-name properties, but it remains to be seen how much money can be made from apps at a low price point, or how customers can be driven to apps that lack a strong brand association. Also, how accessible will apps and e-books be to kids in the near future, beyond playing with a parent’s iPhone or iPad? “The electronic market for kids is a lot less clear than for traditional adult trade publishing,” says Neal Porter, who has his own imprint at Roaring Brook Press.
As for the changing retail landscape, the children’s category should grow in prominence. This year the two largest bookstore chains announced plans to increase floor space for toys and games, and the children’s footprint will be bigger proportionally than it ever was. But publisher complaints about the difficulty of breaking into the chains unless you have a brand name or a big marketing budget will only increase. And if more indie bookstores go out of business, that will likely have a negative impact on children’s sales. The institutional market, once the stalwart of the business, is going through its own difficulties in an era of decreased tax revenues for local and state governments, and libraries are under pressure to increase their technology holdings at the expense of book purchases.
A challenging picture, yes. But children’s and YA books have more than held their own in the past few years, during some tough times. As HMH children’s group publisher Betsy Groban points out, “The death of selling physical books has been greatly exaggerated.” Though the Twilight and Hunger Games franchises have reached maturity, new books from such names as Jeff Kinney and Rick Riordan will still significantly move the needle, with room for some surprises on bestseller lists. And Porter says, “A case can be made for the book as physical object if it can do something an electronic book can’t do, or provide a unique experience that can’t be had on a handheld.”
If 2010 was the year that agents, authors, and publishers agreed on royalties for backlist digital titles, many are wondering whether headway will be made on frontlist digital royalties. A number of the big six book publishers declined to comment on this issue, and it remains one of the major points of contention between authors/agents and publishers. The current digital royalty rate, in which authors receive 25% of net proceeds, is something many in the industry believe cannot stand, in part because more options are becoming available to authors to earn more.
The Authors Guild has spoken out against the 25% royalty rate for some time, arguing that publishers are now making much more than authors on e-books. In a panel PW hosted in September on the subject of digital royalties, Paul Aiken, executive director of the Authors Guild, said that as long as houses stick to that 25% rate on e-books, “the publisher will always do better on e-book sales.” Neil De Young, from Hachette, on that same panel, disagreed.
Given the polar positions of agents and publishers, it’s difficult to say how much headway will be made on this front. Although one prominent agent that children’s publishers spoke to said he doesn’t see 2011 as the year that the 25% rate will move, other insiders insisted on movement. As another agent noted, with sales for some books being 50% e-book and 50% hardcover during the first few weeks after publication, authors now “get absolutely hammered” during the stretch when they traditionally made their most money.