The Future of Literary Agents. Really?

It is a confusing time to be working in the publishing industry. Commentators are telling people they should forget what they know about publishing, and adapt to a digital future.  As regular readers will know, I love to find the reassuring thread of humanity that will guide us through future digital landscapes. In this article, I turn my attention to literary agents.

Traditionally, editors commissioned or discovered new titles (see my last article on the role of editors). However, during the last fifty years of mergers and acquisitions, many experienced editors left to become literary agents, and the big publishing houses started relying on  agents to find new material.

The self-publishing boom has created a new market for literary agents. When a new writer can’t sell the 1,000 copies under her bed, she looks for an agent who can sell rights or get distribution deals, and in some cases she will pay to be represented at a book fair by an agent. At book fairs, it is usually smaller publishers who buy self-published book rights. Last year, an editor at a small publishing house in London told me they had previously commissioned all their work. He was at the Frankfurt Book Fair to buy rights for the first time as a way to reduce their risk and grow their portfolio more quickly.

So the number of literary agents has been growing. They are probably finding at least half of the new material for large publishers, and a growing proportion for smaller publishers, including a greater number of international rights sales. Despite this growth the media is telling us two main stories about the future of literary agents:

1. Literary agents will not be useful in a digital future, because writers’ ability to publish to the world directly will remove industry “middlemen”.
2. Literary agents are becoming publishers because publishers are not doing a good job of re-issuing writers’ material in ebook format. This suggests the beginning of the end for literary agents because if they are also the publisher, then there is no one to sell to – so agents are redundant.

These stories create a stir, but agents are unlikely to disappear because the story writers fail to appreciate the economic value of each player in the publishing chain. The economic value of publishers is managing the financial risk of marketing a book. If they make too many wrong calls, they will go out of business. The economic value of agents is selling clients’ books to publishers (by lowering risk). If they don’t sell enough rights deals, they will go out of business.

Neither the financial risk management nor the sales functions will disappear in an internet world. Agents who re-issue ebooks for established writers are not taking a risk – they are skimming some cream. Most self-publishers (who have “eliminated the middlemen”) are already discovering that they are not in a good position to assess the financial risk of their project, and nor do they have the sales skills to sell their project to publishers.

I can hear some of you asking “so where does Sparkabook fit?” The value of the Sparkabook rights trading community is simply to save people time. Sellers need more efficient ways to find potential buyers, and buyers need faster and more efficient ways to find content that matches their audience.  People making risky decisions buy from people they trust, so agents will be around for a long time to come. I am pleased to report that many of the smartest ones are already Sparkabook members.

Darwinian Evolution at the Frankfurt Book Fair

Frankfurt Book Fair days are the best of days, and also the worst of days. Within several huge halls are assembled a good segment of the global publishing community, and if you stand above the hubbub and watch carefully, you can detect ruthless Darwinian evolution at work.

Publishing has always selected winners and losers. The way for an editor or small publisher to succeed is to match a book to a market, using an intuitive sense of what that market wants. Junior editors are promoted at larger publishing houses when they earn their stripes by finding and backing a successful book. Many books do not succeed, and editors with a low strike rate are less likely to get promoted. The same applies to small and start-up publishers, battling for attention in the distribution and retail systems. If they have a good strike rate, they get enough cash flow to acquire more titles.

Success or failure in publishing rests on the intuition and judgement of editors. Publishers over the last few decades have outsourced printing and distribution functions to achieve economies of scale without ill effects, because these functions were irrelevant to the success of their house.

At Frankfurt Book Fair, I attended a seminar on the role of the editor in a “Brave New World”. One publisher said they had outsourced creation of multimedia applications, another said they were building this capability in-house and were now calling their editors “project managers”. The third (the only trade publisher) was diplomatically silent, but said his team was enthusiastically embracing e-book conversions.

The second editor spoke of some failures they had already experienced due to poor user-interface design. I started to puzzle over a question as I listened. Is the same failure not caused by bad, clunky writing, full of clichés? Why were these editors not taking the same approach to procuring applications that they used every day for procuring new books? The options they were discussing; “Build it yourself” or “outsource”, are both similar to the “contract a writer” scenario. If you know the writer is outstanding, then you have no problem – but how many hundreds of writers are rejected by publishers before one is contracted?

There is intense competition in the application development market, similar to the competition to get books published. With over 10,000 “children’s education” applications on iTunes, the world is ready for some discerning editors to select only the best. A publisher would then have a good chance of creating a best-selling application using their marketing capability, just as they would create a best-selling book.

The other option available these days is to “crowd source” creation of an application. Put up the book you want to create an application for onto one of the myriad crowd-sourcing sites, and seek submissions for the best concepts/pilots. Creative developers are lurking in all corners of the world, ready to generate fantastic concepts and ideas, if only they could find a project or a sponsor.

Perhaps the problem with the seminar was that the third publisher (who said very little) had already decided on one of these different approaches to procuring applications, but was unwilling to share it? I suspect it would give a marvellous competitive edge, so I will be watching what this house releases in the way of applications over the next year.

Old Wisdom for the New Digital

Penguin was a small start-up publisher, which became an instant success in the publishing world. If we look at the reasons they were so successful, we can see they adopted many new concepts that added up to an explosive package.

First there is the format — small paperback, quality writing and simple graphics. Allen Lane, the founder of Penguin, lifted the entire concept from Hamburg publisher Albatross. To be smart you don’t have to come up with a new concept, but you do have to find it! Lane travelled extensively and kept in touch with new ideas. Does your itinerary for Frankfurt Book Fair allow time for discovery?

Second — impulse purchases can be planned. Penguin retailed their books through a carefully planned system of vending machines, railway stations, and other high traffic areas frequented by their target market. Airport booksellers are still growing in numbers today. What are the high traffic areas that your target market passes every day; Facebook? Gaia? Cyclingnews.com?

Finally — status matters. This is a human drive that will never change. Penguin appealed to status shoppers, who wanted to better themselves. In a digital world do we have to abandon the physical? As a frequent traveller for most of my life, I have witnessed many conversations between people about the books they were holding. How could people let other people know what book they are holding in a digital future?

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Lessons from an older format revolution

For many of us, the wave of digital change driven by e-books causes turmoil. “How can I succeed in this new world when I am a literary person, not a technology person?” “Should I acquire, market or distribute e-books in a different way to printed books?”

I take great delight when I can find a historical parallel to modern digital dilemmas. The new whizz-kids driving social media and transmedia changes may be creating new technologies, but the humans using them have been the same for thousands of years, which means history lessons can still be useful.

Over 80 years ago a new format caused a revolution in the publishing industry. Paperbacks. In 1934, most books were expensive hardbacks sold through established booksellers. Paperbacks had been invented, but were generally “pulp” fiction romances, comics or westerns. When Allen Lane at Penguin books decided to publish quality literature in paperback format in 1935, he made a leap of understanding about what people wanted. Traditional publishers of the time thought the working classes wanted pulp fiction, not quality literature. Lane ignored this dictum (he had a knack for ignoring society views in many areas) and stunned the publishing world when his first print run sold out through Woolworths. Within a year he had sold over one million copies.

Pocket Books in the USA emulated Penguin’s success. Their first print run of 200,000 quality titles sold out at department stores within 24 hours. By 1960, almost every major publisher had acquired or merged with a large paperback house. Those that did not, did not survive.

Why were traditional publishers in 1935 so wrong about what “the masses” wanted? In 1935, working class people and immigrants from outside the UK/USA were redefining themselves. Tolstoy and Marx had spread the idea that intellectual endeavour could free them from drudgery, and immigrants in particular were keen on education as a way to better their family’s prospects. When quality paperbacks were sold in department stores, people didn’t snap them up as cheap entertainment – they bought them as affordable keys to social elevation.

To succeed in an era dominated by new digital formats, we can ask ourselves questions informed by history. What is it that today’s “masses” want? What department stores are people passing through? I will explore these questions in my next posting.

Finding Best-sellers in the Digital Age

A bestseller is unique. A buyer cannot substitute a Harry Potter title for any other book. In economic terms, a best-seller provides a mini global monopoly, and therefore, the ability to maximise profits. Over the last decade, mega-publishers have made acquisition of bestsellers their primary strategy. Unfortunately, the only sure way of capturing a bestseller is by acquiring an established brand. Brand value is built through previous books by an author, or acquired through some other form of celebrity – Tony Blair’s memoirs are an example.

The downside of this “guaranteed” bestseller acquisition strategy is that publishers are competing for the same limited number of well-known brands. This ensures that bestseller rights are fully valued by the seller (usually an experienced agent), and the chances of super-profits are slim. The result can be seen in the financial results of the “big five” global publishers. Over the last few years, profits for their book publishing arms have rarely broken the 5 percent mark, and some have suffered losses.

As Bloomsbury can testify – the way to make super-profits is by acquiring rights from a previously unknown writer like JK Rowling. Unfortunately, wading through piles of unsolicited manuscripts, or “slush” as the pile in the corner is generally known, is a soul-destroying job. This applies especially for discerning readers – as editors always are. So editors usually delegate this task to agents or go by the recommendation of authors they know. But there are new strategies available as a result of the internet age. Here are some to consider if you are a publisher or agent, and want to improve your odds of finding/creating a best-seller;

Acquisition. Translation rights are often available for bestselling titles in other languages. Only three percent of English language titles have been translated from another language. Yet if a book has become a bestseller in a foreign country (Sweden springs to mind), it has much better odds of becoming a bestseller than the average manuscript that arrives in your mailbox, since 99.5% of all manuscripts submitted will never be published.

Even in the English language there are opportunities to discover Trans-Atlantic and English-Asian best-sellers. This opportunity arises because the distribution systems and market promotion systems in Asia, the UK territories and North America have surprisingly little crossover. What has been missing is a way to find “sleeper” bestsellers by independent publishers across the ocean.

Sparkabook is a new internet service created to help you trade rights around the world, with the goal of helping you spend less time and get better results from your research and sales efforts.

New discovery methods. Web sites are constantly springing up offering contests and ways for writers to get themselves known. Some examples across different genres are Figment, Authonomy, Webook, and WritersCafe, but there are many others. These sites give you a way to proactively search for material (or writers) that fit your niche, and might help you narrow the pool to the top 20 percent of talent, improving your chances considerably.

Out-tasking. Historically, the slush pile was delegated to new graduates when they joined a publisher. The consolidation of large numbers of publishing houses into mega-publishers with “lean” and efficient structures has all but wiped out this tradition. However, it is still a strategy that will widen the pool of manuscripts being evaluated. In these times of high unemployment, perhaps it is worth investing in our own graduates or students to do this type of work again? Alternatively if this is unaffordable, the rapid growth of a well educated, English speaking middle class in many parts of Asia (India, Philippines, Malaysia) has created an opportunity for you to build a team of low cost, high quality readers that can be reached through social media.

New Research Methods. If you are a non-fiction specialist, finding a bestseller depends on being ahead of the global pulse and matching it with timely publications. You can use the power of the internet and new web applications for trend watching to get the jump on everyone else. Google trends, Twitter trends and Trendwatching.com are just some of the tools you can customise to match your needs.

So, as a publisher, you can improve your odds of finding an “undiscovered” bestseller by using the new tools of the digital age. However, even if you don’t find a bestseller, Amazon.com’s range of titles combined with new print on demand technologies have opened everyone’s eyes to the benefits of having a solid mid-range – the “long tail” of quality titles that do not explode onto the market, but burn for a long, long, time.

How Publishers can flourish in the Digital Age, Part 3: Money for Nothing.

At the O’Reilly Tools of Change conference earlier this year, Kevin Kelly defined the term “generatives” as a way to generate value even when the copy is free. So when is paid better than free? Consider the days of radio and tape recorders. When tape recorders became widely available in the 1970s, various observers of the music industry predicted they would destroy the music business, because people could record what they wanted for free.

So – if you are over 35, did you build your entire music collection from recordings you made off the radio? My guess is – not! As a teenager, I did spend hours recording my favourite songs off the radio, but as soon as I got a job, I started buying music… and here were my reasons;

1. Quality. When I recorded music, it was hard to get a clean break between songs, and they never sounded as good as a new record or tape.
2. Value of my time. It took hours, waiting to catch the right song on the radio, creating labels and messing about. Once I was working- my time had value.
3. Less annoying. When I was glued to the radio, I had to endure mindless advertisements which I found intensely annoying.
4. Unique. All I got from the radio were the latest pop songs, or old time favourites. When I started listening to Neil Young, Joni Mitchell and Billie Holiday, there was no way to get them without paying for them.
5. Instant. I could go to a record shop and have the album I wanted without having to wait weeks to get the right song come up on the radio.
6. Impulse. Often I would wander past a record store, and would buy something I had not planned to buy when I left the house.

For the music industry in the 1970s, these elements were “generatives” – they created value I was willing to pay for, even if the content was being broadcast for free. Like many things from the digital world, you can understand them intuitively because they relate to human needs and behaviour, not technology. So how can publishers use these “generatives” over the coming years to flourish in the digital age?

1. Immediacy. Most of us have experienced the frustration of trying to get something off the internet. Immediacy can be thought of as the price people will pay to avoid frustration, and get what they want now. One example is to offer an item for free, but create a paid option to get it faster. I saw a collection of genealogical information where the free version took painful hours for each paper to trickle down to your computer. The paid option delivered the papers immediately.
2. Personalisation. There are some e-books for which I only want to pay 99 cents – but would I pay $9.99 to get the latest CJ Cherryh as soon as it comes out? Of course I would – If only her publisher knew who I was and how to contact me! They could probably extract $50.00 if they offered collector options and other extravagances. The reality is that I often miss releases of books I would lovingly pay more for.
3. Authenticity. Would I want a bad copy of a book/e-book/multimedia entertainment service? I have bad memories of unwatch-able DVDs that I paid for, only to find they were probably illegally pirated. If my shop was a trusted source, I would pay to get the authentic version. This becomes even more important in the multi-media industry, where quality of experience varies widely (try comparing kids applications on an i-phone)
4. Attention. Call me egotistical, but I like it when an author knows me. Would I pay more for authors/publishers who know me and talk to me – even on an open forum? Definitely.
5. Interpretation. There are current examples of this in the technical book world – I can go to a technical writers site to get tips and techniques for material they published in a book. Education publishers have also been doing this for a long time. But this can also extend to education about a fiction title (think of this as interesting historical notes, forewords etc).
6. Accessibility. I-tunes kick-started revenue generation for digital music by being incredibly accessible. The risk in the digital publishing world today is that fear and protectionism are reducing accessibility (and therefore digital earning potential).
7. Embodiment. This is a simple one – I will pay to hear a writer at Writers and Readers week – they are the embodiment of the book’s creator (who is usually hidden behind an intriguing written voice).
8. Findability. We all know how frustrating it is to spend ages searching for things on the internet. Thankfully Publishers now have more e-book retail and distribution options available – just think carefully about how “findable” each option will make your titles for the consumer. We at Sparkabook seek to differentiate our rights listing service using “findability”. We think browsing book rights should be fun and exciting, not a tedious chore.

Now that you understand the human motivations for “generatives”, take a look at Kevin’s presentation – it should all make sense, and he has plenty of other thoughtful insights.
In my next blog in this series on how to survive in the digital age, I will turn to bestsellers. I will discuss an economic model that might overturn your assumptions about income from best sellers. This will be good for those of you who fret that others are succeeding with bestsellers and you are not. I will also offer some ideas on how the digital age can give you a bestselling edge. If you want to ensure you get the next installment, you can subscribe here on wordpress, or go to our website; Sparkabook and click on the mail icon in the footer.

How to survive when books are 99 cents. Part 2: Creating Communities.

Continuing the theme of how to make a living in the digital book era, this blog is about capturing a community of readers loyal to you.

With a captured community, your marketing costs are reduced because your community members will be coming to your community site, and you can contact them directly to let them know about new releases.

A community also helps to position you as a service provider instead of a “manufacturer”.  If you just see yourself as a publisher of books, then you risk being a commodity supplier of entertainment “things” brokered through a huge distributor/retailer apparatus. As coffee growers around the world can attest – this scenario results in the lowest possible returns for you.

If you create a community, you can directly service and support people with specific interests. If you specialise in history, they may be readers who love to debate the decline of the Roman Empire. If they are biology teachers, they may be discussing techniques for engaging children. I am guessing you have already carved out a known niche for your publishing enterprise (or author “brand”) – so a community is just the next step in the realisation of that niche.

Once you have created a community, you can create a cocoon of services around your members that either generate additional revenue or build greater loyalty and reasons to keep coming back to your “space”.  Harlequin and Scholastic provide good examples of communities created by publishers.

Just because a publisher is big, does not mean they have a great community. Simon and Schuster have created a community, but it is difficult to find a “hook” on their web-site that would engage someone with a specific interest.

When Sparkabook started out, we knew that we wanted to create a community, and initially we looked at the well known consumer communities like Facebook and Twitter, however, these did not give us the freedom to support out members in the way we wanted. I also knew about organisations that had their Facebook sites taken down for breaching a set of changing Facebook rules. I considered this to be too great a risk for our business. After a wider search, we settled on Ning.com, and spent a few days setting up a Ning community. To our dismay, we discovered that we could not access or update our member information. Ning, like Facebook and Twitter really “owns” this information about their community members, and I assume this is part of their plan to create a global network. That is good for them I am sure, but it does not help a business wanting to differentiate itself.

In the end, we settled on KickApps to host our community (as have Scholastic). KickApps provides a flexible, but easy to use, interface for setting up a community. Most of the standard community functions; “friending”, messaging, forums, media uploads etc, as well as advanced widget building capabilities come standard. I wouldn’t say it is perfect – last month it was sold to a European company and we started getting random outages. But for our purposes it provides a happy medium of low cost (you can get started for less than $30 per month) and flexibility.

I will let the last word on communities go to Rhys Lavall, a contributor on the Ning community;

“Facebook [is] for socialising with people you know. Ning is like a discussion with people who are interested in what you are.”

For a publisher to “capture” a community, they need to create a relevant, supportive and fascinating space based on the interests of their target readers, reviewers, teachers, retailers and anyone else likely to join in the discussion.

My next blog will look at more ways to survive the coming digital storm. In particular, I will explain Kevin Kelly’s “generatives” from his presentation at the Tools of Change conference this year.  The good news is that you already intuitively understand what “generatives” are – I will translate them from “geekspeak” for you!

How to make a profit when books are 99 cents. Part 1: Book entertainment is a service.

Industry commentators in the USA are warning that the e-book tipping point is already here. The latest NYT bestseller lists are showing 99 cent e-books in the rankings.  If e-book pricing declines, and more books are sold as e-books, how will publishers protect their value?

In my last blog, I explained how publishers can escape dismal pricing forecasts and lower profits by creating unique offerings.  Here are some ways publishers can leave “normal” behind. I will cover all of these in my next few blogs.

1. Consider “book entertainment” as a service – not a thing
2. Capture and engage a regular audience
3. Leverage Kevin Kelly’s “generatives “ for creating value in the internet future
4. Improve the odds of finding and creating a bestseller

Consider “book entertainment” as a service – not a thing.

I have spent much of my life in the computer industry. Over the last twenty years we have seen profits on “things” drop from 90 percent (honest!) to 3 percent (the last estimate I saw for a  Computer tender). How did we survive? We stopped selling “things” and started selling services.

This is a hard concept to understand when you have been selling products for a long time. I recall a lecture by a great strategist at IBM. He told us that 70 percent of our revenue would be services in 20 years time (up from 10 percent) and I recall scratching my head – I couldn’t see why people would want to pay for more for support! Luckily I was wrong, and we found plenty of services to offer that made our customers lives easier, that they were happy to pay for.

What is the secret to creating a unique, desirable service?  Knowing what readers want from an ideal “book entertainment service” and then being creative. It is about meeting their needs, but it is also about fulfilling their wildest dreams.

Spend time on an average fan site – Mugglenet is a good one to start with, since they have a sophisticated set of services developed by their own fans. But there are many fan sites on the internet – embrace the craziness of what they are looking for. It is not just fiction we are talking about. Part of the success of bestselling title “The Elements” on i-pad is the geek community buzz. Knowing your type of reader is an essential part of creating a unique reading experience for them.

Such an experience starts long before they get your book, and finishes long after the last wistful memories of that experience fade. I can’t tell you what services to create, because they will be different for every community.

Educational publishers are further down the path to service creation, because they realised many years ago that an opportunity existed to create services for educators that have minimal time. The challenge for everyone is continuing innovation to keep services unique.

2. Capture and engage a regular audience

Social networks (communities) are flowering on the internet. It is predicted that communities will continue to grow and diversify to meet the needs of special interest groups.

My next blog will examine how communities provide insight for creating services and  building regular revenue. Sparkabook, being a special interest community, has done a lot of research on the practical tools available for people to create communities (it is not all about facebook!) and we can share this with publishers, agents and writers who want to get started with their own communities.

The blog following will examine the “generative” conditions that Kevin Kelly of Wired magazine described in his recent Tools of Change conference keynote.  His premise is that certain conditions are necessary for revenue creation in the future internet world. His ideas are visionary, and I will help to translate them into practical actions that everyone can start using.

references;

Idealog : http://bit.ly/h0yIZI

Will book revenues crash the way music publishing revenue did?

My last blog discussing the role of libraries as introduction agencies to readers illustrated one reason why the book industry is so different from the music industry. How many teenagers do you know who would have borrowed CDs from the library? WAY too un-cool! But if they were offered pirate CDs from Asia, they could rebel against the establishment and build a cheap collection, so the rise of Napster just continued an already established tradition.

A lot has been written about music publishers’ failure to “monetise” downloads. It was not until Apple introduced i-tunes that people had an easy way to buy the music they wanted.  Since that time, alternative music channels (eg mobile telephone companies) have become the fastest growing music revenue source, although Apple remains easily in the lead.

On the cusp of a similar revolution in digital reader technology, book publishers have an advantage over music publishers, with a more sophisticated internet market, multiple trusted payment mechanisms and competing retailers offering e-books (although still not as easily as one would expect). However, once e-books become the normal reading mode, revenues will decline in the industry – partly because so much of past revenue was needed to cover manufacturing and distribution costs that will no longer exist. This does not necessarily mean that profits have to decline. Authors and publishers could end up with very similar dollar/euro returns per book – assuming that consumer demand soaks up the increased quantity of books they can buy for their $10. Unfortunately this assumption is flawed.

Economic principles dictate that as supply increases, or demand falls (or both) prices will decline. Self publishing is increasing the total supply in the market – some estimates put the number of self published titles each year at 50% of the number created by traditional publishers globally (750,000 titles versus 1.5 million worldwide). So the total supply of books available in the market has increased, and this trend is likely to continue. There are also indications that demand is dropping, with younger people more likely to entertain and amuse themselves online without a book. This trend will also likely continue. Both trends point to downward pressure on prices over time.

So the answer to the original question is that yes – revenues will decline. The industries that will suffer first from this decline are the book printing and distribution service providers. If they follow a similar path to the music industry, then they can expect to see a 5% revenue decline every year for the next 20 years.

How can publishers and authors protect themselves from long term downward pricing pressure? The secret lies in the fact that every book is unique, so it really has its own economic supply and demand curve. For a commodity like wheat, one bushel can be easily substituted for another. The more unique a particular book experience, the less likely that a consumer can substitute it for an alternative (either another book or other entertainment option). The more unique a book, the greater the price that can be charged and the higher will be the publisher’s profits and author’s royalties.

There is another way that the literary community could protect themselves from downward price pressures – by forming an effective guild that controls supply, and negotiates with distribution and retail channels to maximise returns. I can’t see this happening in an effective way – there are just too many publishers and aspiring writers, and it only takes a few (or a few countries) to break ranks to reduce a guild’s overall effectiveness. Such a guild would also be illegal in many countries! However, anything that the existing writer and publisher associations can negotiate or lobby for collectively will almost certainly provide some advantage for their members.

Over my next few blogs, I will look in more detail at strategies for publishers and authors to create unique attributes for a book, as well as how to set pricing and internet marketing strategies for e-books to meet specific outcomes (profit, revenue, market growth, etc).

Sources;

http://www.guardian.co.uk/technology/blog/2010/mar/12/demise-music-industry-facts#history-link-box

Is “free” a valid e-book pricing strategy? Should libraries be part of an e-book strategy?

Let’s start by looking at the pricing strategy of the five big publishers who joined the apple agency collective agreement. In effect they have been able to prevent e-book prices falling much below printed book prices. This price floor has nothing to do with costs. The incremental cost to produce one more e-book is only the cost of additional royalties. The big publishers can do this because they have the power of a cartel, due to the size of their market share, and monopolisation of bestsellers.

But small to medium sized publishers do not enjoy a monopolistic position in the market – far from it! Yet many such publishers are pricing e-books in line with the big publishers in an attempt to maximise revenue. Unfortunately, economic theory predicts that this strategy will not maximise revenue or profit for independent publishers. Over the next few blogs, I will explore this topic in more detail, and look at how publishers can maximise revenue and/or profit (or meet other objectives like increasing audience).

The point at which revenue and profit will be maximised for an independent publisher lies somewhere on a supply and demand curve that will vary for every unique book and for every publisher’s collection. However, there are some tantalising rules of thumb being discussed on the interweb. For example; e-book buyers will generally buy three times the number of titles if the price is around one third of a “normal” book price. Or from the software publishing world; for every 10 free users, you will get one paying user.  These rules of thumb are important because every publisher can test them as assumptions, and become an expert on the pricing methodology that meets their objectives. They are not necessarily correct for any particular publisher.

You can also consider whether these rules of thumb seem intuitively correct. The “buy three instead of one for the same price” rings true for me – why wouldn’t I buy three at $4 when I was expecting to pay $12 for a book? I had to think a lot harder about the ten for free, pay for one scenario, but I think it could be true over a person’s lifetime. If I  calculate over a whole lifetime how many books one borrows from libraries and friends, or buys second hand, versus buying new, then maybe 10 “free” to 1 “paid” starts to make sense. As a teenager I read a lot more library books than when I was working,. And I expect that if I ever retire I will be keen on library borrowing again – and I will have more time to read them. If this ratio (or a variation of it amongst the population) is true for paper books, then creating digital libraries of e-books is not revolutionary at all, but mirrors the current printed book industry. 

Baen books have been giving away e-books for more than ten years through the Baen library. In general, they give away older titles free, and make new ones mostly chargeable. Baen argues (very well I think) that such library services are essential mechanisms to introduce new readers to your authors, or even to your genre. This makes sense to me intuitively. It also throws the whole discussion of libraries and e-books into a different light. Libraries are not necessarily just a service to the poorer folk in the community – they might be how consumers discover your product. If publishers were told how effectively libraries are doing this job by measuring readers converted to buyers, it would help libraries to carve out a stronger reason for existence in the electronic age. Unfortunately that would require an information arbitrage service not currently available.

Non-fiction books need a different pricing strategy. There are few that create hooks based on their author’s voice (Bill Bryson and Alain de Botton being some of the wonderful exceptions). Some non-fiction commentators recommend providing free pdf samples to potential buyers via providers like http://anynewbooks.com, at the same time as offering easy access to chargeable print and e-book versions. The long term bets are on non-fiction being smashed into chunks and separately licensed (much as individual songs rather than albums are now sold). This would create havoc for rights licensing, but some worthy industry bodies are trying to create a set of standards we can use in this eventuality. For most publishers, this future will create even more of a pricing and management challenge.

In my next few blogs, I will look at whether gloomy economic predictions of revenue decline for the book publishing industry will apply to individual publishers and authors, and how independent publishers can create marketing and pricing strategies to maximise the outcomes they want.

References:

http://bit.ly/dwwdqU (rights licensing and industry standardisation efforts)

http://www.baen.com/library/ (Baen philosophy on their library services)

http://bit.ly/d42BL2 (Twitter, Mailchimp, SW “freemium” pricing strategies)

www.idealog.com (Mike Shatzkin on the pricing strategies of the big publishers)

http://web.mit.edu/ariely/www/MIT/Papers/zero.pdf (Dan Ariely’s work – kindly contributed by @lealgood