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. What follows are PW editors' views on what's ahead for some of the most important issues facing the industry in 2011. Oh, and we also take a peek at some promising books due in the first half of the year.
What's Ahead For:
The Mainstream | Marketing and Social Media | Borders | Kids' and Digital | Digital Royalties | The Digital Open Market | Bookstores | The Google Settlement | Book Fairs | Big Books | Print On Demand
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As technology has changed the book business over the past few years, publishers have experimented—with mixed results. In 2010, 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, 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 and poised for the greatest growth period yet in 2011, publishers must begin to fundamentally address the way books are acquired, managed—even conceived. "[2011] 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, 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—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 at S&S—and at other houses as well.
—Andrew Albanese
Adoption of Social Media Marketing Accelerates
It's impossible to have a conversation about 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 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."
—Calvin Reid
Borders Faces Its Stiffest Test
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 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.
—Jim Milliot
For Children's, Digital Grows But Questions Remain
Digital is the catchword these days throughout the 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-books, 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."
—Diane Roback
Will the 25% Digital Royalty Stand?
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 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 PW 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.
While there is little question that bestselling authors with clout will be able to demand more than 25% of net on e-books, for other authors it may be more watching and waiting. But as e-books continue to account for more sales, publishers can bet that authors and agents will grow more and more antsy about this issue.
—Rachel Deahl
Looking for Solutions in The Digital Open Market
Among the host of challenges e-books bring to the traditional print business, one complication in selling foreign rights is how to deal with the open market. Translation rights are sold by territory, but issues become murkier when it comes to the global sale of English-language editions. The "open market" refers to territories where publishers can sell their English-language editions in a country that has not created its own English-language edition. Historically, U.K. publishers have dominated the open market, which has traditionally been focused on continental Europe, as the British have had the easiest access to this area. No longer. The open market is much bigger now, with more demand in, and access to, places like China and India. But the ability to restrict access to titles becomes more complicated with digital books.
Although some agents PW contacted said the concern about who controls the open market when it comes to e-books is a bigger worry for British publishers than U.S. publishers, the issue is coming to a boil as e-readers begin to significantly penetrate Europe. (Up until 2010, digital readers were nearly unheard of in Europe.) The looming question is whether publishers and agents can designate open market rights in the digital world the way they do in print. If devices don't have a meaningful way of blocking those outside the U.S. from downloading the North American edition of a book instead of the British edition, the idea of the open market itself dissolves; with current exchange rates, the North American edition wins out every time. So what's the answer? As one insider put it, except in the case where a large publisher buys all English-language rights, "Solutions are hard to come by."
—Rachel Deahl
If the last few months of 2010 are any indication, this year's most successful bookstores will have a smaller footprint, more diversification, or both. Gone is the book-packed superstore as a bookselling ideal. Borders is closing 17 of them. And for the remaining stores, the chain is following Barnes & Noble's lead and adding more educational games and toys. B&N is currently testing what it bills as "the ultimate playroom," 3,000-sq.-ft. boutiques of games and toys, within five of its New York–area stores.
Books-A-Million has found another way to deal with empty music and DVD sections and the migration of print and e-book sales online: yogurt. Last March BAM purchased a 40% equity stake in Yogurt Mountain and late in the fall opened yogurt sections in two stores. As it adds more nonbook items, book and magazine sales dropped from 81.9% of revenue in the third quarter ended October 31, 2009, to 80.4% of total sales in 2010. Cafe sales held steady, while general merchandise made up the difference, rising from 7.4% to 8.6%.
Independents are not expecting the inventory mix in their stores to change as radically as the chains. "For the smaller stores, we're not seeing any empty shelves because of e-books. It's just too early to tell," says American Bookseller Association president Michael Tucker, president/CEO of Books Inc., with 11 stores in California mostly between 3,500 and 4,000 sq. ft. "We're seeing some incursion in paperback fiction. Oddly enough, hardcover fiction is up 10%." Still, indies are exploring what will work best at their stores. "Everybody is doing a mix of sidelines and books across the board. It's working for us," Tucker says. "The consumer more than the bookseller is driving that. They're bored if it's just books. You'll see more of that in 2011."
And more than traditional sidelines. Eileen McGervey wasn't convinced that a bookstore could make it with books alone. So when One More Page Books in Arlington, Va., opens this week, the 1,500-sq.-ft. space will be packed with 6,000 carefully selected book titles—along with wine, chocolates, greeting cards, and local craft products.
—Judith Rosen
Will the Google Settlement Matter in 2011?
As 2011 dawns, the Google Book Settlement remains unresolved, and legal experts say its approval is far from a sure bet. Whether approved or rejected at the district court level, almost everyone agrees that the deal's ultimate legal fate lies in the hands of a higher court. That means that even if the settlement's approved by Judge Denny Chin, the millions of out-of-print books and orphan works scanned from libraries around the world will probably not be available from Google in 2011—or any time soon. Judge Chin, or the Court of Appeals, will almost certainly stay any order of approval during the appeal process. "I would expect the settlement not to go into effect until the Court of Appeals rules on the case," notes New York Law School professor James Grimmelmann. "Starting up the settlement program is essentially irreversible without great pain to all involved," he explains. "Imagine trying to get the $60 checks back from everyone who got one, dismantling the Registry, and taking books away from every Google user who bought one."
Indeed, the key question may no longer be "if" the Google settlement will be approved, but "when" it will be implemented. Consider this: 17 years after first filing of the Tasini lawsuit, publishers still don't have a settlement that gives them the complete peace they seek. While that may be an extreme example, it is certainly not uncommon for appeals to take years—and it doesn't bode well that issues with the Google settlement have held up a usually routine class action approval for more than two years.
Given the complexity of the settlement, the rapid pace of development in the digital market, and the clear benefit of having orphan and out-of-print books made available quickly, one has to wonder if the stakeholders in the Google settlement, and, perhaps even legislators, won't eventually be compelled to seek out a quicker way to realize the settlement's noble ambitions. After all, the wheels of justice may grind slowly, but the digital world does not.
—Andrew Albanese
One of the earth-shattering publishing events of 2010 actually came from shattering earth. When an Icelandic volcano, the unpronounceable (to the rest of the world) Eyjafjallajökull, blew its top just days before the 2010 London Book Fair, the fallout included more than ash and ruined itineraries. The low attendance in London kicked off a discussion about the value of attending international book fairs. But, it turns out, after years of declining attendance, amid economic recession and uncertainty in the digital age, that volcano might have given international book fairs the jolt they needed.
"I think the volcanic ash interruption of the London Book Fair got a lot of people thinking about what it really is they should be trying to accomplish by attending an international book fair," O'Reilly's Andrew Savikas told PW just before the 2010 Frankfurt Book Fair. "I sense a growing understanding that in the context of the rapidly changing digital and mobile landscape, coming together primarily to negotiate territorial rights for print books needs to be complemented with rethinking the role of territorial rights."
Indeed, that rethinking is exactly what has happened. After hearing complaints from many overseas visitors that BEA's two-day convention wasn't enough time to make it worthwhile, officials quickly announced the 2011 event would keep the exhibit hall opened for three days. The Frankfurt Book Fair featured a host of innovative digital programming that organizers told PW was designed to expand the fair from just books to more of a "content and media" expo. The program was an unqualified success, organizers note, reflected in conference reviews and attendance, including a surge of late registrations just weeks before the opening—many from first-time attendees—that brought real energy to the exhibit halls. Offering a digital program isn't exactly a novel idea. In the past few years, digital-themed conferences have exploded, from O'Reilly's Tools of Change, which now hosts an event in Frankfurt (and its first at Bologna this spring), to Digital Book World. Accordingly, Frankfurt's Katja Bohne says that organizers will expand next year's digital-focused program—as well as the rights center—noting that digital opportunities have helped expand rights center traffic for three years running. And fairs in Abu Dhabi and Sharjah are growing swiftly. The same is true in Asia, with Beijing and Hong Kong
2011 should be a strong year for book fairs—and not just for the well-established ones. .
—Andrew Albanese
FICTION
David Foster Wallace's posthumous The Pale King (Little, Brown, Apr.): Everyone will buy it; many will start it; finishing might be another story.
Ann Patchett's new novel, State of Wonder (Harper, June), is set in the Amazonian jungle with a remote tribe privy to life-changing flora being pursued by a pharmaceutical company.
God bless the young. The New Yorker has, with the magazine's "20 under 40" issue, which featured excerpts from promising spring novels by Karen Russell's (Swamplandia; Knopf, Feb.); David Bezmozgis (The Free World; FSG, Mar.); Téa Obreht (The Tiger's Wife; Random, Mar.); and Chris Adrian (The Great Night; FSG, Mar.).
Our dark horse pick: Algonquin's West of Here (Feb.), whose author, Jonathan Evison—out of the Pacific Northwest, which has been spawning its unfair share of writers these days—writes quirky, outsider characters and situations (yes, there's a salmon).
Siobhan Fallon's superb You Know When the Men Are Gone (Putnam/Amy Einhorn, Jan.), is a timely collection set on a Texas Army base about the Army wives left behind and their soldier husbands' stabs at surviving homecoming.
If Steve Martin can do it... celebrities in the Andy Warhol 15 minutes of fame category surface, with Snooki from Jersey Shore's debut novel, A Shore Thing (S&S/Gallery, Jan.).
In the crime & genre world:
O.J.'s prosecutor, Marcia Clarke, turns to fiction to control outcomes in Guilt by Association (Mulholland, Apr.), her impressive debut legal thriller introducing Rachel Knight, a tenacious, wise-cracking Los Angeles DA.
Knopf's Sonny Mehta is publishing The Troubled Man (Mar.) by pre–Stieg Larsson Scandinavian crime novelist Henning Mankell, "the first new Wallander novel in more than a decade" and likely the Swedish detective's "final outing."
The Living Dead: The Beginning (Grand Central, July) by George Romero is a first novel by the legendary horror director.
NONFICTION
Townie (Norton, Feb.), Andre Dubus III's memoir of growing up troubled and poor after his father left feeds into the fascination with New England's tough working class.
Margaux Fragoso's Tiger, Tiger (FSG, Mar.) is billed as a nonfiction Lolita from Lolita's perspective.
The Fear: Robert Mugabe and the Martyrdom of Zimbabwe (Little, Brown, Mar.) by Peter Godwin is the dark story of the despot's reign of terror.
If You Ask Me (Putnam, May) by Betty White. Betty's having a moment. Who doesn't love her?
The year's first big biography is J.D. Salinger: A Life Raised High (Random, Jan.) by Kenneth Slawenski. The mysterious finally unveiled? This could be the Mark Twain of 2011.
Jerusalem, Jerusalem (HMH, Mar.) by National Book Award–winner James Carroll, whose education as a Jesuit serves him well in this study of the ancient city and "sacred violence."
And Meghan O'Rourke's significant poetic gifts raise The Long Goodbye (Riverhead, Apr.), her memoir of mourning the death of her mother, above a crowded field.
More Demand for Print on Demand
Print on demand and short-run digital printing will continue their methodical growth in 2011, a tribute to the technology's utility to publishers looking to keep backlist titles in print or quickly replenish out-of-stock frontlist titles. POD leader Lightning Source recently published its 100 millionth POD book and has grown its catalogue of titles from about 1,100 titles in 1998 to nearly six million titles today. Amazon's CreateSpace subsidiary also trumpets its growth in on demand titles for books and DVDs as well as an ever growing class of serious self-publishers that use the service. "We have found that the vast majority of [CreateSpace authors] are enabling their work for distribution to Amazon and other sales channel outlets," a spokesperson said.
Like a science fiction narrative, POD is often projected as a way to eventually eliminate the huge costs of warehousing and shipping. While that's still in the future, POD does offer flexibility and cost savings on a more modestly effective scale for publishers and self-publishers. "POD encompasses the entire life cycle of a book—from the very first printing to the long tail," a Lightning Source spokesperson says.
On Demand Publishing's Expresso Book Machine offers a way for bricks–and-mortar stores to get in the POD game, and a sales agreement with Xerox should help expand EBM's reach—there are about 50 EBMs set up in libraries and bookstores around the world. But the EBM's high cost and limited leasing arrangements remain an impediment to its widespread adoption. Don't tell that to Chris Morrow, owner of the Northshire Bookshop in Vermont. He's been a champion of in-store POD since installing an EBM in 2008, and growing from "nothing to printing 5,000 units this year." Northshire Bookshop has its own self-publishing imprint, Shire Books, and through an agreement with Ingram the ability to produce any POD title in Lightning Source's catalogue. "There are more titles out there than any store can stock," Morrow says. "The goal is to have any title available at any time and to get any incremental sales that would otherwise have been missed. But there needs to be a change in industry mindset."
—Calvin Reid
