To E or Not to E...and other Questions

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To E or Not to E...and other Questions Edited by John F. Baker and Michael Coffey -- 1/1/01 *A PW New Century Roundtable* Shortly before Christmas, half a dozen members of PW's staff got together around a table and before microphones with five people with different--and fascinating--notions of where the book business might be heading in this time of earth-shaking change. They were agent (and fledgling e-publisher) Richard Curtis; innovative packager Charles Melcher; Dominique Raccah, whose fast-growing, Illinois-based Sourcebooks has been shaking up conventional publishing wisdom lately; small publisher Beau Friedlander, who espouses a mix of the traditional and the innovative at his Context Books; and African-American bookseller Clara Villarosa, formerly based in Denver, who now plans to set up shop in Harlem. They took as their text for discussion Jason Epstein's meditations on publishing's past and future in his Book Business, about to appear from W.W. Norton. As you will see, the issues raised by Epstein prompted our interlocutors to roam far and wide in their thinking; as for Epstein, he gets to speak for himself in our interview, page 52. We intend this to be the first of several New Century Roundtables to appear this year, featuring industry people pondering various aspects of our business. The Marketplace Nora Rawlinson: I always think it's easier to go looking for the future if you talk about the present, and one of the things Jason Epstein says about the present in his book is that publishers are currently trying to entice an ever more concentrated, diffident and inefficient marketplace to buy their books. Do you think that's basically true? Dominique Raccah: Well, obviously, he's talking about the standard bookselling environment. He's talking about the chain and independent bookstores. But there's just as obviously a whole array of people who sell books who aren't necessarily a part of that culture. We sell in Discovery stores, in JC Penney, in many others. There's no question that the ways and places in which we can sell books are expanding. Beau Friedlander: Target and Price Club sell books, as well, also Wal-mart and Costco. But you're looking at 50%-60% returns there. So, the verb that enticed me is entice. For me, it's extremely important not to cater to, but to know and have a dialogue with independent booksellers. And that's where I do the majority of my business. And I'm distributed by Publishers Group West, so I have access to the chains and I do go through all the dot-coms. But I experience my best sales at Tattered Cover and Elliott Bay. Rawlinson: That's interesting, because so many publishers are saying that's only 15% of the market, it d sn't really matter so much anymore. Friedlander: That's, er, hogwash. Clara Villarosa: The independent is definitely where the buzz gets going. If you can penetrate the independents initially, that's how Target figures out which books are selling. Richard Curtis: But Epstein says that the Internet abhors middlemen, and bookstores are middlemen. As a publisher, as an Internet publisher, I don't understand why anyone has to be enticed to buy books because we have distributors throwing contacts at us. They don't have to be enticed at all. They are eager to distribute titles, particularly our out-of-print titles. People like Gemstar, Rocket Book and the Soft Book; people like B&N.com, Amazon, Contentville, where they approach us, eager to distribute our books. They don't have to be enticed. Lightning Source, the print-on-demand press owned by Ingram, is very happy to have our books, because they are going to be distributing them through Amazon and through Contentville. So the idea of having to entice somebody to buy a book.... Michael Coffey: Well, of course. Distributors need less in the way of enticement than consumers, but aren't we talking about enticing the book buyer? Friedlander: Can I interject for a second? We're looking at a vacuum right now; the e-trade right now is a complete vacuum. That's going to last for four years. And then it's over. Rawlinson: What kind of sales are you finding for e-titles? Curtis: Well, we're just beginning to generate sales through each one of these outlets. And remember, one of the nice things about Internet publishing is that the distributors pay monthly because they handle their royalty accounting so efficiently. So you get monthly royalty statements from seven or eight distributors, and it can add up. We're about to move into the five-figure distribution revenue range. These are genuine sales, they're not tentative sales, they're not returnable sales--this is money credited to the distributor's account. So somebody's at the other end buying the books, even though they're not really being marketed. They are just being made known passively right now. Because my company isn't in a position yet to be doing marketing. Can't afford it. Once we do marketing, then that marketing will filter down to those who are distributing it. And that will generate a kind of multiplier effect. But I'm really talking about a passive approach at this point: come to our site, look for the book you want and buy it. The readers are going to find the books and will not have to be enticed, they will aggressively seek and purchase them. Raccah: Richard, I think that Beau is right: there is a vacuum in the marketplace right now. When there are millions of books available to readers, which is the scenario we're looking at probably four years from now, it will be different. Though you still may get the $1,000 a month that you accumulate across an extensive backlist--or $2,000 or $10,000--that's not going to be enough to support a full-blown publishing operation. Charles Melcher: It reminds me of the early days of CD-ROMs--I knew a number of CD-ROM publishers who would boast about selling half a million units, but really all they did was a bundling deal with Apple to put one in every box. There were a lot of manufacturers and other large corporations who had some incentive to show what their boxes could do, so they helped to support creative content providers at that time--publishers, if you will. And a lot of people thought, wow, this is a real business. And it all went away. And I would actually suggest, if I can be so bold, that this whole round of electronic publishing is all going to crash and burn. 'A New Kind of Literacy' Melcher: I'm bullish on electronic publishing, but not on what's being done now. Walter Benjamin and Marshall McLuhan taught us that a medium is best used when it takes advantage of what differentiates it from other media. We are not doing that with electronic publishing today. What we are doing is Xeroxing books, digitizing books. It's great content, and we love it in books, but the book is already the perfect stage for the written word. And a new type of literacy is coming with the digital age--one that has more to do with a multimedia convergence and interactivity. There are a lot of things that are unique about electronic publishing that are not even beginning to be tapped, like reference, or the fact that publishers are not out there looking for the next great p ts of the digital age. Who will be the Homers and the Chaucers and the Dickenses of the digital age? Is the new technology going to free us in the way that writing helped free our thinking? The only way I think we're going to know this is when the kids in school grow up with digital media: sound, pictures, not just the pencils and crayons we grew up with. Friedlander: We're seeing it in kids already. I'm fortunate (or unfortunate) to have a 15-year-old sister, and I'd have to say that when I was her age, I had already tried to read Bertrand Russell¦ and failed. I don't see that kind of intellectual engagement, and I do know her friends. So I don't know what the electronic age is doing for consciousness, particularly. Raccah: Well, I almost think we're having the wrong conversation. I think the industry, and Mr. Epstein is part of that dialogue, is having the wrong conversation. It's not about the power struggle or the power balance between authors and publishers. The conversation needs to be about what happens when books become a form of digital entertainment. And we need to think about the fact that your cell phone, right now, has about as much processing power as the computer that was on your desk 10 years ago. So go forward 10 more years. What do you get? I think it is a new industry and I think it's an evolution of an industry. And what happens when broadband is ubiquitous?. What is the form of the book then? Rawlinson: And Clara, what d s this mean to a bookseller who's just opening a store? Villarosa: I have a 10-year lease, so I'm fine. I've identified my market. And mine is pretty specialized. I've been in bookselling 15 years and I'm not stupid. I'm not going to open a store in this day and age, with the information that I have, and not know what my chances are. [My options] are so clearly delineated by the place to where I'm going--which is Harlem. Underserved and underwired. Friedlander: Under-broadbanded. But that maybe better for a bookstore. In TriBeCa right now, where my office is, there is Biblios, which was a neighborhood bookstore/coffee shop. And I asked the guy who owned it, can you please stock this book? It will be really good for your people. And he said, "We're not doing books anymore." So here's the point: demographically, TriBeCa, er, stinks, for the traditional trade, because everyone's plugged in. And I know through my own sales that where I'm strongest is with people whose household median income is around $30,000-$35,000. You get up into $75,000-$100,000 and it's more Richard's market, the e-book market. Melcher: Speaking of looking ahead 10 years or so, I wonder if by then publishing companies might actually become attractive again to large media companies. We might go back full cycle, to where they decide that now there is actually convergence, there is such a thing as synergy, because the storyteller is hooked up now with their hot new music artist, and their film director can actually make something that's new. I think when the technology advances, when the tools get much better, then you can put that kind of multimedia authoring in the hands of a young kid, an author who could make something that looks as good as a Hollywood film today, but is much more language-based, much more storytelling. Curtis: Let me address one or two things, especially what Charles said, which is very insightful and very provocative. I think we're looking at the last generation of bestselling authors to come out of the old system. But who will fill the vacuum in the new system? I have one foot in the old world, a world that not only loves books but loves ideas. And I have one foot in this new world, a world that has not yet expressed the way ideas will be conveyed, except as you said, that the medium is the message. The Internet is the idea, in a sense, and the users--the consumers--are creating the ideas that will formulate what kind of books will address those ideas. We can only guess. The Dickenses of the future are all embedded in this vast morass of writing talent that right now is impossible to distinguish. Friedlander: I want to address the more traditional side of it: What are you going to do about advances? Because we have to change our price structure. This book is $21.95. This book in 10 years is still going to have to be $21.95. In 10 years--boom, no inflation?--this books stays the same. And my point is this: this year, I had a three-book deal with Daniel Quinn, whose Ishmael sold 800,000 copies, and there was no advance. Now maybe Dan's crazy, we'll just let that sit out there for a second, but maybe he's a visionary. And we're going to experiment with a more cooperative publishing model, where the author and the publisher have to work together because they are so thoroughly in bed together instead of being adversaries. Which is what the current, the last 15- to 20-year middleman system of agenting, has created--an adversarial situation, with the agent goading the writer against the publisher. So what is your idea about advances? Curtis: Right now, almost no one in the e-book business is paying advances, except a couple of the publishers who are eager to get a foot in and who are well-heeled. But the advances they're offering are to the old crowd, the established name-brand authors of the past. And right now, the authors whose books we are publishing not only got no advance, but they actually agreed to have a production fee deducted from their revenue, which becomes a kind of advance against royalties. So you have a list of authors who have said, "I abandon the old model, I don't expect an advance. In fact, I understand that you have expenses that are necessary to convert my book from the print model to an electronic model, and I agree to let you deduct some of your production costs from my revenue before I collect any royalties." However, when we talk about deducting production costs, we are talking about hundreds of dollars, not thousands or tens of thousands. And we're also talking about a royalty that basically will recover those production expenses after you sell about 100-150 copies. You sell a $10 book and the author gets $5, and I can say, "Gee, I sold 50 copies of this book and my production costs are covered and I'm making money." Books and E-books Coffey: Do you think books, printed books, are really soon to be a thing of the past? Melcher: No, radio is still here. Everyone said television would be the death of radio, but it's still here. Friedlander: But think about audio for a second. I was talking to Jason Smith, who's the general manager of Transitions in Chicago, and we started talking about this new technology, e-books. And he had a very good point, which was that when the hubbub has died down and the opportunists on the business side have milked it for all it's worth, it will subside into about 5% of the book market, somewhat akin to audiobooks, and there will still be printed books. Raccah: I think that we are going to see an evolution, where we carry handheld devices, and books are on those handheld devices. And that is the primary methodology by which we will read text-based objects. And we will be competing with magazines. For example, you're going to see a resurgence of the novella; the short story will have a new meaning. Curtis: I think this printed book versus e-book argument is a non-issue. Whether or not one medium will dominate the other, or drive the other out, for me at least, is not relevant, because the content that I or any other publisher control is everything. The medium by which it is distributed is a matter of taste. For any given book that is published today, you will find people who say, "I have to have that book tonight," and they will download that book. There are other people who say, "I would love to curl up with that book and buy it and put it in my lap or read it in the tub or read it on the beach, and I'm not in a rush for it. I will go to the store tomorrow or I will order it online. And when it arrives, it will join my shelf. I might not get around to it for two months. And I'll read it, and when I'm finished, I'll mark it, I'll dogear it, whatever I have to do, and I will put it up on my shelf and I will own it." There's something about putting it in your library--when you sit surrounded by the books you've read, you'll actually feel enhanced, that's your "Internet," you're surrounded by a web of ideas that the books have given you. Now we don't have that yet, because on the real Internet, the ideas disappear when you turn the machine off. Jeff Zaleski: Are most readers bibliophiles? I don't think they are. And I don't think the mass market explosion showed that. Curtis: There are some readers who throw away their paperbacks when they're through; maybe you do. And there are some readers who put the book on the shelf. And there are some readers who buy a hardcover and put the book on the shelf and they keep the mass market to read. Now those people are the ones who basically say that reading is a disposable experience and they will take a Rocket [device] on a plane with them with eight books on it. And when they turn it off, they don't care what happens to the book. Raccah: And that's why I suspect that we're all kind of saying the same thing: that we will probably end up with both forms continuing. However, as an industry, we're going to end up having a predominant platform. And the money is going to funnel to that platform. Melcher: So perhaps we agree that as electronic media grows there's some debate about how big the e-book will be. But while it grows, print publishing will remain, and perhaps the physical elements, the tactile elements, of a book will become more important to the people who will continue to want to collect books in the digital age. So go out and hoard all those books that you have with cloth cases because those will be equivalent to leather-bound books of a hundred years ago. And in fact, they're might be a renaissance of beautiful bookmaking. Zaleski: What's the difference between a handset edition and an electronic simulation of a handset edition? Friedlander: There's a huge difference. Zaleski: I think you're severely underestimating the hardware. I suspect, and I think the people at MIT do, too, that in 25 years--this is my book, this is the only book I own and it morphs into anything I want to read. You may have a leatherbound edition, but this is my book, the book on my shelf. Unless I'm a bibliophile. And publishers become purveyors of software and then you have a few hardware manufacturers. Raccah: Whatever it turns out to be, it's the future we're all talking about and what's wonderful is that we get to figure it out, we get to test it. We're testing about 25 different things right now in my organization that have to do with e-books, mixed media or multiforms. Coffey: But don't we have a technology shortfall right now--a rather clumsy solution in pursuit of a problem--that, unless it's improved upon, fast, might kill the chances of any of this drastically changing anything? Raccah: Definitely, the technology is lagging a bit, but we're going to get through it. Test a whole bunch of things, some of which will work, some of which won't-- Curtis: I'm going to make a statement that I think must be refuted, since it leaves out one key component, but I don't think it's going to be. When I decided to start a publishing business, I stripped the industry down the way a systems engineer would strip it down to the question of its fundamental function: What is publishing? This is going to be shocking to some, but I really believe it: publishing is an author, a reader and a server. That's all it is. Where's the publisher? Look to the server. The server may very well be a steel-and-glass skyscraper in midtown Manhattan distributing books on trucks to bricks-and-mortar stores and storing them in billion-foot warehouses in New Jersey, but a server can also be a computer under my desk where we essentially issue instructions to others to list the book, sell the book, carry the book. The book isn't even stored anywhere. The book is stored in cyberspace and then it is created and produced. If you look at publishing unsentimentally, then all things follow, including the list price-- Friedlander: "Young Werther" is not in the room. It's not a question of sentimentality. Your definition of publishing implies that there's a certain element of it that has to be called pie in the sky. Publishing is not three completely eyeless and faceless or pie-eyed entities. Publishing is the art of making something known. It is an art form, and it is a very precise one. So to say that publishing is spamming someone, which I know you're not saying, or to say that publishing is something that, like water, will find its own level, is, at the risk of really overstepping my bounds, naÃ¯ve. Because publishing is the art of making something known. And that's different than making something available. Rawlinson: How, then, do you get general-interest books known? How do you interest and entice...? Curtis: Epstein says it here in his book: through very specific marketing to special-interest user groups, you can sell far more books on the Internet without producing a single copy, than you ever could through this dinosauric distribution system where you print 5,000 copies, not knowing quite who the audience is, and probably 100,000 potential users will never get hold of the book because they don't know about it. But now, using, not spam, but very highly targeted marketing, and without printing in advance, you can find them. Raccah: Richard, I agree that we are not doing a good job of finding readers. Part of the problem is that only 5% of the American population walks into a bookstore in an average year. Five percent. So where do you find the other 95%? Melcher: Can I make a suggestion that maybe we're not making the books that they want to read? Raccah: No, I think we are making the books they want to read-- Melcher: Maybe we're not making it a compelling enough experience? Or do you think it's just that every person has 100 books that they would want to buy, if only they bumped into them somewhere? Paul Hilts: Exactly. That's exactly what the combination of Seth Godin and Mike Shatzkin have been saying. Permission Marketing started with 20,000 hardcovers and it did fine, it was a swell book. Then Godin took his own advice, put out a book, every word for free--one million downloads later, unlimited copies, send it to all your friends, he sold 26,000 hardcovers unreturnable. Now is that a million? No. Is it more than his last book, which he did traditionally? Absolutely. And he's happy. Now, how did he get those guys to do that? By using a different way to find your market. Raccah: But that's always been the job of a publisher. Hilts: Well, right. But they haven't used the electronic tools at all. Curtis: But it is not only the job of the publisher. Because any author with a Web site, he or she will not only promote the hell out of this book, he or she will find that special reader. Friedlander: Maybe, but they might also alienate them. Raccah: What's the next step? The next step is that you're going to have niche publishing like you've never had before. Hilts: All publishing is niche. Raccah: No, you now have general trade houses. Curtis: The author is the niche publisher. Wither the Publishing House? Daisy Maryles: But the other thing that we have to take a look at is what happens when you have all these little systems. You have an editor, or freelancer, a publicity person over here. Is the author managing all of this? Did they then become their own manager or chief executive? Is that where we're going? Melcher: Richard is a good example of that agent turned publisher, in fact, helping to manage the careers of authors, lending those services. He realized he could either provide them himself or find them outside. Friedlander: Richard, do you have any e-books where you think your numbers would be better, honestly, if it were a printed book? Right now, in this market. Curtis: Yes, and I'm printing them. I have e-books that I decided would be better off with a traditional print market. Any e-book publisher should essentially advertise the book on its site and have options for the buyer to say how he wants the book--downloaded, Rocket E-Book, printed version--click here, one will be manufactured and printed, it will show up in your mail two days from now. But it will not exist in the warehouse. Friedlander: Are these like the e-books that have the really cheesy covers? Curtis: No. They look like books. Friedlander: Is the spine glued? Raccah: It looks like a perfect-bound book, but it is not the quality of a perfect-bound book. It is cheesy in the eye of the-- Curtis: You're talking about the aesthetics-- Friedlander: No, I'm talking about what's going to last. Curtis: Stay in the 20th century. If you want books that are going to last, stay in the 20th century. If you want books that people want to read, then you have to move on. Raccah: Richard, there will be books that last in the 21st century. Paul, you don't think so? Hilts: How many of you are doing any books at all with rag-content paper, as opposed to all-wood because all-wood books fall apart? Friedlander: All my books are anatomically correct. Hilts: Okay, but would you have any linen paper, or is it all based on wood pulp? Friedlander: It's not based on wood pulp, it's some mixture, but I spend an enormous amount of money on books. My books are actually very high quality. Melcher: There's a difference between high quality and long lasting. Curtis: What are we in this business for? We're in this business to write content, to publish content that will last forever. Not physical books, but content. When you shut your computer off, your reader off, the book may disappear but the content is still embedded in its memory, to be brought up as soon as you want it back again or when anybody else wants it. Hilts: In my view, to have a book that lasts, you have to go back to the 19th century when they did, in fact, have rag paper. And sewn bindings. That's the point of this e-reader here. I have 300 books that I use with this thing. I love it, because I can carry them, but I don't want to put it on my shelf. And the texts don't deteriorate. Friedlander: How many books of p try do you have on that? Hilts: On this one I have four. Friedlander: How many books of short stories do you have on that thing? Hilts: Not very many. Friedlander: Again, it's a question of market. There are always going to be books and new authors that need the venue of a bookstore and traditional readings and all that, so that people know who the hell they are. Especially in this day and age, when an author can fall through the cracks. Ten Years Down the Road Rawlinson: What I'd like to do is to bring things back to a more concrete level. I would like each of you to tell us: How far ahead are you looking and what specific things are you doing to prepare for your vision of that future? Richard? Curtis: Well, the technology will produce a handheld device that will be a complete reading, text, audio and motion picture experience. You're going to see an integration of media and you will see new books being created for that new media. And there will be authors who will be able to create multimedia works. One of my clients created a concept in 1980 called a visual typewriter. He imagined typing a movie into his keyboard. Well, that now exists. The author of tomorrow will basically be the kind of auteur that we usually associate with Stanley Kubrick. Villarosa: I'm already looking 10 years down the road--that's when my lease expires! But, also, I see the evolution of what's happening. My situation is fairly unique, because I am going into an underserved market that I researched very carefully. And I feel that I have about a 10-year span before I maximize out. But in the meantime, I will do the traditional things to make that work. But also I have to look ahead to see what's happening in the general market, listening and looking and seeing how it's evolving. Can I predict what may happen? I don't know. Melcher: I think there's a lot one can do now, short of having a crystal ball. For one thing, I spend a lot of time absorbing other media, whether it's film, theater, television, music. I spend a lot of time looking at new technology and making sure I'm aware what's going on at the cutting edge. A big part of what I do at Melcher Media is try to push the envelope of the traditional book, whether that's by making books that talk, making books that move, making books that are waterproof. All of those things are ways in which I am trying to grab this book which I love and turn it into something else. Rawlinson: And now we turn to the man who has told me he d sn't have cable... Friedlander: But Nora, I'm completely plugged in, I can assure you. I am online all day long. So I agree that there are wonderful uses for the electronic media, and I agree that with traditional publishing there's a lot to be done. But there's one thing that is reassuring to me, and it's something that Epstein hits on, and that is the continuing need for the traditional filters, whether they are the future portals on the Internet or an editorial staff or freelance editors or what you call publishing houses. There must be filters, there will be filters. Raccah: I, too, am working on a 10-year model. I see books as being one form of digital entertainment. I think we need to look at the new book not just as a text object, but as a richer multimedia event, almost a show. This is taking authors to new levels and to new readers. And that excites me to no end. Melcher: I think it's important that we remember that we are people who practice a craft, and it is craft that, in major conglomerate publishing, is losing out to the bottom line. And we have an opportunity to be part of the future of publishing. Curtis: Craft is a function of time. And when you have to demonstrate a 15%-20% annual profit, time is the victim. When you talk to authors and you call them content providers, they get very mad at you. When young people talk about content, or engineers talk about it, they talk about blocks of digital text that can be shifted, cut, pasted, posted, transferred electronically. But when we talk about content as publishers, we talk about authors baring their souls, and the author's soul cannot be digitized. Melcher: I would just like to make perhaps a final historical reference. In Plato's The Phaedrus, Socrates mounts a major attack on the written word, as opposed to the oral culture, suggesting that it was a kind of external technology--that you couldn't refute a text, that it killed memory, all about how terrible is this thing called writing. The lesson I would take from that is that we should welcome the technological changes and advances that are coming, but do so with some understanding of our past, and bring that forward with us.