Rights Issues Top Debate at 'PW/Inside' Confab

The control of rights was one of the main themes that ran across several sessions at last week's Book Summit held in New York and cosponsored by [Inside] magazine and Publishers Weekly. McKinsey & Company director Michael Wolf told publishers that to be successful they need to take more "control of the product" by acquiring rights to as many distribution platforms as possible. It's difficult to be profitable if a publisher is just involved with one format, Wolf advised, observing that publishers need to leverage a franchise author throughout the "multimedia universe." The notion of acquiring a wide range of rights was endorsed by publishers throughout the day. Time Warner Trade Publishing chairman Larry Kirshbaum summarized many publishers' position on rights when he declared that TWTP "will fight hard for e-rights" to backlist titles.

The problem with that approach was made clear in a later panel where two author representatives indicated they are wary about selling too many rights to publishers. Richard Heller of Frankfurt Garbus Kurnit Klein & Selz said that, while he is willing to discuss various proposals with publishers, too often publishers are only interested in "warehousing rights." Robert Gottlieb, founder of Trident Media Group, said he "was not a big fan" of publishers owning the work of authors, believing that when authors control their works they are more likely to be entrepreneurial than publishers. He observed that in the past, when authors toured they promoted their most recent book, but, with the Internet, authors can now promote themselves. "I'm a proponent of the idea that people who create copyright should benefit from it," he said, adding that if publishers had their way "they wouldn't pay an advance."

The daylong seminar was kicked off by a keynote address from Random House chairman Peter Olson, who noted that, while some media companies have abandoned the book market, not only are Random and parent company Bertelsmann committed to books, but they expect to broaden that commitment. Olson said Random will grow internally by adding new imprints as well as by making acquisitions of small to medium-sized publishers, possibly including companies in the religion and educational fields. Olson said he sees "tremendous" growth potential internationally where Random just made a major move in the Spanish market (see page 9).

Olson was also bullish on the prospects offered by technology, estimating that by 2005 Random will be selling "millions" of e-books, adding that most e-book sales will be incremental to the sale of print books. While meaningful e-book sales are still several years away, print-on-demand offers opportunities in the near future, Olson said. In addition to helping keep backlist titles alive, Olson said POD technology gives publishers the ability to issue more regional and local titles as well as limited runs of foreign-language books.

Regarding the Internet, Olson reported that online sales represent about 7% of Random's total revenues. But the Web "goes beyond" just e-commerce, Olson said, noting that it provides publishers with new promotional avenues as well as a way to work with retailers to reduce returns.

The recent bankruptcies of Crown Books and Bibelot are just the latest examples of changes in the retail marketplace, and Olson said Random will monitor events in that sector closely. Although Random has not tried to sell its books directly to consumers, some bookstore chains have been stepping up their publishing programs, Olson noted, and asked rhetorically if publishers will need to become vertically integrated in the future to reach the marketplace. In answering a question on whether Bertelsmann would be interested in buying Amazon.com, Olson only noted that the conglomerate "has a strong commitment to e-commerce."

McKinsey director Wolf's take on the retail market was that, with bookselling increasingly concentrated in the hands of Barnes & Noble, Borders and Amazon, books need to be a quick success in order for the giant companies to give the book attention. He suggested that publishers think about changing the focus of their sales forces from merely "selling in" a book to a store, to a focus on merchandising the book once it hits the store.

Wolf was not as enthusiastic about the future sales prospects for e-books as Olson, saying that most forecasts "are overhyped." He predicted that e-books would not even represent 10% of book sales in five years. Publishers need to find ways for e-books to provide greater value than print titles before the format will become successful, he said.

Wolf also thinks that publishers are publishing too many titles, contributing to the clutter in an "oversupplied entertainment market." He said publishers should focus on titles that editors champion and that stand a reasonable chance of success. "Less will certainly be more," Wolf advised.

Although not billed as an e-book conference, the subject surfaced at nearly every panel. Don Katz, founder of Audible.com, stated that the idea that there are no new costs associated with e-products "is stunningly wrong." David Rosenthal, v-p and publisher at Simon & Schuster, said, "There are no short cuts" to publishing successfully, despite the misguided notion that technology has somehow made the publishing process simpler. The only speaker to devote his entire presentation to e-publishing was Night Kitchen founder Bob Stein, who demonstrated his new TK3 toolkit, which will allow non-techies to create e-books. The new tools will be released at the end of this week.

AAP Sales Report: Bad Start in 2001

(Measured in $ sales against same time period, 2000)

Book sales got off to a slow start in 2001, with the Association of American Publishers reporting that six of the 11 categories tracked in its monthly sales report had a decline in revenues in January compared to January 2000. The high-flying children's book segment had the worst performance in the month— both the hardcover and paperback categories reported declines of more than 32%. Adult hardcover did not fare much better with sales down 31.5%. Bright spots on the trade side were a 68% jump in mass market paperback sales and a 8.3% gain in the trade paperback segment. With the industry worried about returns after a disappointing holiday season, the AAP report showed children's hardcover returns up by more than 103%, while adult hardcover returns were 29% higher. Children's paperback returns were down 46% in the month and mass market paperback returns were reduced by 4%.