The Death Throes of a Small Town Newspaper

Regular readers of my ramblings here will recall that the trials and tribulations of my hometown newspaper, The Cecil Whig, was a regular topic of conversation a couple of years ago, before I moved out of Cecil County and, honestly, I finally lost interest in watching what was a staple of the community I grew up in crash and burn as spectacularly as The Whig was.  It reached the point where I simply had to avert my eyes from the carnage. 

Well, in the time since I last mentioned anything going on with the formerly-distinguished, nearly two century old newspaper, things have actually gotten worse.  The Whig has now dropped from printing five days a week to three, a shift, I’m told, was horribly unpopular with many of their regular subscribers.  More than that, layoffs have continued periodically, including another region-wide purge reportedly shedding somewhere in the neighborhood of 80 people from Chesapeake Publishing’s (The Whig’s immediate parent company) payrolls in the past few weeks.  Their long-standing office in Elkton is up for sale, nearly vacant as it stands after the printing facility that operated from there was shuttered nearly two years ago.  The office itself, where something like 200 full time workers were employed not that long ago, has been pared down, unbelievably, to less than a dozen, reportedly.

With the sorry state of the newspaper industry these days, what’s happened at the Cecil Whig isn’t really surprising.  It is, however, difficult to watch a once-venerable institution be picked to pieces like this.  Sometimes, I almost think bankruptcy and an outright shutdown would’ve been preferable to this death by a thousand cuts.  At least that way, the paper’s legacy would’ve remained relatively intact.  When the doors do finally shut on them now, will anyone really miss the wispy, hollowed out shell that was left during its final days?  I kind of doubt it.

At this point, it serves no purpose to rehash what went wrong.  Like many in the newspaper industry, good decisions in the face of technologically driven change were virtually nonexistent at Chesapeake and The Whig, overwhelmed as they were, and continue to be, by the poor choices of those who never really came to grips with the disruption that shredded their business model.  None of that really matters anymore, with the Whig down to a skeleton crew, soon moving to a smaller office, then, very likely, oblivion sometime later.

No matter how difficult times have become for them, it does seem like the hits just keep on coming, taking away a little more of what was once their sole domain. Earlier Today, I read this piece on the Cecil Times website about a battle going on within the Cecil County government about where its sizeable (for a small town) legal ad business will go in the future.  Legal ads are one of the last bastions of classified revenue still flowing into newspapers’ formerly dominant positions in communication, made so by local laws that generally require publication in a region’s “paper of record.” It’s also one I happen to believe is in dire need of reform. Frankly, in a time of shrinking tax receipts and shriveling municiple budgets, there is very little justification in sending good money after bad by continuing to pay monopoly rents to a fading, formerly only-game-in-town newspaper business. According to the Cecil Times piece, the county government spent upwards of $150,000 on legal ads with the Whig last year, a sum that strikes me as massively wasteful, particularly considering how the newspaper itself has continued to decline in relevance and readership.

A few years ago, when I was publishing Pet Companions Magazine, I put out about 20,000 monthly issues for a year between 32 and 52 pages each, with a full color glossy cover and my print bill for the entire year was less than a third of the county’s legal ad bill. The glossy cover alone accounted for about a quarter of that amount, too. So, what’s stopping the county government from publishing its own legal ad magazine monthly in regular 8 x 10 size or so on newsprint? They could put out 20,000 to 25,000 a month and bulk drop them for free everywhere in the county where the Whig is available. They could also post everything freely on the county’s website, provide a pdf file free for download or, if they’re especially adventurous, put in a little extra effort to format it into an ebook and make that available freely as well. The county could pay someone to compile the info, typeset it, layout the publication, get it to a printer, have the finished print run delivered, bulk drop the entire county and create the pdf and ebook files for, at most, half of what they pay The Whig for position in its rapidly thinning classified pages, if not significantly less.

As many have learned over the past few years, it has become much cheaper and more efficient to communicate directly with the public than to go through the traditional path of an intermediary like newspapers. With the local paper losing its influence, we see more and more advertisers, writers, and even readers circumventing the old ways altogether. With the crush of needed funds in localities all over the country, it really doesn’t track any longer for governments to pay exorbitantly for newspaper advertising. Crucial government information can be passed along to the public in any number of formats, print and digital, without that traditional large expense.

The fight in Cecil County shows another interesting issue with governments supporting those who’s job it is to cover them with advertising revenue, as well. Cecil County Commissioner Diana Broomell obviously has a problem with the content of The Cecil Guardian, a competitor of the Whig who put in a much cheaper bid on the legal ad business and got legal approval as a qualifying newspaper from a judge. She clearly wants no part of shifting that business The Guardian’s way, savings be damned. The Whig’s coverage of county business, on the other hand, has either been pared down to non-existent or is outright positive. Do we really want to have a situation where local newspapers, struggling for revenue, have to softball their coverage of the local government for fear of losing that ad money?

With the current and constantly improving technology, there’s no reason at all why local governments can’t communicate cheaply and effectivly with the people they represent on their own in matters like legal ads. The laws about “paper of record” are becoming more and more costly to follow, and have lost much of the justifications for their existence in the first place. If the paper was donating the space out of a sense of community, that would be one thing, but a $150,000 annual advertising bill seems to me to be a harbinger of a past better left to history.

This illustrates why it’s both sad and inevitable that newspapers will soon meet their demise. Sad because we are leaving a rich and storied element of our past behind us. Inevitable because there is virtually no single element of a newspaper’s role in the community that can’t be done better, cheaper, and more efficiently by any number of alternatives. Newspapers have always been intermediaries between the public and institutions, be it government, private or business interests. The digital shift going on now has very effectively removed the necessity of intermediaries from much of open communication.

I am sorry to see a classic element of society like the newspaper struggle and fall, but, as with all of us in our day-to-day decisions, needs must win out. That means the county government and the people they represent are much better served now and in the future by going directly to the people and using the extra $80,000-$100,000 they save on things like infrastructure, firefighters, teachers, and what have you. To do anything else in this day and age with these present conditions, is a level of wastefulness we can no longer afford. Tradition doesn’t pay the bills.

Correcting My Mistake: Petrocelli tops Carr in battle for who can be more wrong about DOJ price fix suit

Last week, I read what, at the time, I thought was the most one-sided, absurdly inaccurate article that could possibly be written about the ebook Agency Model price fixing lawsuit the Dept. of Justice recently filed against Apple and five of the six largest book publishers in the country.  I went through some points on the complete and utter nonsense spouted by David Carr in the New York Times here. Today, being one to readily admit my mistakes, I have to say I was wrong.

Now, I’m not about to suggest that my impressions of Carr’s piece have softened or that I’ve been convinced that he was right about any of it. He wasn’t.  It’s just that I read this piece in the Huffington Post by bookstore owner and former attorney William Petrocelli that, to my complete shock and dismay, somehow managed to reach a level even more misguided and inaccurate than Carr’s propoganda piece.  I guess the old adage really is true: don’t think things couldn’t possibly get worse because they certainly can. Here we go:

The Justice Department is hounding MacMillan and Penguin Publishers, even though those companies and other publishers have done nothing more than try to protect their business from the unfair tactics of Amazon.

This is a very early quote from the piece, but it sets the tone throughout. You can see pretty clearly that his take is Amazon is totally at fault and publishers were doing little more than defending themselves. Interesting take, particularly considering Amazon was the victim in this case, the admitted target of the pricing scheme that publishers (allegedly) illegally colluded to put in place.

News coverage of the DOJ’s case has been almost uniformly critical. When large publishers, small publishers, independent booksellers, Barnes & Noble, Apple Corporation, the American Booksellers Association, and the Authors Guild all agree that this case is terribly wrong, it’s time for the Justice Department take a step back and re-assess what’s doing.

Really? I’ve read more than a few defenses of the DOJ since this was filed, but then again, he might have a point. In the mainstream press, coverage has been generally critical of the case. But consider the sources. Most of the entities that own the mainstream press also own other business interests, you know, like book publishers, including some of the defendants in this case, under giant conglomerate umbrellas. Not exactly an unbiased position to report from, huh?

As for his list of groups inside the book industry that have been critical of the decision, they have one thing in common. They all have notable ties to the traditional industry, and therefore stood to benefit from the price fixing scheme. Without it, genuine adaptation is looking even more necessary, and that places every group inextricably tied to the traditional model at risk.

By the way, the big news this week is the DRM is on the verge of being killed off by some major publishers. Does anyone for even an instant think that would have happened if not for the DOJ lawsuit that stifled the price fixing racket? The lawsuit has already worked as it has compelled these publishers to actually compete rather than spend their time trying to squash competition they don’t like.

The DOJ has stepped into a business it doesn’t understand at all, and it is tilting the outcome against those who are trying to play by the rules.

Huh? I’m sorry, but even as cynical about government as I am, I just don’t see anybody getting sued for antitrust violations for simply playing by the rules. Collusion and price fixing are illegal actions that artificially hike prices and stop or slow down competition. If that’s considered playing by the rules, I’d hate to see what a publisher who was openly cheating looks like. Maybe Petrocelli needs to brush up a bit on what constitutes playing by the rules. Pretty sure breaking them doesn’t count.

What did the publishers do to bring down the wrath of the Justice Department? They did nothing other than what any rational business person would do in the face of unfair pressure from an over-bearing, dominant retailer.

So, according to a former attorney, the rational course of action for a business person faced with growing competitive pressure is to break the law? That’s the rational choice? Not to innovate or adapt? Not to find new ways to compete in a changing marketplace but to violate the law to manipulate market conditions to quash a competitor’s earned advantage? Sure, I guess that’s rational. This must be a line of thinking I missed out on by skipping law school.

If you read the Justice Department’s complaint , you’d get the impression that the publishers adopted the Agency Plan as a means of maximizing their profits at the expense of the consumer.

You know, he’s right. When I read the DOJ complaint, I did get that impression. You know why? Because that was their intent. And it worked. Remember all those stories a few months back about publishers’ profit margins increasing even in the face of declining revenues? How do you suppose that happened? Could it possibly have been consumers paying 30-50% higher ebook prices? And let’s not forget that a big part of the Agency strategy was to protect print profits, as well. Of course, this could just be a serendipitous coincidence for the publishers in question, right?

It is clear even in paragraph 30 of the DOJ’s own complaint that Amazon was engaging in predatory pricing — i.e. by selling e-books at $9.99, Amazon was selling them below cost.

It’s only clear if that’s what you want to believe it says. Here’s a direct quote from that same paragraph 30 that he seems to believe is so incriminating: “From the time of its launch, Amazon’s e-book distribution business has been consistently profitable, even when substantially discounting some newly released and bestselling titles.”

Predatory pricing is generally defined as losing money to run off competition, then recouping those losses later through unchallenged higher prices. But what happens if the supposed predator isn’t actually losing money? Isn’t it just as feasible that Amazon’s managed to develop a more efficient, consistently profitable mechanism for selling ebooks? Maybe they’re not really predatory at all, but actually have a sound, profitable business practice? Notice the emphasis on the word profitable there. Also, there’s the perplexing fact that in all of U.S. history, there’s never actually been a monopoly created through predatory pricing.

To top it off, here’s a quote from the SCOTUS in its 1993 case Brooke Group v. Brown & Williamson Tobacco , dealing with a predatory pricing allegation:

“The mechanism by which a firm engages in predatory pricing–lowering prices–is the same mechanism by which a firm stimulates competition; because cutting prices in order to increase business often is the very essence of competition. Mistaken inferences are especially costly, because they chill the very conduct the antitrust laws are designed to protect. It would be ironic indeed if the standards for predatory pricing liability were so low that antitrust suits themselves became a tool for keeping prices high.”

Interesting that Amazon haters who toss around the predatory label seem to want antitrust law to do exactly what the Supremes in 1993 declared it shouldn’t; chill competition and keep prices artificially high. Even more interestingly, there hasn’t been a successful prosecution in this country for predatory pricing since this decision. That’s because (1) predatory pricing doesn’t work (2) the remedies end up more anticompetitive than the offense itself and (3) very few, if any, are actually engaging in it, not even Amazon.

While it is true the cost of producing e-books is somewhat lower than print books, there are large development, marketing, and other costs that publishers simply couldn’t recover if they were forced to drop their wholesale price significantly below $9.99.

This, to me, seems a little confusing. The market shifts, prices drop and publishers find themselves in a position where their established costs exceed the prices they can bring in. Ok, so that’s Amazon’s fault? It is, in a way, because they largely ushered in the ebook disruption, but other than that, this seems to be pointing out the necessity of publishers to change. Their business model isn’t working with current or sure-to-be future market conditions. Shouldn’t the point here be adapt before you go under? Rather, he seems to be using this point to justify publishers’ actions to stifle the changes in the market to support a status quo your own damn customers are walking away from! I just don’t know anymore. These people work with books, for god’s sake! Wouldn’t some knowledge and logic sink in just out of random chance once in a while?

To really see the disastrous effects of the DOJ’s action, we should probably listen to authors.

By authors, he really just means Scott Turow. Otherwise, you might actually run across some authors who aren’t all that fond of the traditional book business model, and they might even hold opinions that don’t truck with illegal collusion and price fixing. Can’t have that. Don’t these silly writers understand that if something isn’t good for old school publishers, then it must be bad for them, too? I mean, writing and literature–hell, the entire culture itself–will simply cease to exist if the so-called Big Six go under. I’m sure I read that somewhere.

With a new hardcover book, an author will typically get around $3.00 to $4.00 per copy in royalties — hardly an extravagant amount, when you consider the effort that goes in to writing a book. But if the print book fades away and the $9.99-priced e-book becomes the new norm, authors’ royalties would be reduced to a pittance.

If I started selling ebooks on Amazon for $9.99, I’d make $7 a book. I already make the $3-$4 per book he cites for an author’s royalty on a hardcover for an ebook priced at $5. Not that it’s possible to make that, mind you, I already have, virtually every day for several months now, and so have lots and lots and lots of other writers.

This is, again, a problem for the publishers and their business model. Writers get the pittance royalties, particularly on ebooks, because that’s what publishers want to pay. This may well become a problem for those chained to traditional contracts down the road, but the rest of us pretty much just shrug it off and go back to writing.

The entire end of Petrocelli’s article is a virtual point by point presentation of the failings of the traditional model. But unlike what most rational people would do, see the need to adapt, he seems to prefer sticking his fingers in his ears and yelling, “Nah, Nah, Nah, It’s all Amazon’s fault, Nah, Nah, Nah, It’s not fair, Nah, Nah, Nah!”

So, as I said at the beginning, I was wrong about David Carr’s piece being the worst possible. And to show that I do learn from my mistakes and know how to adapt, here’s my new take: William Petrocelli’s piece is the worst, most misguided, one-sided Amazon hating missive I’ve seen, so far. See, adaptation isn’t so difficult.

The Five-Tool Player: Writers should break with tradition to become the industry’s versatile superstars

For writers these days, many things have changed. We all know it. More opportunities exist now than ever before and many of them necessitate acquiring and putting to good use skills we’ve never had to really consider before. This can be seen as a liberating development or a very concerning one, depending on your point of view. If you’re a newbie looking to break into publishing, these new skills may be seen as simply an essential part of the process. If you’ve already had a 30-year career, and developed a process that you’ve got down cold, it may well be that the new realities seem like just an added pain in the ass, extra work you never had to worry about before now dumped right in your lap screwing up the system you’ve been perfecting for decades. But that doesn’t change the way things actually are. To quote a fairly popular sci fi property, as many writers and publishers are learning every day, resistance is futile and getting more so every day.

There are an ample number of writers out there on the web more than willing to share their knowledge, insights and advice to anyone who will listen. Hell, you could spend ten hours a day reading up on all the different takes on what new writers need to do to find success these days and not run out of material for weeks. Yet even with many of these writers steeped in the new order of things, a few long standing beliefs about the role writers should play continue to be perpetuated. These notions, while rooted in some legitimate facts, I believe are holdovers from the previous regime where writers, in many cases, allowed themselves to be underestimated and infantalized. It’s understandable, as we could avoid tasks that sometimes included drudgery we didn’t want to deal with and it simultaneously allowed the publishing industry to build up additional layers of “necessary” assistance helping to cement their self-proclaimed central positions in the content creation process.

While writers today have the potential to be freed from the shackles of the traditional industry in many ways, we also can be freed from the layers of unneeded outside “help” that have been accepted, largely, as weigh stations between writers and readers over the years. Here are my opinions on three of the biggest, and often most controversial, myths of the writing process that, thus far, seem to be tagging along into the new reality.

Marketing is too time consuming for writers

It’s too time consuming to promote yourself and your career? You know what else is time consuming? Getting up and going to a job for eight to ten hours a day every day for your entire adult life. You want to build a career in the entertainment industry, you’re going to have to do some heavy self marketing. You can’t expect someone else to do it for you, no matter how much they claim it as an advantage of throwing in with them. To be sure, publishers have an ample history and the resources to take care of promoting your works. That’s not at issue. What is at issue is whether or not you, personally, will be graced with any of those resources or efforts. Far too frequently, the answer to that question in no. Besides, one of the first things publishers are looking for these days in an author is a platform and/or a following. If you don’t already have one, you can be damn sure they’ll require it of you. Don’t care for blogging, tweeting, facebooking, pinteresting or what have you? Too bad because you’ll be doing it anyway, either for yourself or at your publisher’s behest.

You don’t have to fight it, however, and it doesn’t have to eat up all of your time. Blog once in a while. Tweet occasionally, leave some comments on other sites. And write. One of the truest statements I’ve seen come out of self publishing thus far is that the best marketing you can do for a book is write another kick-ass book. Everything else can be handled in increments.

You don’t have to spend eight hours a day pouring over Twitter, just a little time and effort when you can. Remember, everything you do online, no matter how large or small, adds to your digital footprint. That footprint is where fans and customers are ultimately found. A blog post once a week or so, a few tweets a day, a comment or two on any articles of interest is all you really need. Do those things consistently and, before you know it, you’ve built yourself a platform.

Once you have that, everything else you do simply adds to it. Do a blog tour, create an online site for direct sales, do a Goodreads promotion, etc. Whatever you come up with, and there are nearly infinite means of exposing your work to new potential readers, it all adds up. You don’t need 12 hours a day of marketing, just consistency. You’re books aren’t on a limited time schedule any more, you’re promotion doesn’t have to be either. And don’t ever forget that each new piece you publish is, in effect, part of your marketing efforts. Overlapping duties is a great way to save time.

Writers can’t design professional quality covers or art for their work

I like graphic designers. Some of my best friends are designers. They each have a certain artistic flair and approach uniquely their own, and many of them do magnificent work. But one thing I’ve learned is that the real artistry in design for publication is knowing how to manipulate the software. It’s not an unreproduceable skill, it’s a learned one that experience helps grow. Maybe you can’t draw, but that doesn’t mean you can’t manipulate art, images and fonts into a compelling piece. And that goes doubly for layouts for ebooks and print. Learn a little html, and you can easily crank out well formatted books in any digital file-type you like. Learn InDesign, or some other page layout software, and you can do print layouts for POD quite easily. You’d be surprised how easily.

Design seems like such an intimidating process, particularly if you’ve never tried. But once you get the hang of it, you soon find yourself stretching the basic skills and pushing yourself to figure out how to do some cool effect or other that you’ve got envisioned in your head. As your skills grow, you’ll be amazed how many things you can pull off on a professional level of quality that you had always thought was unreachable to you.

Developing the basic skills is the easy part. Learning to fit various design elements together seamlessly and effectively is tougher. Practice, practice, practice is the only way, and believe me, you will be glad you did. Adding an artistic-execution eye to your work also helps fully develop your understanding of a piece and can aide you in better marketing for it. Just as great writing is an important element in promotion, so is great art, particularly a stellar cover. Learning design isn’t impossible, far from it, and it can add to your overall package, improving both your understanding of the work and how it should be promoted.

Writers can’t edit their own work

This is a big one. You see it repeated everywhere, from the most jaded traditional publisher to the most optimistic indie. To that, I say, “Nonsense!” This, to me, has never made a lick of sense. You’re the writer, you crafted these sentences yet you can’t properly copy edit them? Absurd! Of course you can. More than that, you should. A writer who relies on others to produce clean copy free of errors is only doing half the job, in my opinion. One caveat to this is that it is always better to have multiple sets of eyes look a piece of writing over before it is unleashed on the world. Is it better enough to justify dropping some heavy coin down for it? That depends. If you develop the patience and skill to produce clean, grammatically sound copy, then it may not be in many instances. But this isn’t something that just suddenly happens. You aren’t born with magical typo-seeking editor skills. You have to work at it, but once you do, you can eliminate or seriously cut down on the need for extensive outside copy editing.

Now, what I’m talking about here is strictly editing for mistakes. Typos, grammatical problems, perspective errors, etc. Editing for plot and story content is an entirely different matter. For that, you absolutely need extra points of view. But, and here’s the crucial thing, you don’t need a professional editor for the content side of the equation. All you need is a beta reader or two or three. Someone you trust to read analytically and take notes. They don’t have to pour over the manuscript word for word, just for overall concepts, plot flow and character issues. I would even argue that having content reading done by actual readers is preferable to professional editing in that sense. Your target audience is regular readers, after all.

The two largest justifications for the belief that writers can’t do their own editing are that you know what you were trying to say with your story so well that you can’t see what you actually said, and that typos will slip by because your mind tends to be too familiar with your intent so it fills in whatever blanks you may have left. These two occurrences, while somewhat related, do have merit from a certain point of view, but there’s a solution to each. For content, beta readers will see what’s actually on the page (or the screen, if you will). If there are flaws in your logic, portions where characters acted against type or unrealistically, or holes both large and small left in your plot, your beta readers will point those out. For the technical side, there’s a straight forward solution as well. Write the story, do a thorough read through or edit and then put it aside. A couple weeks or a month later, pull it back out and pour over it nice and slowly, word for word. With a bit of practice, the distance you put between drafting and copy editing removes the familiarity blunders and lets you see what anyone reading the piece would see.

A good editor can be worth their weight in gold, but they can also be rare. An average or mediocre editor doesn’t bring very much to the table you can’t do for yourself and costs you extra money. No one knows and understands your particular style like you do. No one can properly follow the pace, tone and feel of your sentence structure better than you. If you have an editor you’re comfortable with, both in terms of what they bring to your work and what it costs you, by all means, use them to your full advantage. But don’t confuse any editor for a good one. And the more capable you are of crafting and polishing your own clean copy, the less you need to rely on outside help that may or may not truly be all that helpful.

Remember that editing a manuscript is a two part process–technical and story. The better you become on the technical side, the less hassle you will encounter preparing a work for publication. The notion that writers can’t adequately copy edit their own work is just wrong. Editing is a crucial part of the writing process. Without possessing those skills, you’re not fully developing your writing powers.

Defenders of traditional publishers like to tout the benefits they bring to the table, foremost among them are marketing, art design and editing. As such, a system has developed over the years where each of these three areas has been gradually taken away from the writer’s control and we’ve had it ingrained in us that it’s in our best interest to do things that way, that we just don’t have the skills to do them ourselves. Writers have been both underestimated and purposely sheltered by those beliefs for the sake of someone else’s self-interest for a very long time.

Editors, designers and marketers introduce layers of separation between the writer and their work, making the finished book more a product of the publisher than the writer. This is the mechanism used to justify keeping the writer’s share of the proceeds underneath the publisher’s share, despite what you might hear about writers being the costliest part of the publishing process. Don’t believe it. The publisher’s cut and the infrastructure costs used to justify that cut are the greatest expenses in publishing. Remove the necessity of some those infrastructure costs and that removes the justifications to keep the writer’s cut from actually becoming the highest expense in publishing, as well it should be.

It’s wonderful that we now have the opportunities we do, but this added potential also carries added responsibilities. We must expand and improve our skills if we are to truly circumvent the established process for getting work to market, and continue to cultivate new, profitable models for selling our wares. It’s great if you have the relationships and money to acquire first rate design and exceptional professional copy editing. But that doesn’t mean we can’t fill in some of those gaps on our own. Writers need to understand that we, now and increasingly in the future, are more in the position of publishers. As such, we must truly grasp the implications of every aspect of the process between first draft and publication. The more of those elements we can do ourselves at a high level, the better our understanding of the underlying reasons for those skills and how they contribute to the whole, and the better our chances of finding success.

We don’t necessarily have to do everything alone, nor am I advocating that in all cases, but we should at least know how. Don’t let anyone, however good intentioned, tell you that you can’t do it because, with some few exceptions and a modicum of effort, you can. Specialized skills are nice, but the level of specialization that has developed over the decades in big publishing happened because the financial framework existed to allow it, and it served publishers’ ultimate ends to make writers but one link in the chain of production they lorded over rather than a partner in the process.

The real question you have to ask yourself is what kind of writer do you want to be? In baseball, prospects are often given the highest ratings for being five-tool players, or players whose skill sets are diversified across the spectrum of abilities (power, average, speed, defense and arm). Writers in the future have the ability to be five-tool players in our own little field of dreams, those five tools being writing, editing, design, marketing and distribution. When one of those prospects finds success on the diamond, they quickly become the cornerstone under which a winning franchise can be built. If writers in large numbers cultivate all the tools needed to get from writing to reader, we, too, have the potential to become cornerstones of our own winning enterprises. Otherwise, we remain one-dimensional players better suited to remain as one of several specialized contributors to a lineup rather than the centerpiece and driving forces we all now can be. Should we strive to be the versatile, all-around great player or the power hitting DH who is slow on the bases, can’t play the field and puts up almost nothing at the plate but home runs and strikeouts? Which player do you think has the greater opportunity for lasting success?

Don’t allow long-standing prejudices about what you are and are not capable of underestimate your worth, value or potential as a writer. The one thing publishers fear more than Amazon is the thought that writers of all stripes will one day figure out that we are just as capable of successfully taking on all the tasks that have been made to seem insurmountable. Ignore the propaganda that says you can’t do something, and you may well discover that you absolutely can. What could be more liberating than that?

Truth Be Told: Five unalterable realities of the approaching publishing landscape

After a week or so of reading, writing and ranting about the Amazon-Big Six-Apple-DOJ battle for the fate of the publishing universe, I’m a little sick of it. Besides, at this point, what the hell else can be said that hasn’t already been said bunches of times over? Amazon is an evil monster hellbent on destroying the publishing world or they’re not. The Big Six minus one and Apple colluded illegally to fix prices or they didn’t. The DOJ is over-reaching and doing more harm than good or they’re not. Agency Pricing is a racket used to shield print and slow ebook adoption or it’s not. Everybody’s got an opinion, and many of those overlap depending on which side of the old/new debate your sensibilities reside. Either we’re cheering on the damage publishers inflicted on themselves or we’re bemoaning the inevitable end of literature, culture and the publishing industry.

The thing I’ve finally realized is that none of this really matters in the grand scheme of things. There are a few basic realities that will carry on regardless of what any of the parties involved in this debacle decide to do. Amazon will become a monopoly or it won’t. The publishers will see their preferred business models smashed to pieces from the fallout of the various lawsuits or they won’t. Doesn’t matter either way in either case.

Truth #1– Digital Publishing and eBooks are here to stay

There’s no turning back now. The massive print infrastructure that roadblocked so many writers from reaching the marketplace for readers is no longer a real obstacle. The so-called Big Six can no longer stop anyone from selling their wares on equal terms. They can no longer steer customers to the limited options they prefer at whatever price points they want. Protectionist actions like the Agency Pricing deal that got them sued are ineffective and counter-productive.

Digital publishing hasn’t just kicked open doors that were long shuttered, it has blown the whole side of the building wide open.  Trying to stack up some boxes or slide the dresser in front of the gap of their gatekeeper controlled entry points won’t work. The passage is clearer now than its been in a long time, maybe ever, and we’re only at the very beginning of the changes yet to come. Things are going to get a whole lot worse for those who formerly controlled the industry before they get better, if they get better at all. Digital reading will become ubiquitous sooner than later, and it will dominate the market no matter how many warm, fuzzy memories of the past we conjure up.  Nostalgia is not a business model.

Truth #2- Amazon’s perceived dominance is fleeting

When discussing Amazon, the conversation almost inevitably turns to monopoly and now its first cousin, monopsony, too. This is a mistake because it superimposes economic conditions of the physical world onto digital. Long standing monopolies are exceptionally difficult to build and maintain in the virtual realm, and that’s only going to get harder to achieve over time. Amazon may hold most of the cards right now, maybe even the entire deck, but the thing about digital is that there are infinite decks from which to draw your hand. They’ve built up their position today because they have all their bases covered–cheap prices, overwhelming choices, a reasonably priced device most people find unobjectionable and the single best store interface in existence for both consumers and sellers. But that’s the rub. They may have the bases covered right now, but the instant they leave one unguarded, someone somewhere is going to jump all over it. To make matters worse, it might even be a base (or several bases) they didn’t even realize was on the field. We haven’t even scratched the surface of the changes yet to come.

One nice idea from some other quarter has the same potential to pull the rug out from under them that they’re innovations had for the traditional industry. And companies, as they get bigger and more complacent about their positions tend to miss important things. Amazon today may not ignore a game-changing reality, but what about tomorrow? Or the next day? Amazon is currently competing with an old school industry stuck in an industrial manufacturing, physical goods past. In that regard, they look for all the world like an unstoppable force. The next generation of competitors, however, won’t be tied to a bloated and inefficient past. They’ll be digital natives building from the advancements of Amazon itself. When the disruption has finished chewing up traditional publishers, Amazon is next on the hitlist.

Truth #3- Bookstores are doomed in every possible circumstance

How many record stores do you see around these days? How many video stores are left? Bookstores are the next to fall. As digital reading inevitably continues its ascendancy, eventually becoming the default manner in which people read, the notion of a shop specifically catering to an outdated product will seem quaint. Physical books in the future are far more likely to be found in antique stores rather than their own dedicated shops.

We will soon reach a point where the physical bookstore becomes a losing financial proposition both from the customer and the retailer standpoints. Nothing that can be achieved by a trip to the bookstore won’t be done faster, cheaper, more thoroughly and efficiently online. Barnes & Noble and what’s left of the big box book retailers will fall first, followed by a steady stream of independents until all that’s left are a smattering of tiny shops, very likely willing to lose money on books just to keep the doors open. I’m not reveling in their demise, I love bookstores, but I loved music stores, too. It would be nice to see them thrive, but it’s unrealistic. When every service you offer can be done better and more conveniently by your customers from their own living rooms, your days are numbered. Talk about literary culture and their place in publishing history all you want, but it’s not going to alter anything. Again, nostalgia is not a business model.

Truth #4- Publisher’s whining about ebook prices is irrelevant

Traditional publishers are stuck between the rock of their expensive print-centric business models and the hard place of cheaper, more efficient digital-centric changes to the industry. Given how quickly digital is eating away print’s market advantages, that is a very bad place to find yourself. Many small publishers and independent writers know that ebooks are almost insanely cheap to produce and distribute. They have direct, first hand experience selling ebooks very profitably at half or less of the price traditional publishers claim is too low for the industry to survive ($10). They, and everyone else including readers, know it. When the head of a Big Six publisher says that ebooks are only 10% less expensive to produce than print, it sounds like bullshit because we know it doesn’t have to be that way.

Print’s share of the overall market is as high today as it’s ever going to be. There’s nowhere for it to go except down. If you’re a publisher who’s business is built on a print infrastructure packed with layers of middlemen trying to squeeze ebooks into the identical framework, you’re screwed. As digital continues to grow, bookstores die off and other physical retail outlets discard large book sections, that print-first dynamic will become ever more untenable. Publishers are making a crucial error in trying to unilaterally increase ebook prices in the service of supporting print infrastructure. If they can’t profitably sell ebooks today at $10 or less, they need to make changes to their businesses so that they can. Whining about market forces and taking actions in opposition of your own customers’ desires and beliefs isn’t going to magically turn things around, and will very likely make it much worse for those that do. Yes, publishers have built virtual empires on the back of expensive print-based models. But the market is moving away from that model. If publishers don’t follow it, their predictions of doom will become self-fulfilling prophecies.

Truth #5- Writers who succeed in the future will be their own publishers whether they like it or not

Conventional wisdom suggests that publishers will eventually adapt and reclaim their positions as the principle gateway for authors to get their works to market. I don’t agree, unless, and this is a big one, their adaptations convert them into a service industry catering to writers. Thus far, I’ve seen nothing to indicate that’s going to happen. So, a far more likely outcome is that writers will, in most cases, be small businesses responsible for producing, marketing and selling their own material. This entails developing relationships with editors, designers and other services, essentially becoming micro-publishers each representing one writer–themselves.

As digital continues to threaten traditional publishers, we’ve seen more hard line stances taken with regards to writers. Rights grabs, revised contracts, shrinking royalties, non compete clauses and more efforts undertaken to mitigate their risks by cutting compensation and snatching more value from the writers under their collective umbrella. As print’s importance fades, eventually we’ll hit a point of no return where a traditional publishing contract does far more harm than good for a writer. Some have suggested that we’re already at that point for the vast majority. There may be other businesses emerge that service the essential activities of publishers, but I don’t expect their agreements to be significantly less one-sided. This means that the primary means for writers to reach publication will be essentially do-it-yourself.

“I just want to write,” is by far the most commonly used excuse by authors to place themselves under the endentured thumb of publishers, and, from a business standpoint, it’s not a very good one any more. The thing is, if a writer just wants to write in the future, they willingly will have to subject themselves to egregiously one-sided agreements where they’ll be fortunate to earn a pittance of what their work actually produces, even less than is currently the case. The current fight over the ebook market contains only occasional lip service from publishers about the benefits of writers. They seem to be treating it as a battle over who amongst the corporate giants gets to reap the rewards from writers’ efforts. The far more viable, and sound business choice for writers will be to become publishers themselves. The control, creative freedom and ability to earn the lion’s share of revenue from your efforts will make it worthwhile. It will also pose a greater risk, but that’s a tradeoff. No matter how much digital changes things, you still don’t get something for nothing.

There will be a contingent of writers who ultimately will bristle at the notion of having to expand their skill set and devote more time, effort and resources into pursuing their own success, but that’s the breaks. Traditional publishing seems to be trying to establish a pattern of poaching independent writers once they reach a certain level of success. That may make some sense, depending on who you ask, given the benefits they can potentially bring in the physical print market, but as print declines, those justifications from going indie to traditional will evaporate right along with it. If a writer puts in the time and effort to reach a level of success independently, the benefits of signing a traditional contract in a principally digital world are almost exclusive to the publisher. Sure, you might be able to no longer worry about things you don’t want to, but you will pay dearly for that “convenience.” It’s also highly debatable you’ll get the benefits you think, particularly when it comes to marketing, which is a burden already being shifted to writers today.

We may well develop a two-tiered writer system–those who are essentially lowly paid employees of publishers and those who become publishers themselves. In that environment, the big winners will come from the second group. Some writers may not like things going in that direction, but just as everyone is so keen on the notion that publishers will have to alter their conceptions and business practices, writers must also adapt to the new realities. No one on any side of the disruption is immune to having change thrust upon them.

Published in: on April 20, 2012 at 9:20 am  Leave a Comment  
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Bass Ackwards: NYT’s David Carr somehow manages to get everything wrong

Ever since the U.S. Dept. of Justice first dropped hints of taking antitrust actions against Apple and several publishers over what is quickly becoming the agency pricing debacle, there has been a noted increase in hit job articles ripping Amazon flooding the net. After the much-rumored lawsuit was actually filed last week, those efforts ramped up considerably. But perhaps the single worst, most misguided one of these missives came yesterday from David Carr in the New York Times. I thought I’d seen everything in this regard but when I read his piece yesterday, I was absolutely dumbfounded how someone with the skills to be a regular contributor to one of the most prestigious newspapers on the planet could get, quite literally, everything so completely wrong. About the only accurate thing in his article was the spelling of his name in the byline. Here goes:

That’s the modern equivalent of taking on Standard Oil but breaking up Ed’s Gas ‘N’ Groceries on Route 19 instead.

What? Five of the six largest publishers in the country (all six after Random House allegedly was threatened and coerced into jumping in) plus the largest tech company on the planet, one several orders of magnitude bigger than Amazon, colluding together to price fix is the equivalent of Ed’s Gas & Groceries? This is so completely absurd a statement that it almost doesn’t need to be refuted. Almost. Wow, what an amazingly disingenuous thing to say! Six companies with combined resources that far outstrips Amazon joining up to, openly and admittedly, stifle competition from the online retailer is no small thing to sneeze at.

Let’s stipulate that there may have been some manner of price-fixing here, perhaps even arranged in “private rooms for dinner in upscale Manhattan restaurants.”

Oh, okay, let’s do that. Let’s stipulate that there may have been some collusion and price fixing going on. Hate to break it to you, but those actions are illegal! What are we supposed to do, simply ignore it? Look the other way while a genuine innovator from outside the traditional industry gets attacked illegally (maybe if we keep pointing that out, it will sink in eventually) by companies who have largely sat on their hands, fat and happy with their “chummy little business” as Carr calls it? Sorry that it’s inconvenient to your worldview, but the entire point of the Sherman antitrust act was to prevent competitors within an industry from combining their market power to hamper competition. That is precisely what seems to have happened in this case, and the primary reason the DOJ got involved is because the publishers in question were too arrogant to keep their damn mouths shut about it!

(Amazon) leaned on the Independent Publishers Group in recent months for better terms and when those negotiations didn’t work out, Amazon simply removed the company’s almost 5,000 e-books from its virtual shelves.

No, Amazon was in negotiations for a new contract when the old one was up. They failed to reach an agreement, so they had to pull the books because, I repeat, the contract was up! If Amazon had continued selling their books with no contract, that would have been illegal. Besides, IPG isn’t a publisher, they’re a distributor. Distributors are still somewhat useful in the print market, but in ebooks, they represent an unnecessary and inefficient expense that increases prices and little else, something Amazon didn’t want because, you know, they seem to actually give a shit about not gouging their customers. How useful is IPG in the ebook market? Well, combined, the publishers in their membership earn, on average, about 10% of their revenue from ebooks. The rest of the industry is more than double that and growing. Did Carr ever consider that maybe Amazon wanted better terms because they actually wanted to sell some damn books!

The Seattle Times just published a series with examples of how Amazon uses its scale not only to keep its prices low, but also to keep its competitors at bay.

The only thing I’m going to say about this is of course he referenced the Seattle Times. Over the past few weeks, they’ve made one-sided hit pieces on Amazon a virtual art form. At this point, I’m almost curious to find out if the Times has gotten any large donations or influxes of cash from any particular Manhattan addresses recently.

Remember that it was only after agency pricing went into effect that Barnes & Noble was able to gain an impressive 27 percent of the ebook market.

No, Barnes & Noble earned that marketshare once they actually decided to genuinely compete in the ebook segment. The Nook device was generally well received, they smartly leveraged their physical stores to push devices and ebook sales to customers, and generally made a real effort. Funny how much easier it is to gain marketshare when you actually try!

If the decision to charge the publishers was good for competition, why has the stock price of Barnes & Noble dropped more than 10 percent since Wednesday?

This is another easy one. B&N is still inextricably linked to the print ecosystem. Agency pricing, at its core, a point Carr has apparently missed entirely, was a protectionist racket to slow digital growth and artificially prop up print. So B&N stood to benefit from the illegal collusion. This model goes away, and there’s nothing to stop ebooks from quickly jumping up to 50%, and very likely much more, of the industry’s revenues.

B&N is still saddled with a ton of physical stores that can quickly become an albatross around their neck when (not if) print sales continue to decline. That’s why there’s been rumors floating around that they will soon be spinning the Nook portion of their business off, so it doesn’t get dragged down with the stores. There’s also the little matter of B&N allegedly taking retaliatory action at the behest of Penguin against Random House to pressure them into joining agency as well. At this point, they’re lucky they aren’t named as a co-conspirator. Any of these are perfectly understandable reasons for their stock to decline.

Amazon views e-books as cheap software sold to animate device sales, in this case, the Kindle.

Here’s my favorite piece of pretzel logic making the rounds of Amazon haters these days. Apparently, they don’t care about losing money on ebooks because it drives kindle device sales. But wait, I’m pretty sure I’ve read somewhere that Amazon is taking a loss on device sales. So, apparently, Amazon is selling ebooks at a consistent loss in order to drive device sales at a consistent loss. And conversely, depending on who you ask, they’re selling devices at a loss to drive further ebook sales at a loss. At some point, you’d think someone would realize how absurd this logic is. I don’t care how much money Amazon has, they have to make a profit on something!

The problem is they aren’t really selling ebooks at a loss, only select ones (NYT bestsellers in the pre agency days, for instance) as loss leaders to get customers into their system and buy any of the hundreds of thousands if not millions of other books that aren’t discounted below cost. They might be selling devices slightly below cost today, but the tech is only going to get cheaper. Besides, some of the cheaper Kindles are ad supported which mitigates some if not all of those supposed losses. And that’s not to mention the profits on all those books that aren’t priced below cost they sell on those devices.

Publishers are pissed because, while they sat on their hands and had fancy dinners discussing ways to undermine ebooks, Amazon identified and executed a rather impressive retail plan to attract tons of customers, sell lots of devices and boatloads of books, all while keeping prices low and raking in the cash. Sorry for your luck, but I’m pretty sure this qualifies as “you snooze, you lose.”

The counterargument to the publishers’ position runs like this: why should consumers be saddled with paying an extra few dollars just to keep competition alive?

I’ve made bunches of counterarguments to the publishers’ positions over the past couple years, and read bunches more. Never once have I seen that one. If he changes the wording to read “to keep certain competitors alive” then he has a point. Why should we, as readers be saddled with artificially high prices so Macmillan’s outdated and inefficient business model can survive, for instance? We shouldn’t. In reality, the agency deal was all about stifling competition by forcing all ebook retailers to homogenize pricing at high levels across the board and protect print sales from erosion at the hands of ebooks. It’s all about picking winners and losers on the retail side, and on the product side. In the end, customers get to pay extra to have a cartel of publishers decide for them what they’re allowed to buy and from whom. Agency has stopped untold numbers of retail pricing models and experiments from happening, from package deal, group offerings, subscription services, and who knows what else could have been developed?

It has very effectively stifled competition in the retail market. Don’t believe me? Look at Google. They were gung ho to get into ebook retailing in a big way before the agency debacle. Now, they’ve dropped out of the market altogether very likely because of the restraints agency placed on real retail competition. When everyone uniformly has the same products at the same prices, it becomes an enormous barrier for entry to anyone who doesn’t already have an established ebook store and associated device. So agency really only served to lock online ebook retail to a select handful of players already in the game–Amazon, Barnes & Noble, Apple, and to a lesser extent, Kobo and Sony. Agency didn’t increase competition in ebooks, it hindered it.

Richard Epstein, a professor at the New York University School of Law, pointed out, “It is not clear that lower prices are necessarily in the long-term interests of the public at large.” He said that lower prices work both ways, spelling “low costs to consumers and low royalties to authors.”

No, it is clear that low prices aren’t in the long term interests of publishers who still insist on expensive, outdated and inefficient products. It is also clear that lower prices are in consumers’ interests, both now and in the future. And as to his second point, here’s a slight illustration to how wrong he is. In strictly the current traditional model, he may be right that lower prices lead to lower royalties for authors, but that’s only because publishers want it that way. On a $15 agency ebook where the author gets a standard 25% net, that author makes $2.62 per sale. On a $4.99 ebook sold directly through Amazon, the author gets $3.49 of each sale. That is a rate $0.82 more than the traditional author on a book 1/3 of the price. My math skills may be a little rusty, but that kinda looks 67% lower price to the reader and a 25% higher royalty at the same time per sale.

Robert F. Levine, a lawyer with an extensive practice in publishing, said, “There is not a drop of new capital coming into this business. The margins are low and there is almost no growth, so you end up with a rather small industry, with a handful of companies and a handful of players.”

Is this guy looking at the same industry everybody else is? Ebook sales have been growing in triple digit percentages the past few years. Sales of devices have exploded. The whole DOJ lawsuit stems from the manner in which Apple brought its weight and resources into the market. There are hundreds if not thousands of independent authors selling their wares now that never could have before, and many more of them than the mainstream industry and its defenders will ever admit are making money doing it that’s nothing to sneeze at. Publishing is a growth industry again, for the first time in a long time. If anything, the agency model actually slowed that growth slightly, but that’s pretty finished now, however the suit ends up. The only way it worked in the first place was if all those publishers colluded to make it happen. They’ve already fragmented with three settling, and will stay that way for at a minimum two years. But by then, it may be irrelevant what any of these companies wants to do. Besides Apple, Penguin and Macmillan could all still be tied up in court at that point, too.

The problem with this line of thinking is that, prior to digital, publishing already was an industry dominated by a small handful of players; the so called Big Six, the few big box retailers, and two or three distributors pretty much called the shots. There’s more diversity in book publishing right now than there’s been in a long time and, despite all the hand-wringing over a theoretical Amazon monopoly, that diversity seems poised to continue expanding.

I’d be lying if I said I didn’t get a little thrill when I found out on Amazon that I could get an e-book version of “Fifty Shades of Grey,” the No. 1 book on the New York Times best-seller list, for just $9.99. But after a week of watching the Justice Department and Amazon team up, I’ve learned that low prices come with a big cost. Maybe I’ll order it at my local bookstore instead.

Interesting example. An essentially self published ebook and POD paperback that grew out of fan fiction that traditional publishing never would have touched in a million years before the DIY way spearheaded by Amazon produced a bestseller. In addition, in the past, you’d have had to order it specially because, being DIY, the local bookstore almost certainly would never have considered stocking it. And even if they did, it would have ended up spine-out on a back shelf somewhere, virtually out of sight, out of mind.

So what was all that Carr was saying earlier about Amazon wiping out competition and the publishers championing it? Seems to me, he’s got that all ass backwards.

Bile-Soaked Spite and Vitriol: Why traditional publishing should shut up and adapt already

After reading a week’s worth of steaming recriminations of the antitrust lawsuit brought against Apple and a handful of super large publishers, I thought, in the service of clarity, that I’d like to make a statement:

If the players on the traditional status quo side of the publishing industry had put as much time and effort into figuring our how to adapt and compete in the changing book marketplace as they have in bitching, moaning and complaining about Amazon and the Dept. of Justice lawsuit, maybe the publishers in question wouldn’t have had to (allegedly) illegally colluded to put the price fix in and stay afloat in the new order of things. 

Most times, I take the whinings of the disrupted with a grain of salt but after a few days of reading pronouncement after pronouncement of the end times for literature and the twists, contortions and generally pretzel-shaped reasoning that somehow manages to justify collusion and price fixing as the right and proper path to open competition, I’ve gotten a little tired of it. 

Coming from newspapers, I totally understand how disturbing it can be to have the manner in which you’ve earned your living thoroughly torn asunder by disruptive change.  But in that circumstance, I saw who was to blame and it wasn’t the disrupters.  They found new, unique and innovative ways to do the tasks we always had, and used the new technologies at their disposal to do so ever more efficiently.  That’s called progress.  It’s called innovation.  It’s the very engine that has always run our economy.  No, the blame for the newspaper industry’s catastrophic collapse doesn’t rest with the disrupters, it lies at the feet of those at the helm of the industry itself.  They refused to even acknowledge there was a problem until it was far too late.  They fought innovation every step of the way. They ignored the clear and certain handwriting on the wall screaming for change, and instead laid off everyone not nailed down, clung to a steadily declining revenue base and pissed away pretty much any and all opportunities to successfully transition. 

The reason there aren’t more jobs in newspapers today isn’t because the disruption wiped them out, its because of the pig headed obstinance of those in who’s care the industry resided.  They didn’t want to admit that their business model was fading, and didn’t want to put in the time, effort or resources necessary to save themselves or all of those that depended on their leadership to earn a living.  The problem I have with the insistent rhetoric coming from the traditional book publishing segment is that it contains heaping helpings of the same obstinance, the same refusal to see the cracks developing in their business model, the same tendency to throw blame and vitriol on the disrupters without looking inward at those who should be leading the way but instead choose only to cling to a fading past, reassuring those depending on them with false platitudes about their importance to intangible ideals like culture, heritage or literacy.

I’m not a prophet of Amazon ranting out of blind devotion. They are an enormous corporation who sometimes engages in some pretty hardball business practices. There is a risk, however minor I happen to think it is, that if they consolidate too much of the publishing industry under their banner, they may well exploit that position unfairly. But consider for a moment, the one big, constant complaint about Amazon is that, if and when they gain a dominant monopoly position within the industry, they’ll use that position to jack up prices and squeeze percentages on writers. Well, even before Amazon went to the 70% royalty from 35%, they were still paying nearly double the rate to writers that traditional publishers were. Today, in many cases, they’re paying three or four times the average ebook royalties. What’s the risk here? That Amazon will screw writers by dropping royalties to the level that traditional publishers already pay right now?

As far as hiking prices goes, correct me if I’m wrong, but isn’t the whole point of the DOJ suit that publishers got together to push a model on Amazon that forced them to significantly raise prices? See the hypocrisy here? We’re being told by traditional publishers and their supporters that an Amazon controlled market will be virtual Hell on Earth because they’ll pay pittance royalties and jack prices way up at the same time those very same publishers are, at this moment, paying pittance royalties and openly taking actions intended to jack prices way up.

There are risks involved with a company the size of Amazon, but there are also advantages like the single best online bookstore by a long shot, massively increased selections of books of all stripes, and a platform that has ushered in a new era for writers where we can do an end run around the gatekeepers of old and get our wares into the marketplace quickly, efficiently and affordably. I haven’t seen traditional publishers bring anything remotely as positive as those three changes to the table in my lifetime. Amazon isn’t a saint by any means, but they’re not a devil, either. And they’re certainly not an old-guard cartel throwing propaganda bombs and desperately clinging to a fading business model by any means necessary, legal or otherwise.

I’m probably most disturbed by the lack of understanding of the law used by defenders. If even half of the facts laid out by the DOJ are true, there won’t be much debate, if any, that the publishers in question illegally colluded. And far from creating a fair and open competitive market for ebooks, they were attempting to create a flat, uniform, highly priced ebook market to slow its growth and prop up print sales, which is their bread and butter. The ebook boom, and digital disruption in general, is possibly the best thing that could have happened to this industry. Prior to this, reading for pleasure was a declining activity, looking a lot like yesterday’s news heading for a much smaller level of importance in our society. Today, however, people are reading more than ever, buying books at rates I never thought we’d see. Digital and ebooks have brought reading back from a slow decline to an industry segment that is potentially poised to grow like wildfire over the next few years. And what do we get from traditional publishers as a response to these developments? Nothing but doomsaying and protectionist scams, legal and (apparently) otherwise intended to stifle this coming boom period and prop up a model that was fading before digital reignited widespread consumer interest.

The traditional industry did nothing to reignite interest in reading. They were responsible for precisely zero of the innovations that have come to pass in the last few years. And now that consumer interest, demand and the money that goes with that is growing again, they are trying to shove their way back to the head of the industry table, pretending to be defenders of culture when, truthfully, they are little more than late-comers and former pseudo-monopolists trying to swipe the profits away from the businesses who took all the risks and actually did create an atmosphere of growth around publishing again. Amazon CEO Jeff Bezos says their primary goals are to provide the best possible shopping experience for the consumer. The head of Penguin in the U.S., John Makinson, recently said in his response to the DOJ lawsuit that their primary goal is to make money for their shareholders. See the difference in corporate culture there?

I don’t implicitly trust Amazon to always do the right thing. They are a giant corporation, after all, and we need to watch them closely. But traditional publishers are far, far worse. I find it interesting that the term “predatory pricing” has become almost synonymous with Amazon in some circles, despite the fact that their pricing strategies were anything but. Amazon never lost money on ebooks. They priced some ebooks below cost as loss leaders and recouped those losses and then some on the vast bulk of their catalog of offerings, which weren’t priced below cost. If that conduct is illegal, as so many seem to suggest, then so is the behavior of virtually every store, physical and online, on the planet. When I go to the grocery store later today and pick up some buy-one-get-one-free deals, do you think they’re turning a profit on those? Is the ACME going to wipe out orange juice suppliers because they selectively sell some at a loss to get more customers into their stores? Of course not.

What’s at issue here isn’t a giant company wiping out a long standing industry by behaving unfairly. It’s an industry that simply must adapt, they have no choice, but are extremely reticent about doing so because it would entail an entirely different culture where, more than anything else, even the best, most successful publishers who make the transition will lose a significant amount of the power they’ve grown far too comfortable exerting over writers, readers and retailers. Agency pricing is about keeping that control. It’s about stifling competition from digital retailers they don’t control to the perceived benefit of the print ecosystem they do. The saddest part to me is that, in doing so, they’ve not only damaged themselves and their writers, it wasn’t going to work anyway.

One particular positive thing that could come from this, and one that affects Amazon as well, is the rebuke of the most-favored-nation clause. Without that enforced, we actually all gain more control of our pricing across all platforms. This can only mean that pricing will become even more important in the post MFN world. It also could mean that those who backdoor free books into the Kindle store by listing them free somewhere else and waiting for Amazon to price match them down will have to shift strategies.

That is the nature of business, particularly in a highly disruptive, constantly evolving market like ebooks. Things change, we adapt and make the best use of those changes for as long as we can until they change again. What the publishers have done here is the exact opposite. Things changed, but they didn’t want to adapt. So instead they joined forces in an attempt to undermine those changes and lock in their preferred status quo. That wasn’t good business, as some have said, and it was doomed to failure anyway because these changes can’t be stopped. On top of it all, if the DOJ is right, it wasn’t even legal.

I would like to think that those on the traditional side will take a lesson from this. Don’t ignore the changing landscape around you, find ways to use it to your advantage. If individual writers in large numbers can figure out how to benefit from the new market that’s been established, I find it hard to believe that giant publishers with all the resources at their disposal can’t. The only way that makes sense is if they really don’t want to. So instead, we get illegal collusion, protectionism of fading markets under the guise of literary culture and tradition, and an over-willingness to condemn those truly leading the way to the future, and much more effort put into throwing roadblacks in their path than exploiting the new possibilities on the trails they’re blazing.

As I said, I’d like to think they’d learn something from this, but based on the increasingly dire rhetoric coming from those quarters, I’m not holding my breath.

Them’s Fightin’ Words! Even publishers’ statements on DOJ antitrust suit sound like they were written together

So the other shoe finally dropped and the U.S. Dept. of Justice filed the long-rumored antitrust suit against Apple and five of the so-called Big Six publishers for their alleged collusion on a price fixing scheme using the agency pricing model. According to the DOJ, the publishers and Apple (allegedly) conspired together to raise the retail prices for ebooks and stifle competition in the growing ebook market, specifically targeting one particular competitor–Amazon. Immediately after the suit was announced, three of the six parties named in the suit agreed to a settlement, leaving only Apple, Macmillan and Penguin left standing.

While Apple has been silent on the matter thus far, the heads of the two publishers in the DOJ’s crosshairs released statements indicating their positions on the matter and why they intend to fight what they claim is the good fight. Interestingly, both publishers’ statement dismiss the notion that any collusion took place, each taking great pains to clearly state the decisions they made on agency pricing were taken totally independently. What struck me immediately after reading both statements was how absolutely identical they each were in form, justifications and even wording in some places. Odd that two companies who vehemently claim such independent thinking on the matter manage to crank out virtually indistinguishable responses to accusations of collusion, don’t you think? Not proof of a conspiracy by any stretch, but pretty telling nonetheless.

My beliefs on the agency issue have been pretty well on record both on this site and on my Twitter feed. I do think these publishers and Apple illegally colluded, and I think the DOJ is right in pursuing this. I believe they intended to use the agency model to institute significantly higher prices across the online retail landscape for several reasons. One, to handicap Amazon’s (and, in consequence, anyone else’s) ability to discount ebooks on the retail level. Two, to use the higher prices to slow the growth of the ebook segment and the rate of digital adoption in consumers. And three, most importantly, to insulate their much more favored print products and the physical bookstore and distribution ecosystem they largely dominate from digital competition. Taken together, the agency price fixing scheme put in place was, in my opinion, a conspiracy amongst several supposedly competing entities to hamper an emerging market that was disrupting their preferred and long-standing business models.

To be clear, I don’t think there’s anything inherently wrong or illegal about the agency model. The problem in this case rests with the way agency was used by these (allegedly) collusive businesses. A similar result could have come about if, instead of agency, these publishers had all agreed in unison to force a 50 or 60% increase in wholesale prices. Even Amazon would be hard pressed to discount books to $9.99 if they were paying double that or more for them. The pricing model isn’t the problem here, it’s the collusion amongst competitors that is at issue. Agency was the model used simply because that has been Apple’s preferred system on virtually all other forms of digital content it sells.

Anyway, I thought I’d run down a few points from the two publishers’ responses, starting with John Sargent, CEO of Macmillan. Click here to read his full statement.

We felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.

The bold emphasis on that comment is mine. Apparently, according to Sargent, physical bookstores are the only folks who sell books for a living. To hell with the numerous online book sellers, or the many, many hundreds of thousands of independent writers who are now selling books for themselves as well. I think he gives their underlying motivations away a bit with this statement. They wanted to protect bookstores and the physical print business model. The damage inflicted to the emerging digital markets wasn’t a strict concern, nor were the growing ranks of self published authors outside of their traditional control. Far from creating competition in the ebook segment, this arrangement tried to stifle competition by attempting to remove the most important weapon in the retail arsenal, price.

When Macmillan changed to the agency model, we did so knowing we would make less money on our ebook business. We still believe in that future and we still believe the agency model is the only way to get there.

So these publishers knowingly enterered into a business arrangement expecting to lose money in the short term in order to better position themselves for the future? Really? That’s funny because it sounds an awful lot like Amazon losing money on discounted ebooks to grow marketshare and better position themselves for the future. But when Amazon did it, we were told by these same folks that they were evil, despicable and destructive. Apparently when publishers behave similarly, they become defenders of culture and literature. See how that works?

The difference here, of course, is that Amazon’s loss-leader practices were undertaken on their own and directly led to lower prices for consumers. Publishers’ efforts in this regard, however, required (allegedly) illegal collusion amongst a critical mass of the largest competitors, and directly led to significantly higher prices for consumers. There might be a clue in there somewhere for why Amazon keeps chugging along nicely, and these various publishers will have DOJ lawyers all up in their business for the forseeable future. Just maybe.

I hope you will agree with our stance, and with Scott Turow, the president of the Author’s Guild, who stated, “The irony of this bites hard: our government may be on the verge of killing real competition in order to save the appearance of competition. This would be tragic for all of us who value books and the culture they support”.

Antitrust lawsuits make strange bedfellows, apparently. Here we have a publisher being sued by the U.S. Government for a (alleged) price fixing scheme that, by their own admission, raised ebook prices and cost publishers (and by association, their authors) real, tangible dollars and he quotes the head of an organization called the Author’s Guild to justify his actions. I discussed Turow’s rather shortsighted take on this issue a while back, so I won’t rehash that, but if I were a member of that group and I saw his statements used in support of an act that both cost me money and tried to stifle competition and emerging market opportunities, I don’t think I’d be very happy. Turow seems to be supporting the publisher apparatus when he should be looking out for the interests of writers. His statements being used in this way by a publisher is awkward at best, and a serious conflict of interest to his position as representative of writers, at worst.

As an added problem for the publishers wrapped up in this, there are numerous civil lawsuits that will very likely result in many tens of millions of dollars in damages above and beyond whatever penalties the DOJ will look to extract. In fact, it’s already been reported that the three publishers who agreed to a settlement with the DOJ have also agreed to settle a civil suit with several state attorney generals that will result in damages that somehow filter down to consumers who purchased high priced agency ebooks during the time this practice was in effect.

My question is, if I’m an author under Simon & Schuster’s banner, for instance, and they end up paying a percentage of damages for each of my books sold under agency terms, is that money going to be backed out of my future royalties? After all, they theoretically paid me royalties on the initial full sale price, miserly though it may have been. If they’re forced to refund a few dollars of each sale back to the customers, am I going to be forced to give back my percentage of the refunded price? How thrilled would Turow’s membership be if all the agency authors he speaks for suddenly had future royalties docked to cover part of a legal settlement for a questionable practice he defended so openly? Sure, its hypothetical, but would it surprise anyone if publishers took this action?

Now it’s on to Penguin Group Chairman John Makinson. You can read his full statement by clicking here.

The decisions that we took, many them of them costly and difficult, were taken by Penguin alone.

I already addressed this point a bit, but for added clarification, no, they didn’t make this decision alone. They and four of their largest competitors all made this decision at the exact same time, with the exact same justifications. The DOJ’s complaint details a nice long list of instances where these publishers were in communication on this matter with one another and Apple in the lead up to this decision. There’s even an allegation that the publishers issued strict instructions to double delete emails and to leave no papertrail. Does that sound to you like businesses acting independently and behaving like they’re doing nothing wrong?

One of the allegations in the DOJ complaint I find most interesting relates to the one member of the so-called Big Six who initially stayed away from the agency scheme, Random House. According to the DOJ, Random House was actually gaining marketshare during the year in which they stayed out of the agency agreement. Allegedly, they were then pressured by the other publishers to get with the program, including an overt threat of retaliation against them by a large print and ebook retailer made by none other than Penguin’s U.S. CEO David Shanks. Sure, Penguin made that choice to go agency all alone. So did the other four, obviously. How could anyone think otherwise? It looks as though, according to the DOJ, that the one member of this group that actually did make a decision alone was pressured and/or threatened into changing their mind later. No collusion there, nope. Totally above board all the way, right?

The decision we took in January 2010 to move Penguin’s e-book business to agency pricing has been vindicated by the very rapid subsequent growth in the volume of e-books sold by agency publishers, and by the benefit to consumers of the steep decline in the price of e-book readers that that has resulted from this open competition.

Does he mean the rapid growth of ebook sales by everyone in the market, agency publishers or otherwise? That growth happened because the consumer demand is there. The agency pricing scheme had nothing to do with it. In fact, I would argue that these so-called agency publishers actually left a ton of money on the table they otherwise would have made if not for this pricing scheme. I think this shows that not only was this arrangement destructive to those involved because now they have to deal with the DOJ, compliance requirements and numerous civil lawsuits and probable steep damage claims, it didn’t even have the desired effect. The ebook market continued to grow, the print market continued to stagnate and decline, Amazon’s market position has remained strong and Jeff Bezos hasn’t exactly been crying himself to sleep over this matter.

This may ultimately end up as one of the most futile and expensive mistakes in recent business history by the time it all shakes out. Publishers have taken what was a difficult and trying circumstance in the teeth of a major technological disruption and made things exponentially worse for themselves. Good job, guys! I hear the local Waffle House is looking for a new manager after you’re finished running your respective companies into the ground. Have your resumes ready!

And perhaps I’m mistaken, but wasn’t the steep decline in device prices he mentions spurred almost entirely by Amazon? One of the accusations in the DOJ complaint was that Apple’s involvement in the conspiracy was driven by their desire to undercut Amazon’s ability to enter the tablet market as a legit competitor to the iPad. That would seem to me to indicate Amazon was well into the process of developing cheaper tablets long before this agreement ever came about. It seems Makinson just enjoys pointing out things that were inevitably going to happen, agency deal or not, and ascribing those results to the model they undertook. This, too, despite the fact that these results were precisely what the (alleged) collusive arrangement was supposed to prevent. I really wish I could find a job where I could fail upwards so magnificently.

We reasoned that the prevention of a monopoly in the supply of e-books had to be in the best interests, not just of Penguin, but of consumers, authors and booksellers as well.

Just a brief addition on this. I don’t doubt that they believed they were preventing a monopoly in ebook sales. But, to be clear, they tried to do so in a manner that propped up their own ogliopoly of the physical print book market. This wasn’t some selfless act undertaken for the greater good of the little guys, this was a fading cartel of major publishers desperately trying to hang on to the glory days in any manner possible. They pushed the envelope of legality because, apparently, actual innovation and adaptation to the changing environment was too difficult, and they got caught. No more, no less.

Amazon is no saint, and there are some significant, perfectly valid concerns with some of their business practices, but, at this point, it’s these publishers and Apple who’ve (allegedly) crossed the line into violating the law. Kind of hard to stake a claim to the moral high ground by crawling through the sewers to get there.

Anyway, here’s a link to a pdf of the full 48 page DOJ complaint. It’s definitely worth a read. This problem is not going away, though it remains to be seen what the far-reaching effects will be on the ebook market and book publishing in general. Keep in mind, too, that there are still a few civil lawsuits and an EU antitrust investigation hanging out there as well. This really has the potential to get a whole lot uglier for those involved before it gets better.

Reading (In) The Future: Does Clay Shirky have a point when he says publishing is going away?

The future of publishing is and has been a hot topic of discussion ever since the first weblog went live. There are many people lined up on opposite sides of the debate and, as is typical in most things, many more scattered amongst the vast middleground. Over the past few years, I’ve been rather unabashed in expressing my opinions that the legacy institutions that have dominated all sides of publishing for so long are now living on borrowed time. Nothing I have seen or any recent developments have changed my opinions in the slightest. In fact, legacy’s continued resistance to needed change have only further emboldened my beliefs. Unlike some, however, I don’t believe the fall of these long-standing organizations is a bad development. In fact, I’ve come to believe that it is a necessary step in the evolution of communication and will only help to usher in a new era of growth for the written word and, most especially, for those who practice it.

Earlier today, I read an interview with internet scholar Clay Shirky. He detailed many aspects of the emergence and value of social reading that makes it well worth a look, but I was particularly struck by his comments on the publishing industry itself. I had thought my opinions were strong in the matter, but Shirky takes things one step further. While I think some of the formerly great and powerful entities may crumble in the digital upheaval, I never considered that “publishing” itself may cease to exist. But after reading Shirky’s opinions and, specifically, how he defines things, I am starting to see his point.

The word publishing means a cadre of professionals who are taking on the incredible difficulty, complexity and expense of making something public. That’s not a job anymore. That’s a button.

Many people, myself included, have always considered publishing an act. But Shirky paints an interesting portrayal of publishing as the entities that engage in disseminating written works. From that perspective, I can see his point about publishing no longer being a job at all. Perhaps what we need here is a different term for the industry at large. Maybe we’re not simply shifting the players and tasks within the industry, but the entire industry itself. What we may be looking at is, in fact, the death of the publishing industry and, rising from it, the birth of the writing industry. (Actual future industry name may vary.)

The question isn’t what happens to publishing. The question is what are the parent professions needed around writing? Publishing isn’t one of them.

If publishing and publishers are no longer necessary, as Shirky claims, then it really does make little sense to refer to the entire industry by a term of description for a soon-to-be obsolete element of the past. Recently, there has been an increasing number of defenses of publishers springing up all over the place. What I’ve found intriguing is that all of these defenses rest essentially on the same points–editing, marketing and some mythical notion of quality. Editing and marketing are tasks that can easily be farmed out, for much less than the cut a publisher will take of your proceeds.

Quality, on the other hand, I’ve found to be a bit of a disingenuous defense. Publishers and their advocates always spring this one to support the gatekeeper role they’ve occupied for so long. But the physical necessity of limited offerings no longer makes much sense in the online retail environment, and it’s this very gatekeeper position, one that has served to cement publisher’s control and position atop the literary food chain, that has directly led to so much resentment amongst writers and helped expedite the robust environment that new technologies have created to circumvent exactly that practice. It’s always seemed not quite right to me for publishers to use actions that have alienated and, to be blunt, oppressed so many writers to justify their continued existence. If we truly found value in publishers’ narrow windows of opportunity, why would we have ever embraced self publishing in droves, as we have?

Institutions will try to preserve the problem for which they are the solution.

This is, perhaps, one of the clearest and most reasonable points Shirky makes on publishing and publishers’ efforts to retain power over readers and writers. There can be little doubt that practices like overpriced ebooks, windowing of releases, restrictive DRM, resistance to libraries, etc, all display a pattern of publishers’ intentionally hampering ebook growth in favor of print, an area in which they still maintain a modicum of their former control. Some publishers have even openly advocated increasing friction on the customer experience, ostensibly to undermine the advantages of digital over print.

In these instances, publishers are almost certainly trying to protect the problems they have long been the only answer to. Unfortunately for them, by handicapping what we all know is possible and, increasingly, preferred by the customer, they themselves have become more of an obstacle to digital growth and consumer desire than a solution to it. This is not a good place to inhabit if you’re taking the long view of the future.

The more I thought about Shirky’s point, the more I found myself agreeing with it. Remove print books and the physical bookstore chain out of the loop, and publishers bring absolutely nothing to the table for writers that can’t be acquired cheaper and more efficiently on our own. Certainly, print still maintains a majority of the industry, but can anyone honestly claim they believe it’s going to stay that way very much longer? Typically, those that do so fall back on nostalgia and some vague notions of tradition, but those elements play very little role when competing directly with the real, tangible benefits to readers that digital possesses.

I look at book publishers in some of the same ways I look at print newspapers. It is patently obvious that newspapers in their traditional form have little or no future at all if, for no other reason than digital alternatives do every last thing they do better, quicker, cheaper, more efficiently and more conveniently for readers. Newspapers still exist, of course, but who can say for how long? Two years? Five? A decade at the most? Given the advancements of the past 10 years, can we even imagine the means by which we’ll be consuming news by 2022? The only thing I can safely say is that ink on paper will look even more obsolete than it already does. And to an increasing number of people, it looks pretty damned obsolete already.

Book publishers have the same root problem. Digital alternatives are quickly reshaping the environment into one where every last aspect of what they do can be done better, cheaper, more efficiently, etc., etc. Shirky has a strong point, I think; publishing isn’t dying, it’s already dead and just lingering around waiting to be buried.

Which brings me to another point. About a month ago, the New York Times ran this piece on how publishers have begun to sour on multi-purpose tablets over dedicated ereaders because, they believe, tablets provide too many distractions for readers. This, to me, is yet another example of industry people refusing to see the forest for the trees.

Firstly, what leads any of them to believe that distractions for readers are some new development brought about by tablets? I can be distracted while reading a print book every bit as easily as I can a digital version. If I want to read, and what I’m reading is engrossing, I’ll stick with it. And if not, I can always pick up where I left off later, same as I always could. Why else would they have invented book markers in the first place if not to allow readers to easily walk away from what they were reading, for whatever reason, and come back to the same place at a more opportune time?

Secondly, and most importantly, what about our society leads any of these folks to believe readers want to plunk down money on a device that intentionally limits its possible utility? I have a nice HTC smartphone that is capable of all sorts of nifty tasks, from checking email, Twitter, Facebook, web surfing, playing music, games, watching videos and, lo and behold, reading books. Hell, I’m even writing this blog post right now on it. I’m gonna post to the site with it when I’m done, too. All of this utility is the reason I bought it in the first place. It would have been somewhat shortsighted of me to buy a basic cell phone because all these other things might distract me from my phone calls. I wanted all of these capabilities when I went shopping for one, I bought it because of them. On purpose, no less.

I even have the Kindle app, and I frequently read ebooks with it, and am a regular Amazon customer. Sometimes, I do get distracted while reading when a text message comes through, or I get a notification from email or Facebook or Words With Friends. You know what I do then? I either keep reading, ignoring the notification, temporarily stop and check on whatever it was that wanted my attention then go back to reading, or I close it and come back to the exact same place I left off sometime later. Pretty simple. Never once have I thought, “Wow, I need a device just like this one but that’s purposefully limited to only read books so the rest of my life doesn’t intrude.”

Most disturbingly, there was a poll of publishers referenced in the article stating that only 31% believed tablets are the future. Well, tablets, smartphones and other similar multipurpose devices are the future. Anyone who’s really ever used one for an extended time can tell you that. It’s disturbing that almost 70% of publishers surveyed don’t believe that. But again, this is an opinion rooted more in what they want to believe rather than what is the reality.

If publishers are so afraid of competing for readers’ attention that they think widespread adoption of intentionally limited devices is a viable possibility, then they should just close up shop now. Besides, even if every customer had a dedicated ereader; hell, even if they only read print books; distractions in our lives would still abound. That’s the nature of the world we live in, and it’s the reality of the marketplace we have to compete in. I can buy one device that does many things, including reading ebooks or I can buy numerous task-specific devices to avoid distractions. Which option do you think most people will choose?

Of course, if Shirky is correct in his assessments, what publishers believe really isn’t going to matter in the long run, anyway. The publishing industry is dead! Long live the writing industry!

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