Prognosticating the future is always a tricky business. Easy to do, far less easy to actually be right. Fortunately, we don’t often call out folks for being horribly wrong in their Nostradamus impersonations after the fact. You can argue maybe we should but relatively few who make public predictions are going to jump all over someone else’s bad ones because they know only too well how many of their own are way off base. What goes around, comes around so don’t go around in the first place.
But predicting things is fun! Hell, I spent 40 or 50 tweets predicting the NBA season back in the fall, then used another 20 to predict the playoffs last month even though my regular season picks were so hit or miss as to be nearly random. The only pick I’ve got left is Indiana winning the title. I also may be the last person not named Larry Bird who’s riding that particular bandwagon, and I’m not too sure Larry didn’t tuck-and-roll his way outta there a while back, too. But if they win, you bet your ass I’ll be doing some gloating. Albeit without mentioning the other dozen predictions I made that didn’t come through, of course.
My point here is take any and all prognostications you see with the biggest grain of salt you can find. Not usually something you see a writer say in a piece about to make a prediction, I know. But I find the value in prognosticating doesn’t so much come from whether the final prediction is right or wrong, it comes from the process of evaluating circumstances and evidence and extrapolating that out to a conclusion. When I read predictive pieces, the reasoning why the writer is making the guess they’re making is more important to me than what that guess is. You could be completely correct with your prediction but the reasoning leading to it could be so flawed as to be useless, or you can be completely wrong in your prediction but dead on in the circumstances leading you there. You have to evaluate those circumstances and how they relate to your individual situation. It’s impossible to know for certain how things will turn out in a complex environment like the publishing industry, but it’s very possible to understand the conditions and act accordingly for your personal ends.
That being said, here’s my extrapolated prediction: book publishers, even huge conglomerate ones like Random Penguin, will be non-existent or so altered as to be unrecognizable as present-day publishers in less than 10 years time. Easy to say, no way to prove. In fact, you can’t even prove I’m wrong at the moment, only after the fact. You can try, and state evidence opposing my viewpoint all day long, if you like, but guess what? All you’re doing is making predictions to try and counter my prediction. The same flaw that makes my prognostication far less than a certainty is also making your counter-prognostication far less than a certainty. So my final word, as it were, isn’t really the point, only a guess as to where things are heading, exactly like your theoretical counter is really only a guess.
What matters is why I’ve extrapolated that publishers are screwed (or why you’ve extrapolated that they aren’t.) Here’s the basis for my reasoning, in five handy points: Hatchette is reportedly trying to reinstitute some flavor of Agency pricing in its deal with Amazon now that it’s prohibition against such is almost up. The other major publishers will likely take similar action as their DOJ-imposed limits expire. What does Agency pricing do? It limits discounting by retailers and raises the price of books. Point one.
One of the major arguments in favor of Agency pricing (and against, to be honest) is that it works to protect hardcover sales and sales in brick and mortar bookstores from ebooks that are “too cheap.” That’s great and all, but ebooks aren’t what’s hurting brick and mortar retailers, online commerce is. Doesn’t matter if someone’s buying a print book or an ebook, if they’re buying it online, that’s a sale a physical store didn’t make. Certainly, ebooks are native to online but trends show print sales are increasingly migrating there, too, for a number of reasons. Online commerce is exposing the inefficiencies of brick and mortar retail in virtually every business that doesn’t ask if you want fries with that. (I also predict it’ll be exposing their inefficiencies sooner than later, too, but that’s a different article.) Does Agency pricing affect that deeper societal trend in any way? No, not really. Point two.
The book publishing industry hasn’t had the classic disruption drop off in sales that all disrupted industries have suffered. Napster and it’s ilk exposed the holes in the music industry’s model and set off the demand for digital music that caused massive, rapid declines in cd sales. (Not that downloading killed cd sales, mind you, consumer demand for digital music did that.) Craigslist (and later, eBay) virtually wiped out newspaper classified advertising almost overnight. For those that don’t know, classifieds were the most profitable advertising per column inch in the newspaper business. The sudden loss of great chunks of it was catastrophic.
It’s tempting to say ebooks were that force and the industry avoided the huge losses. But think about it for a second. Ebooks have been a decided gain for publishers, the extra profits they reap from ebooks have made their bottom lines look better than they should. Ebooks didn’t work against publishers’ interests, they were extra money dropped into their laps. They were the best positioned of anyone to take advantage of this when a market was firmly established. And they did, albeit while bitching all the way to the bank. Ebooks themselves have never been a threat to publishers, so unless they were braindead stupid, they were bound to benefit from them like everybody else. The fact that they haven’t benefitted more from them is something they’ll soon come to regret, I believe. Point three.
Barnes and Noble is circling the drain. We all know it. It’s just a matter of when. I would argue that if not for the college bookstores (a different, less disrupted to-this-point market) they might already by a ghost. They just reported a 10% drop in sales the third quarter of 2013 over the year before. Immediately after, they suffered about a 10% drop in their stock value. This corresponds rather neatly with a recent U.S. Census report that shows bookstore sales in general have dropped by 10% from last year, illustrating that this isn’t a B&N-centric problem but an industry-wide issue. Their online commerce effort is an epic trainwreck. And, they’re a brick and mortar retail store at their core no different from Borders or Best Buy or Circuit City (remember them?) or Blockbuster or any number of other chains that used to be mainstays in strip malls everywhere. Those pressures aren’t going to go away and they really have nothing to do with ebooks or even the publishing industry itself. Higher education is in many people’s crosshairs as a ripe market to be disrupted. When someone finally breaks through, and they will, those college stores aren’t going to be life lining anything. Barnes and Noble is doomed. Point four.
Ebook sales are slowing down. The market is maturing, establishing a ground floor somewhere around 20% of the industry and is growing at a slower rate as its marketshare rises. Now you could argue if that’s even true, given the nature of the data available and the invisibility of many self published works in that data. But what’s not really disputable is that the data we have is unquestionably reflecting traditional publishers. So, while you can argue whether ebooks on the whole are slowing down, you can’t really dispute that they’re slowing down for traditional publishers. On top of that, inexplicably, many of those same publishers seem to be under some impression that this is a good thing. Point five.
So that’s the five elements I see as the present conditions I’ve made my prediction from: the biggest publishers are likely going to try to reinstitute Agency in some form; the results of that will handicap retailers and raise prices in a market struggling with online commerce already undermining brick and mortar retail; we’re still waiting for the classic steep decline in legacy product sales caused by disruption; Barnes and Noble is a dead man walking; and the growth rate of ebook sales for traditional publishers is slowing. Now that I’ve identified what I believe are the current applicable conditions publishers face, I’ve concluded that their long-term prospects aren’t particularly good.
Here’s how I think this goes: Say you’re a big pub CEO and you sit down at your desk one morning to headlines reading “Barnes and Noble files for bankruptcy. Remaining stores to be shuttered.” As you drop your head into your hands considering the 65 different ways this screws you, there’s a knock at your door. It’s Walmart, Target, Sam’s Club and the other warehouse stores.
“We’re so sorry to hear about Barnes and Noble. It’s a terrible tragedy. We’d like to offer our condolences. Here’s a cookie bouquet.” You nod solemnly and they turn to leave, but Walmart stops short, looks to you and says, “By the way, being that we now represent the last mass-market retail space you have, we’d like to have a discussion about the discounts you give us, when you feel better, of course.” He then leaves, closing the door behind him.
Your mind races. “Well, we can probably absorb a bit of an increase in discounting. Maybe we can hire more interns or move to more freelancers.” As you snatch up one of the cookies from the bouquet and start munching, feeling somewhat ok, your office door suddenly flies open and in storms Amazon. “Hey bozo, guess who’s responsible for 70% of your business now? I’d suggest you get ready to open that checkbook of yours or we might happen to have some technical difficulties with your buy buttons. See ya, loser!” Amazon storms back out, slamming the door so hard the picture of you and a smiling James Patterson falls off your office wall.
“Ok,” you think to yourself, “maybe if we cut advances by 30%, we can get through this. We’ll be alright.” Just then, there’s another soft knock at your door and a finely dressed, lawyerly gentleman strolls in. “Hi, I’m from the Independent Bookstore Alliance. We represent 1500 independent bookstores in the U.S. Given as we are now the last bookstore shelf space in the country, we’d like to discuss the types of discounts you can give to our members at your soonest possible convenience.” He softly lays his business card on your desk, next to the half-eaten cookie from the bouquet, and leaves.
You lean all the way back in your fine $10,000 Italian leather desk chair and mutter to yourself, “Oh fuck…”
Or something like that. B&N’s gone, brick and mortar bookstore sales start dropping 10-20% year-over-year, quarter after quarter for years until what was 50% of your business is now 15%. What’s worse is that the sales you’re still making, both online and physical, print and digital, are less profitable than they were before due to being squeezed by retailers of all stripes. Ebook sales growth, while inexorable, isn’t keeping pace with the losses that are mounting. It’s the book industry version of the print dollars to digital dimes problem. On top of that, you’re losing writers from two camps: the upper echelon superstars who you’re not producing results for like you were before, and the entry level writers who scoff at the increasingly miser-like contracts you’re foisting on them. Midlist writers would likely join them in the exodus, too, if they hadn’t already fled in large numbers by this point. Both groups of writers are moving on to either do it themselves, to better adapted publishers or to some new concoction of collaborative publishing or author collectives that cut you out altogether.
At that point, there’s two choices: change to become a different kind of company, one that can handle these new market realities where you and your ilk are no longer at the head of the food chain (a process you may already be too late for) or fade to obscurity in the corporate sell-off/bankruptcy/vanity buyer process that has chewed up most newspapers. Either way, what publishers are today, and especially what they were 10 years ago, will be largely no more.
So that’s my theoretical timeline. Am I right? I don’t know, ask me in 10 years. What I do know is that there are likely more protectionist actions coming from publishers that don’t actually protect anything. I do know that Barnes and Noble is struggling mightily from the same reasons in the same ways other similar businesses didn’t survive. I do know publishers have lost a great deal of their control of the distribution system, and with it, their principle means of discovery and a chunk of their leverage with retailers over discounts. I do know, for whatever reason, ebook sales growth is slowing for traditional players and maybe everybody. I do know that writers have more options to make it to market than ever before, many of them outright replacing the essential positions publishers were anchored in. Whether all this means what I think it means is open for debate. Whether you agree with all of my five points, a few of them, just one or even none at all, there’s elements within each that can have profound impacts on the choices we have to make as writers.
Maybe you don’t think publishers are in serious trouble but you agree B&N is, so you set up a short-sell deal on their stock. Maybe you agree publishers are heading for a period of great upheaval and don’t want to sign an open-ended contract with one, or go with a publisher willing to work with contracts with a 5 or 10 year expiration date. Maybe you’ve been considering striking out on your own and the struggles of publishers are the last push you need. Maybe you think reinstituting Agency will protect the print side of the industry and put your efforts there. Maybe you agree B&N is toast but you think it’ll lead to a resurgence of independent stores rather than the start of a deep brick and mortar downfall and seek out a publisher better integrated with that community. Interpretation is in the eye of the beholder and should always be based on achieving your own individual ends. Making my prediction led me through a long cycle of circumstances, patterns and considerations to reach what I think may happen. Reading this likely led you to consider the same things, even (maybe especially) if you were breathlessly hollering at your screen how full of shit you think I am as you read. Whether I’m right about the end result or not doesn’t really matter. There are several factors in play here that will impact what I ultimately choose to do, and that’s the real value in predictions. It’s not a right or wrong thing, but a process of understanding and examining smaller elements in order to extrapolate out to a conclusion. Progress doesn’t just happen in big, sweeping pronouncements. It occurs from within the smallest details. And nothing you choose to do will be very effective if you don’t have a better understanding of those diverse yet interconnected details. I predict that’s the case, anyway.
Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron