The Shatzkin Files: 2013: The Shatzkin Files

By Mike Shatzkin

Your essential, insightful guide to the past, present, and future of book publishing

In his 50-year career, Mike Shatzkin has worked in every area of the publishing industry: writing, editing, agenting, packaging, selling, marketing, and production. Since 2009, his blog, The Shatzkin Files, has been essential reading for publishing executives, indie authors, journalists covering the industry, and academics, as well as for people just plain interested in book publishing.

Covering everything from the rise of the ebook and serious self-publishing to the trade’s growing internationalism, the birth of vertical marketing and dramatic changes in retailing, Shatzkin combines deep knowledge of publishing’s history with keen—and at times controversial—analysis of the challenges and opportunities posed by digital change.

This volume of The Shatzkin Files includes every post published in 2013, a new introduction summarizing the year in publishing and reflecting on its impact, and a foreword by series editor Simon Collinson. It has been lightly edited and carefully proofread, and the posts have been newly categorized for easy reference.

• Language: English
• Publisher: Mike Shatzkin
• Release date: Nov 16, 2017
• ISBN: 9781386398363

Book preview

Preface

If you’re seriously interested in the strange business that is trade book publishing, you’ll probably have come across Mike Shatzkin. A fifty-year veteran of the publishing industry, since 2009 he’s been writing a blog called The Shatzkin Files, analyzing publishing news and providing a forum for frank and intelligent discussion of the business. Mike has covered everything from the rise of the ebook and serious self-publishing to publishing’s growing internationalism and the birth of vertical marketing. He has been particularly insightful about the impact of online bookselling on physical retail and on the way publishers approach what they do. His commentary has long been required reading for publishing executives, indie authors, and academics alike.

In 2011, Kobo published the first two years of The Shatzkin Files as an ebook. So much has happened in the publishing world since 2011, however, that we were overdue for an update. In late 2016 we started work on six new volumes, and this is one of them. We’ve taken the opportunity to add some extra value and context to Mike’s original work. These volumes have been fully proofread, and broken links have been updated to point to archived pages at the Wayback Machine. The posts have been categorized under broad subject headings, but for anyone who’d like to read the posts in the order they were published, there is also a chronological table of contents at the end of each volume.

Mike’s analysis is bold, clear-sighted, and unsentimental – at times even pugnacious. He’s made his fair share of mistakes, and has been happy to acknowledge them in the introductions to these volumes, written with fresh perspectives and new data. In general, however, Mike has succeeding in predicting and explaining many of the changes publishing has seen during the past decade. Where publishers have often sought comfort in the familiar, Mike has urged them to rethink everything. Nobody can read the Shatzkin Files without coming away with a few new ideas.

The first few years of 21st century have been a crucible for a publishing business that will soon be radically different from the one we are used to. It is our hope that Mike’s commentary will go some way towards helping readers, writers, and publishers understand this fascinating, strange, and wonderful business – both now and into the future.

Simon Collinson

November 2017

Introduction

2013 was a year of consolidation: the heady growth of the ebook market finally started to plateau, in March Amazon bought Goodreads, and in July the PRH merger closed.

In January, I made five predictions for what might happen during the course of the year:

The overall migration of sales from print to digital would continue to slow down.

‘Other-than-immersive’ books would continue to lag in the transition to digital.

Mergers and consolidation among publishers would become more common, after a long period when they hadn’t been.

Platforms for children’s books would become increasingly powerful gatekeepers.

Marketing for publishers will be a constant exercise in learning and reinvention, and increasingly difficult to separate from editorial.

These were more conservative than my 2012 predictions, but largely proved correct, with the exception of the point about children’s books, which remains an open question.

In 2013, I argued more directly than ever before that marketing would eventually replace editorial as the driving force behind publishing houses. The necessity of rethinking the time, timing and budgeting of marketing efforts in a long-tail backlist environment was becoming increasingly clear, and the advantages of using vertical marketing techniques to go to readers were becoming increasingly obvious. I pointed to the example of Hay House, the highly successful mind-body-spirit publisher which significantly outperformed a Big Five house’s previous efforts with one author.

Some in the industry saw flattening ebook sales as a victory for stores, although I warned against false hope, pointing out that bookstores were (and still are) in a vicious cycle from which there is no easy way out:

Online book buying – whether print or digital – takes business away from bookstores. So bookstores close or reduce shelf space. That decreases both their attraction and their convenience, which makes online buying increase even more. So bookstores close or reduce shelf space further.

I wrote four posts between January and February focused on the future of bookstores. In particular, I looked at the health of Barnes & Noble, and quoted a B&N executive who said that in ten years the chain would have 450 to 500 stores. But at the time of writing – late 2017 – they had at least 600, and had recently told investors that they wanted to open more.

I also noted that B&N could switch square footage to selling non-book product very quickly, and that consequently shelf space within stores dedicated to books was a more important measure of the health of bricks and mortar business than the absolute number of stores. In the four years between that series of posts and the time of writing, B&N’s market capitalization has fallen by about thirty percent. Publishers started to think hard about what bookstores were really worth to them, and what – if anything – they could do to bolster them financially.

Publishers started to look overseas to find opportunities for ebook sales growth. Although take-up has been slower than expected in Europe – at the time of writing, Germany and the Netherlands were the only European countries with substantial ebook readerships, at around 10% of the market – emerging economies like China continue to grow strongly, and the pattern of sales was familiar, with ebooks approaching 40% of romance unit sales in markets like France.

In April–May, I tried to sum up the four big forces that would determine the future of publishing: scale, verticalization, atomization, and unbundling. I argued that thanks to these forces, ‘Anybody Press’ – the increasingly skilled and effective self-publishing community – was the newest member of the Big Six, with something like 12% of all ebook sales. Contrary to some reports, however, I never said that the commercial publishing establishment was ‘spiraling down the drain’. It is shrinking, has been shrinking, and will continue to shrink. But that process will happen slowly and while it will almost certainly lead to more consolidation, we are not on the verge of any big publisher collapse.

Mike Shatzkin

November 2017

Publishing History

What to watch for in 2013

January 2, 2013

Although digital change in publishing has a year that lags the calendar year and this year won’t end until we have a read on how post-Christmas ebook sales were affected by the new devices consumers got for Christmas, the dropping of the ball in Times Square is the signal most of us respond to when timing our look ahead.

The signals about what to expect when the digital year ends are mixed, but not wildly encouraging. There are anecdotal reports of strong sales by US indies selling Kobo devices and Amazon has bragged about their Kindle Fire sales. On the other hand, B&N does not seem to be meeting its targets on the digital side and we’re learning that we don’t get the ebook sales surge from replacement devices that we get when a consumer first switches over from print. Most of the devices being sold now are replacements. And we’re also seeing tablet sales surging past ereaders. Prior analysis has told us that people spend more time reading books on ereaders than they do on tablets.

But quite aside from precisely where Digital Year 2012 ended up, there are five trends I think will be increasingly noticeable and important in trade publishing that are worth keeping an eye on in 2013.

1. Overall migration of sales from print to digital will continue to slow down.

We have already seen this clearly in data that has been reported throughout 2012. After ebook share growth that was in triple digit percentages for four years (2008-2011), this year we saw that switchover slow down considerably to substantially less than a 50% increase over last year.

Although the slowdown was pretty sudden, it shouldn’t really have been that surprising. Since the ebook era began in earnest with the arrival of Kindle in November, 2007 (5 years and a few weeks ago), it has been clear that heavy readers were early adopters. Both price and convenience were drivers that made the reader of a book a week much more interested in the new way of purchasing and consuming than the reader of a few books a year.

There appear to be those out there who believe this is a temporary lull and that the ebook switchover will shortly accelerate again. I really don’t think so. Although I don’t think the various surveys of reading habits have captured this, my hunch is that there are relatively few heavy readers left to make the change and those are, demonstrably, extremely resistant.

It is entirely possible that the death of Borders and changes at B&N reduced the amount of shelf space for books by as much as 50% in the two years that ended with 2011, a year ago. (That emphatically does not mean that print sales declined by that amount, or even that print sold in stores did.) That adjustment of shelf space to the reality of the purchasing shift consumers had made was a sudden over-correction, with the result that the remaining booksellers got a bit of wind at their backs. The data is hard to interpret, but it is possible that the indies benefited from that more than B&N did, perhaps as a result of B&N’s more intense focus on its NOOK business compared to the indies, who (despite the lift they got from selling Kobo devices this past Fall) are more focused on print.

This does not mean the digital switchover has ended. My gut (I don’t think there’s a great empirical substitute available here) tells me that store sales for books will continue to lose ground to online (print and digital) at a rate of 5-to-10 percent a year for some years to come. But that’s a much more manageable situation than the one bookstore owners had been dealing with for the several years leading up to 2012.

This is good news for big publishers. Their model is still built around putting print on shelves and managing a marketplace that works around a publication date focus and the synchronized consumer behavior that store merchandising really stimulates. It is good news for B&N too, if they can take advantage of it.

2. Other-than-immersive books will continue to lag in digital transition.

The commercial realities of ebooks and print are very different for immersive reading than they are for reference books, illustrated books, and picture books for kids. This difference is unfavorable for other-than-immersive books both in their creation and their sales appeal.

For immersive reading — books that are all text where you basically start on the first page and read through to the last — the adjustment to ebooks is both technically simple and uncomplicated for the consumer. Make it reflowable and it works. And the additional labor to make the two different versions (print and digital) is minimal.

But for books that aren’t consumed that way (reference) or which have important content that isn’t mere words, a single digital version might not work effectively (think of the difference in screen sizes and what that could do to a picture and caption or a chart). And compromises we make for a printed book — using six still pictures instead of a video or a flat chart instead of an animated one — can be downright disappointing in a digital context.

There are ongoing efforts to make creating good complex ebooks cheaper and easier, the most recent one coming from Inkling. Apple offers tools to do this, but then you can only sell the output through Apple. Vook was on this trail, although their most recent pivot seems to be away from reliance on illustrated books. The ebook pioneers at Open Road Digital Media have been making deals with illustrated book publishers — Abrams and Black Dog & Leventhal among them — and appear committed to solving this problem

But it seems to me that it might not be readily solvable. The inherent issue is that precisely the same intellectual output in both formats, which works fine for immersive reading, almost never does for complex books. So the core realities that have cushioned the digital transition for publishers of novels and biographies — that the cost of delivering to the digital customer is really very low and the appeal of the content is undiminished in digital form compared to print — don’t apply for illustrated books for adults or kids.

Will the how-to or art book in digital form ultimately be as close to its print version as has been the case for novels? Or will the how-to or art digital products in the future come from book publishers at all? Will there be any real synergy there? I don’t think we know that yet. As pressure grows in the retail marketplace, it gets increasingly urgent for illustrated book publishers to find out.

3. Mergers and consolidation among publishers are likely to become more common, after a long period when they haven’t been.

I have been a bit surprised about how little imagination has been evident from the kommentariat about the pending merger of Penguin and Random House. It seems like it is being viewed primarily for its cost-cutting potential (and that will be real), but I think it could actually be transformative.

I see two very big immediate wins for the combined company. They’ll be able to launch a credible general subscription, book-club-type offer using their own books exclusively (print and digital, although the big opportunity is digital). And they’ll be able to serve no-book-buyer retail accounts with a commercially-appealing selection of books working with a publisher’s full margin, not the thinner revenue available to a third party aggregator.

This is the two biggest of the Big Six joining forces. The other combination that is believed to be under discussion, putting together HarperCollins and Simon & Schuster, would be something like half the size of Penguin Random House and it wouldn’t have an equivalent reservoir and flow of highly commercial titles.

While Macmillan, according to the year-end letter from its CEO, John Sargent, remains determinedly independent, it is hard to see Hachette staying outside the merger tent as a stand-alone if Harper and S&S were to execute on the current rumor. The three of them together would present a competitive challenge to PRH and would have similar opportunities to open up new and proprietary distribution channels.

The merger activity will not be confined to the big general players. Both F+W Media (our partners in Digital Book World) and Osprey are building out the vertical model: providing centralized services to enable development of audience-centric publishing efforts for many and diverse communities. F+W has more than 20 vertical communities, most recently having acquired Interweave. Osprey, starting from a base in military history, has added science fiction (Angry Robot) and mind-body-spirit (Duncan Baird) to their list by acquisition.

The key in both cases is being able to add revenue channels to an acquisition as well as the time-honored objective of cutting costs through a combination. In different ways, all of the mergers we’re talking about here accomplish that.

4. Platforms for children’s books will become increasingly powerful gatekeepers.

Publishers discovered the power of platforms when Kindle showed them that they, not the publishers, controlled the customers and they, not the publishers, controlled the pricing. It took less than a year for Kindle to own enough customers that it would have been very difficult for any publisher to live without their sales, even without the leverage Amazon had as a significant customer for print.

Now we suddenly have a plethora of platforms that want to convince parents and teachers that they are where kids should be doing their reading. This is coming from the retailers: Amazon has a subscription offering for kids’ content and both Kindle and NOOK have parental control features. It is coming from the people who have been in this market all along: Storia from Scholastic and Reading Rainbow’s RRKidz. It is coming from outside enterpreneurs: Story Town and Ruckus.

And, before long, I think we’ll see branded digital subscription offers from the biggest publishers. (Why not?)

This suggests that a lot of shopping and purchasing decisions for young reading are going to take place outside of any environment that one could say now exists. And that’s going to be true pretty soon.

There are a lot of moving parts here. Sometimes the content has to be adjusted in some way for he platform, or can be enhanced for it. Sometimes the platform can facilitate a sale of stuff that is pretty much as it already was. Some of the platforms work on subscription models and others on discrete product sales models. But publishers (and agents) are going to be thinking about what those deals ought to look like. For now, platform owners are eager to engage the content so they have something to capture an audience with. When the audience is captured, the power shifts to the platform owner for anything but the most highly visible and branded content.

This will be an interesting arena.

5. Marketing for publishers will be a constant exercise in learning and reinvention, and increasingly difficult to separate from editorial.

I spent a post recently trying to describe an audience-driven rather than title-driven or, worse, title-on-pub-date-driven approach to marketing. When you get down to actually trying to use the biggest new tools publishers have in the digital world — the top two coming to my mind are using email permissions and social media for dirt-cheap communication and lots of data sources with more and more tools for analyzing big data — you very rapidly realize that it is very limiting to think about using them on a per-title basis.

Rick Joyce of Perseus presented some ground-breaking thinking at our Frankfurt event about using social listening data tools for publishing marketing; he learned that the tools were most effectively applied across categories rather than for titles. (Part of the reasoning here was that using the tools is time-consuming and therefore expensive; part of it is that you just get more actionable information categorically than you do title-by-title because you’re crunching more data.)

So when publishers start to conform their publishing and marketing to what the new tools can do best (we’re still in the stage where we’re mostly trying to make the tools do what we did before), it will mean an explosion in the number of marketing decisions that have to be made (because the age of the book will not be a central factor in the decision to include it in a marketing opportunity.) This is accompanied by the big increase in decisions required to respond to the near-instantaneous feedback marketing digital initiatives deliver.

All of this will continue to be very challenging to the structure and workflow practices in large companies.

I think the clearest indication that marketing is reaching its proper 21st century position in publishing will be its increasing importance in driving title selection. As publishers become more audience-centric, it is the people who are communicating with the audience (the marketers, but also the editors, and the line between them will get fuzzier, not that it hasn’t sometimes previously been blurred) who will see what’s needed that isn’t in the market yet. In a way, that’s always happened. But in another year or three, it will be a formal expectation in some structures, and will have a defined workflow.

One obvious trend I’m not discussing here is globalization. In fact, one analyst sees exploiting global opportunities as one of the big wins of the Penguin Random House merger. With all the retailers publishers know well (Amazon, B&N, Kobo, Google) expanding into new countries every month, there will be no shortage of reminders that publishers should clear rights and price books in all territories for which they possibly can. But the problem starts further upstream than that, with the licensing practices of agents, who still often maximize advances-against-royalties by selling books market by market. There is a long gestation time on deals, so even if the dealmaking changes, it will take a while for that to be reflected in more ebooks on sale in more places. That’s why I am not expecting globalization to have a major commercial impact in 2013 and it is also why I see it as a more distant opportunity for the new PRH business than the ones I suggested in this piece.

Is trade publishing’s situation more like the newspapers or more like the advertisers?

February 25, 2013

It has been an important tenet of my thinking