The Shatzkin Files: 2016: 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 2016, 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: 9781386188490

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

By February 2016, the big five trade houses’ new agency agreements were all in place. While in 2010 agency had looked like a strategy, just a few years later it felt more like a surrender. The very visible disparity at Amazon between high ebook prices (set by the big five) and lower print prices (set by Amazon) may have have been a significant factor in the much-discussed print recovery, although it arguably also explains the lower rate of breakout successes seen in the past few years from traditionally published ebooks.

If print was seeing a resurgence, Barnes & Noble didn’t feel the benefits. It fired its CEO Ron Boire in August, with Len Riggio postponing his retirement to take the reins again. (Of course, this all took place in a context of challenges faced by all big-box retailers.) In an interview with the New Yorker in October, Riggio finally acknowledged the advantages of smaller stores with a more diverse product mix. I had previously proposed B&N try to make a 25,000 title store work – and suggested they look north to learn from Indigo, who had successfully introduced a new product mix. Meanwhile, it was rumored that Amazon planned to open 400 bookstores. At the time of writing, it was operating about a dozen. And although they were reported to be generating very little revenue, it was not entirely clear how much that would matter to their plans to open many more.

2016 also saw consolidation in the ebook market. Nook withdrew from the UK, and Scribd capped its monthly offering in order to slow its most prolific romance readers, leaving Kindle Unlimited the last truly unlimited subscription program standing. It had paid out over $130 million in 2015, not including payments to traditional publishers. (Of course, Kindle Unlimited had the built-in advantage of being able to decide on its compensation rate month to month without any effective controls or requirements.)

By September, I suggested that alarm bells should have been ringing in publishers’ ebook sales departments. Although indie authors’ market share appeared to fall from 25% to 20%, according to Author Earnings data, publishers were seeing declining sales in a market which was probably not declining, although profit remained steady. In September I took an in-depth look at the complexity of ebook pricing, suggesting that the best approach would soon be to uncouple it from print pricing altogether.

Although big publishers’ global reach and backlist offered untapped revenue opportunity, and special sales – with their requirement for strong B2B brands – remained a competitive advantage, I argued that revenues would continue to go down on a per-unit basis. Perhaps publishers can also cut costs faster than revenues shrink, but at the end of a half-century of uninterrupted growth for American book publishing, there is no room to get complacent.

Mike Shatzkin

November 2017

Amazon

On Amazon stores and publishers accepting standardization; two unrelated commentaries

February 10, 2016

When the Amazon-opening-400-stores rumor landed a week ago, many people were gobsmacked. It took me a minute to get past that, which also required getting past my firm conviction when they opened the Seattle store last year that it was an information-gathering exercise, not the opening move of a bigger retail play.

But, when you think it through, it not only doesn’t seem crazy that Amazon would open stores, it seems like an obviously compelling move.

Other retailers that started strictly online have opened retail locations, most notably the eyeglasses shop Warby Parker. (This New Yorker story mentions that. It also has an interesting disclaimer at the end because "Amazon Studios is producing a New Yorker series in partnership with Condé Nast Entertainment". Wow.)

Omni-channel, which is really a new-fangled fancy term for selling both online and through a brick store, is the buzzword du jour of retailing. Actually, the online piece of that is the harder part and Amazon already had that licked.

Barnes & Noble beat Borders largely because they had a network of distribution centers that made stocking their retail locations extremely efficient. Amazon’s network of distribution centers is complicated because it isn’t just books, but they have many times the number of points of inventory storage as B&N. In fact, they have many times the number of storage points as B&N and Ingram and Baker & Taylor combined!

Amazon has tons of information that nobody else does that would inform their stocking decisions if they harnessed it. They know where searches are coming from for particular book titles or for generic needs, both geographically and psychographically. And they probably can detect early lifts for particular books faster than anybody else, simply because they have more data.

It is possible that if B&N and the indies had responded differently to Amazon Publishing, agreeing to stock the books rather than boycotting them, this could have played out differently. (No stronger argument could be made for the efficacy of that strategy than this post arguing that stores should stock Amazon titles to punish them because the returns would make them unprofitable! You can’t beat logic like that.) If the stores had stocked their titles, Amazon might have chosen to use their distribution center advantage to start wholesaling, rather than to support their own retail locations (as they appear to be doing).

But the determination of the brick retailers to boycott Amazon was spelled out loudly and clearly. So opening Amazon retail locations — as it increasingly appears they have every intention to do — has two strategic payoffs for them. One is that it gives them access to at least some brick-and-mortar retail locations for their publishing output, which otherwise they can only sell online. And the other is that it capitalizes on their distribution centers, delivering additional sales and margin for investments already made.

In a recent post, I suggested one specific way Amazon could get very disruptive if they had more than a handful of stores. There’s another. They are a tech company that likes to have computers make decisions that in other companies and in other times have been made by humans. I suspect they’ll figure out pretty fast that they will want to have some sort of vendor-managed inventory system to streamline and optimize the stocking decisions for what will almost certainly be a growing network of retail locations. (The part of a trade book person’s DNA that is most out-of-step with the digital age is that we like to make decisions case-by-case, rather than living with decisions made by rules we create. That’s the key to the second half of this post.)

Sophisticated but automated stocking and restocking decisions are not part of the toolkit at B&N or of any other retailer or wholesaler we know. Could that be the next battleground that Amazon retail stores create? That would certainly be disruptive, but at least in this corner of the world it would not be a surprise.

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One mantra of the book publishing world is every book is different. We sometimes refer to that fact as reflecting the granularity of the book business compared to other kinds of consumer goods businesses or other media. Even if you think in terms of categories, there are just more of them in publishing than there are for other products or media.

Perhaps, then, it isn’t surprising that publishers are often inclined to encourage that uniqueness beyond where it is required. And, frankly, it is only required for editorial development and for targeting the marketing. The objective at every place in the value chain in between should be to standardize and, as much as possible, to treat many different books the same. That’s not a creative imperative; it is a commercial imperative.

My father first experienced the tension that this insight can create at Doubleday in the 1950s when he persuaded the company to standardize the trim sizes of their books for maximum printing efficiency. That didn’t require radical changes. It simply meant that books would be an eighth- or quarter-inch longer or shorter, wider or narrower. These were differences that were really not perceptible to most people, yet it was a real internal corporate battle to wrest control from designers who believed every book is different and that this mystery (or cookbook) had to be published as a 6 by 9 inch book while that one had to be 6-1/2 inches by 9.

In fact, the trivial differences in trim size were not important at all to the books’ chances of success. There were other decisions — the specific paper or type face among them — that also had no discernible commercial impact on each individual book but were, nonetheless, intentionally made book-by-book as though they did. In many houses, and (admittedly I’m saying this without any supporting data) probably more in smaller houses than larger ones, they still are. And that’s true even though whether the paper is 55 pound or 60 pound or the type face is Times Roman or Baskerville can’t be shown to have any impact at all on a book’s sales.

Now the University of North Carolina Press has been funded by the Mellon Foundation to put Dad’s theory to use in the university press and academic publishing world. They’ve created a service offering through their Longleaf distribution platform that takes the design, pre-press, production, and distribution burden off the hands of university press and academic publishers so they can focus on what makes them distinctive: the books they choose to publish and the skill with which they edit them.

This fits an industry reality I identified a couple of years ago that I called unbundling.

On one hand, UNC Press Director John Sherer reports real success, expecting to grow that part of their business by 50 percent in the coming year. But he also reports resistance by some presses who believe that making these design and production decisions adds so significantly to the quality of their output that they’re comfortable losing money doing it.

My own hunch is that many directors just don’t have the heart (or courage) to get rid of staff that, with all the best intentions and capabilities but without the advantages of technology and scale, provide them with no better than average quality at a much higher cost than they need to spend. This was a battle for Leonard Shatzkin when he fought it at Doubleday in the early 1950s and apparently it is still being fought hard six decades later.

If Amazon pricing of ebooks is the problem, is agency actually the right solution?

February 26, 2016

In the