Five Digital Changes To Respond To

Battle lines are being drawn in the digital book arena and these are changing both in terms of goals and measures of success. The changes taking place may appear relatively small and tactical today, but their impact could be significant over time. How long they will take to deliver change is questionable, but that they will, is inevitable.

Although there is much noise in the market and many are merely shouting about what they are doing and it’s often hard to determine noise from substance and authority. It is also has to be recognised that different sectors have different issues and drivers and nowhere are there any silver bullets.

We would suggest that are five shifts taking place with the Trade environment. These are all at different stages of evolution and moving at different speeds, but will spawn more change.

Interestingly, as the overall digital market will be shaped by all of them, it may not be wise to simply cherry pick the ones you think apply to you and ignore the others.

Subscription

We are now starting to see the emergence of serious players and offers. Interesting, they have all pitched the consumer reading demand at the high end and made ‘one price fits all’ offer. 

Subscription offers need to be geared to individual needs and yet encourage members to read more. Just having the biggest library to choose from and expecting readers to consume 3 books a month is not the answer and niche genre offers are essential as well as recognising variable reading demand patterns which will keep members hooked. Today the churn rate is unknown and we suspect it will be quite high in the initial period and therefore these services need to develop secondary community draws to compliment and add subscription value and not merely appear as one trick pony’s. We would expect them to follow other media subscription services and align themselves to larger and complimentary subscription lists and this is essential as long term as subscription offers continue to consolidate their customer facing propositions.  

Ownership

The old and somewhat irrelevant buy to own model that prevailed in the physical market is fast becoming exposed. Although we have yet to see the ebook used market happen, with only the Dutch service Tom Kabinet is challenging the courts, it is inevitable in a highly restricted market.

However as used books, DRM, watermarking and on demand streaming services all overlap, maybe the emergence of on demand means that we no longer have to test the first sale doctrine and the used ebook market never happens. But unless on demand occurs, the used sale market potential for ebook is bound to be tested and found wanting and it is inevitable that the courts will eventually fall on the side of the consumer.

One of the challenges is about proving ownership, which with DRM should be easy, but with the current DRM walled gardens is almost impossible. Again with watermarking it should be also possible, but without a registry and standards conformity, is again almost impossible. With no DRM, no watermarking and no registry some would suggest that this is like closing the stable doors after the horse has bolted.

Self Publishing

We are firm believers in the democratisation of writing which is currently exploding in the digital market and will continue to grow for the foreseeable future.

Self publishing is no longer about the slushpile of aspiring writers all wanting to be the next EL James, but about the ability of anyone to bypass the intermediaries and express themselves and publish their works. It facilitates small publishing ventures as well as new and established writers. They may select to use outsourced services to polish and refine their work, or simply publish themselves.  

It challenges the ability of the intermediary to control what is being bought and read and can level the marketing playing field. The bestseller will still be a bestseller, but increasingly the backlist and midlist authors will now have to do more themselves to promote their works and in doing so find themselves head to head with others who have self published and earn a greater percentage of the revenue they have generated.

Can traditional publishers use the self publishing services to feed their lists, or have they now lost that opportunity? Maybe it’s down to the value they will offer the writers and that may have to be more than just a ‘safe home’ and a brand.

Author Care

As author earnings continue to be squeezed by net receipts, reduced advances and more competition, the publisher profits from digital have been seen to grow. Maybe the widening gap is down to bad PR and communication, but the writers are increasingly aware and continue to be the ones who create the initial value.

One area that is very visible to authors under the KDP and other self publishing services is their sales reporting and revenue payments. As the authors will demand greater transparency on earnings, speedier payments and an increased revenue share, there becomes less hiding place for publishers.

Publishers do add significant value, but now have to increasingly demonstrate this and one potential knock on effect will be a revision of digital rights to term based and separation of these from print. 

Content, Context and Community

In the main, the market continues, to merely pour the physical content into a digital container. 

Some would suggest that this is short slighted and ignores that it is just a transient step and some would even argue is the equivalent to performing self-harm. We don’t say that all ebooks must go down the multi media experience route, far from it, but that we should be thinking about the user experience and making the digital rendition complimentary and not just substitutional.

Digital also offers significant opportunities to grow author, genre, reading and writing communities. These may be devolved to others better suited or motivated to organise and curate. Digital also expands the ways in which works can be discovered, validated and valued which applies to both digital and physical renditions. It is no longer about describing books to place them on dry one dimensional shelves, but about enabling them to be found in many ways within a virtual environment. Standard bodies think library and bookshop shelving, but today’s buyers don’t.

Too many what we have said, is not relevant to their business today. They may wish to sit on the fence and wait for it to happen and expect that they can respond quickly. To others they see these changes happening, new opportunities and the ability to position themselves for tomorrow and not run the risk of being too late to the party. 

So How Do You Reward The Author?

At one end of the value chain we have ebook pricing, which today is in need of a sustainable model that is in the consumer interest. After all, they are the final arbitrator and the only one who actually puts real revenue into the chain. At the other end, we also find a similar need for a sustainable reward model, which is in the long term interest of the author. After all they are the ones who actually create the work and its value.

We have long stated our views on agency and its flawed position. Some have claimed that without agency, the future is bleak, prices will fall and the rewards for authors will be impacted. Whatever position you think is right, the future of agency will be addressed by the Department of Justice and EU investigations and filed class actions. Irrespective of the outcome, the question of author reward should be debated and is not just tied to any one model.

We have seen the drop in advances and the pressure on established authors to grant ebook on their back list. We have also seen the ebook self publishing model change, with the likes of Amazon, Barnes and Noble and others offering large incentives to authors to publish, both backlist and new titles with their services. The percentage of reward offered by publishers on ebooks has also gone up and down like a YoYo.

So what should an author earn on ebooks? Does an ebook have to be tied to its pbook or abook renditions? Where are the added value steps between the author and the consumer on ebooks?

Last week we also listened to a good friend, who is an published author and who told us about an aspiring author‘s manuscript that they had been given to read. They said the work was very good and a well constructed 'page turner', but that they were lost as to what to say to the writer. Five years ago they would have lined them up with an agent introduction and pushed them towards the traditional publishing route. Today, they feel that the rewards have changed dramatically and although the model still works for many, the odds on new authors making it are increasing and they believe, ‘its growing impossible for authors to make a living out of writing alone.’

The ebook itself is potentially changing the relationship between the author and the others who sit between them and the consumer. Yesterday the rights were often traded on a ‘performance related’ model. If the work wasn’t shifting, the rights could revert. Yesterday, there were often separate rewards for unit sales, special ‘book club’ deals, and the royalty statement could be tied to production, inventory and sales. Today, we increasingly see ‘net receipts’ and in the digital world, ‘honesty box’ sales and receipts. We do not doubt the sales reported but it would be interesting to see who has fully audited their digital sales and established that the money paid relates to the sales achieved?

We also have the question of rights being reverted. Contracts may still tie the pbook break clause to performance, but does this extend to ebooks whose inventory is now virtual and now exists within a ‘long tail’ marketplace? Are ebook rights becoming perpetual deals? Why aren’t ebook’s rights term based and fixed and renewable on say a five year basis? This would not only remove perpetual deals for the life of the copyright but it would make sense in a marketplace which is rapidly evolving and where it is often difficult to predict next year, let alone twenty or thirty years out. Today, an author can not only be tied to an agent’s deal for life but increasingly, the publisher too. Let’s hope that they don’t ever fall out!

Permission rights will become increasingly important in the digital market, but how are these rewarded and itemised on that royalty statement, let alone calculated and recorded?

We also have the question of payment schedules. It was understandable that royalty payments on pbooks took time. But in today’s real time payment transaction world where all ebook sales should be firm, does to same ‘banking’ delays and reconciliation make sense? It is interesting that the agency model agreed the commission split upfront, but irrespective of that simplification of the division of revenue, the money flow remained slow to the author.

Marketing and promotion can be one of the greatest value added services provided by a publisher. In the physical mass market world this was relatively easy to define and could even be written into the contract, but does this still work in today’s mixed market and how will it work in tomorrow’s digital direct market? As publishers move to a more direct marketing position will the exposure and spending gap between the ‘celebrity author’ and the rest widen? Does the publisher see the author, the work, or themselves as the brand tomorrow and how is that reflected in the marketing spend?

We now have the emergence of the rental model, which as in music and other media, often has a consumer appeal. Not only can this be at title level, but also incur a subscription across collections. How will this be reconciled moving forward?

Advertising revenue driven models are now starting to take hold within other sectors but how will they be reconciled to reward authors?

There are beacons of light for authors and we applaud the Simon and Schuster new author service and believe that transparency of marketing, sales, and reward is the only way forward.

Finally, we have the question of what should the author be paid on their digital sales. Some suggest a bit more than the physical sales, some stick around the 25% mark, some go higher and then we have the self publishing levels where the majority of revenues flows to the author. These are mere numbers and meaningless unless tied to performance as it is better to earn on a lower percentage and sell volume than earn on higher percentage and sell few.

So how do you relate performance and reward in digital rights contracts moving forward?

A New Era of Author Care?

We live in a connected world where information can be instantly available at a click. However, information on book movement and sales has todate often been a dark secret and a source of frustration to a major stakeholder – the author.

Today three major publishers have announced in the US that they would allow their authors to access book sales data directly online. Simon & Schuster have created an author portal, where authors and illustrators can check sales of their books, by format and merchant and including digital. Random House and the Hachette Book Group have also declared plans for their own portals for authors sales information. This in itself a significant break through and starts to make sales data transparent, embraces authors and is to be applauded.

Some have suggested that the motive behind the initiative is to combat Amazon, which gives authors access to data on their titles from Nielsen BookScan and also allows them to check their sales ranking compared to other books on Amazon. If this is the case it should be accepted as a price to be paid for not acting earlier and making business with author transparent in the first place.

The big question is whether this new wave of Author Care is to be consistently applied across all publishers, or remain as a tool by the big publishers to differentiate them from the smaller ones who will find it difficult to compete. As the creators are the ones who input the most it would be great if industry bodies such as the APA or AG could help facilitate a similar service for smaller publishers and their authors.

There will always be issues re timing and accuracy of the feeds but as the likes of Bookscan have proved, there should be no reason in today’s world why information lines are so broken and inconsistent.

Authors should only need to see actual sales to consumers, not the units shushing around in the market. Trying to explain sale or return movements to authors may prove a very interesting exercise and its not one that they need to understand today. However they will need to see special sales as units sold firm to intermediaries.

Digital sales are different and should be instantly available, as in theory, they only leave the digital warehouse when sold. However the more these are with aggregators the more difficult this often becomes. This brings us to the next logical issue of royalties and whether this new era of transparency will lead to a long overdue open reporting on royalties and speeding up of payments? As more contracts adopt reward based on net sales the actual cost of sales and not price paid by the consumer becomes important. With respect to digital sales and the agency model there is little reason why monies earned should not straight forward and even transfered in the swipe of a card. We realise that may be too much to ask but it should not be too much to strive for.

As many author advances and rewards shrink we must strive to look at ways to keep them better informed and pay them quicker.

Carpe Diem

It’s the aspiration of the vast majority of the population to write a book. So has digitisation made it easier or even harder to get published today and what are the dependencies, relationships and rewards in this dynamically changing environment?

The publishing trade is shifting from one where publishers looked to cultivate long-term relationships with authors and develop their stable, to one where the greater emphasis is now to sell books. Some would suggest that it’s not a bad thing to focus on moving books rather than merely printing them. However, does that change the relationship and with it the contract between creator and producer?

Some see digitisation as just a change in output format whilst others recognise it challenges the traditional relationships. In a world where print on demand can effectively remove the term ‘out of print’ , we now have to understand rights reversals, term contracts, the line between promotional material and content itself and much more.

The changing marketplace is being driven by global economics, network connectivity and technology. Territorial boundaries that existed in the physical world are now questioned in the virtual world. Roles that controlled the physical world are being challenged by networks and what once was a unique, or highly skilled operation is becoming commodity available to all. Define an; agent, publisher, distributor, wholesaler, reseller, library and digital aggregator, then ask what the following are; Amazon, Google, Ingram, Barnes and Noble, Apple, Sony, FPD, Lulu, Scribd? Are we seeing the divergence of the market into more highly focused vertical segments or richer flatter horizontal ones? Which is better, volume through a supermarket, book club and internet sales or the traditional trade channel? Is publishing becoming more a ‘department store’, or niche and boutique? Are ‘special sales’ becoming a little less ‘special’ and what is the impact of all the above on the author?

So where does the aspiring author pitch their manuscript? Do they go the traditional route and hunt the agent? Do they put their manuscript up on the many social slush piles and hope to get spotted? Do they self publish and pay to achieve their ambitions? Digitisation certainly helps in both the availability of options and the lowering of the economics, but is it enough? The fact is that the number of titles ‘published’ by whatever means and in whatever format is going to continue to grow. The number of ‘best sellers’ are going to reduce and the traditional bookshelves will get smaller. The digital world enables consumers to be more discerning, eclectic and virtual and it also increases the potential for more consumers to read what they would never find today.

The biggest challenge is not digitisation, but its impact. We may focus on the consumer, the latest devices, even the price of books, but unless we pay equal attention to the authors of yesterday, today and tomorrow, we may find as with other media sectors, it is they that hold the keys to many digital doors. What is the appropriate royalty expectation on digital sales? In a world where pricing is ill-defined, should royalties be based on list price or net sales? When digital removes ‘out of print’ should contracts be term based? Musicians, sportsmen, entertainers have all started to take control; is this now possible in the world of the book?

The one thing that is certain about tomorrow is that the aspiration to write will not go away and irrespective of how it is achieved, neither will the reward sought for doing it.