Booksellers: Why Publishers Will Go Direct

The following article was published in the October 2010 issue of News on Bookselling, the official journal of the Australian Bookselling Association.

By Martin Taylor

When we look at the price of a printed book, about two thirds of its cost pays to get it from the publisher, via the bookseller, into the hands of the consumer. The remaining third covers all the other author, printing, production and publishing expenses.

This selling and distribution cost will be fertile ground to meet consumers’ demand for cheaper ebooks. It’s the biggest cost and arguably the part that ought to have the easiest digital saving.

Today, the retailer’s display space is where the heavy lifting of selling books happens: selection, recommendations, local convenience and promotions aid discovery and drive most of the sales. Publishers offer some air cover for this sales job, notably through publicity efforts of varying effectiveness. But most demand creation and fulfillment happens at the bookstore.

So publishers understandably focus on booksellers as their primary customers. Ask a publisher who his customer is and most will say the bookseller. Few will say the reader and if they do, they’ll still spend most of their time focused on booksellers. It’s these bookseller relationships, with the logistics to back them up, that make publishers attractive to talented authors.

Ebooks will seriously erode this bond as they bypass traditional booksellers at every point. Readers’ research, as well as their purchases, happen more often online. When the traditional bookseller’s role is reduced, publishers’ value to authors will also take a hit unless they can address it with proven marketing clout in the digital realm. Good authors demand publishers who can strongly influence the channel to the reader.

Unfortunately for today’s publishers, they’re not players in the digital world. Über agent Andrew Wiley prodded this Achilles heel recently. Wiley set up his aptly-named Oddysey Editions to exclusively license premium backlist titles to Amazon, completely sidestepping the publisher Random House. Random House headed off this threat with a major royalty back-down.

But in winning this battle, it only served to expose the vulnerability that started this showdown in the first place. Quite simply, no one believes that Random House has any more influence over the digital supply chain than a brand new start-up with minimal staff or track record.

Publishers have been too slow embracing the digital space for marketing and sales but expect now a scramble to make up for lost time. Most of these efforts will be aimed at connecting directly with readers, the space booksellers have traditionally held.

In the short term, it will help book sales through all channels. But longer term, booksellers might not cheer this greater role for publishers, especially if it means smaller margins and less influence. I think this concern would be misplaced, though. Publishers have little choice. They will have to care much more deeply than today about how to get buyers to the point of purchase. That means shifting more focus online and carving out serious digital channels to readers to make their books visible. No-one else will have the emotional or financial stake that a book’s publisher has to lead this. The internet gives them the same opportunities as booksellers to achieve it, and their authors will hold them to it or go elsewhere.

It will also mean more direct competition for booksellers. Some publishers, like computer book publisher O’Reilly does today, will sell their books through very sophisticated direct operations as well through online booksellers. This model is sure to increase, especially in well-defined niches. But the norm for most publishers and books will continue to be indirect sales. Consumers will still expect a convenient selection in one place from many different publishers.

This greater sales involvement by publishers should prompt the emergence of new online places where book lovers can find books that interest them. And one thing that will fuel it is a big injection of advertising cash as publishers seek online channels to their readers. I come from a publishing industry—technology—that’s awash with advertising cash and it funds a sophisticated and diverse range of specialist coverage. Much of that today, by the way, is from bloggers and non-traditional media sites. Google Editions should further fuel this trend by opening ebook sales to anyone with a good website, just as its AdSense programme—filling every other website with Google ads—spreads advertising income beyond mainstream media.

Compare, then, an advertising-rich sector with today’s book industry where most spending is below the line (publicity, retailer co-op) and even large markets can barely support a specialist publication, let alone keep mainstream media involved.

I’d argue that a thriving future book industry needs this shift in financial resources to support a diversity of quality places for books to be found and talked about. With hundreds of thousands of new titles a year, we can’t afford to see this vast output squeezed through a small group of megasites with fewer avenues to promote titles. This could potentially happen if costs are ground down by huge players and publishers don’t counter-balance this with a strong, direct role in the selling process. In music, for instance, Apple now exercises massive power over the industry with its 69% market share of paid downloads.

The new opportunities will be wide open so expect some of your competition to come from unexpected places (bloggers, anyone?) But it’s equally open to booksellers who can embrace digital media and think beyond just shifting products and price promotions online. Some of the new skills you’ll need are closer to media than they are to retail. But there’s plenty of room online to do what good booksellers have always done so well: help readers decide what to buy.