What Hugh Howey Won't Talk About (but Should). The Publishers and Amazon, Part VIII (the Next to Last Part. No Really)
What is Happening to the Publishers?
I've worked extensively in software and high technology since the mid-70s and have become comfortable with disruption. In high tech, nothing is stable and tried and true business models, empires, and technologies are constantly being overthrown. Here are just a few choice examples:
The toppling of IBM from the apex of corporate power and respect. Before Microsoft displaced IBM from its throne, a change of CEO at "Big Blue" was front page news. Now, IBM is just another company.The disruption of the retail market for software. In the mid 90s, you could have walked into one of several big box computer stores dominated by row after row of boxed software. Today, all gone. The amount of software carried on the shelves of Staples and Office Depot is shrinking steadily and will soon approach zero.The rise of the Internet, a technology which was first conceived of in the 60s and began to disrupt conventional wholesalers and retailers in the early 90s. The disruption continues today in media, shopping, the taxi industry, hotel rentals and on and on.
The breakdown of Microsoft's Windows monopoly. The company that stole IBM's imperial crown in high tech is itself being torn from its perch atop the industry by Google, Apple, and the rise of new devices such as smartphones and tablets, markets where Windows has negligible market share.
By contrast, the book publishing has seen one major technology disruption in the last 100 years. The introduction of the Kindle, in 2008. As I've written before, an earlier effort to kickstart E-book adoption in the 1999-2001 timeframe failed (I document the attempt in the second edition of In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters and predicted the effort would restart in 2010. It's not the first time I've misjudged the speed of change.) At the time, the publishers relaxed and assured themselves all was well. The book industry seemed to be immune to all the bits and bytes whizzing around and reshaping other businesses.
Yes, Amazon had disrupted book distribution via its online purchasing and delivery model. Borders had collapsed and he independent bookstores massacred and this was disturbing. Still, this was primarily a channel problem. The publishers still controlled the critical part of the industry, content creation. And there was an upside to all this channel fuss! The less places you needed to ship books to, the more you saved on that aspect of the business. But paper books would never die.
But those of us in high tech knew they were wrong. Technology doesn't give up. Technology keeps coming at you. In 2008, it arrived.
The arrival of the Kindle shook the publisher's control over content. As the device took off and a massive infrastructure began to form around the system, more and more people took advantage of its downloading service to independently sell their books directly to readers. Competitors to Kindle appeared and more outlets for independent publishing appeared. The success of authors such as Hugh Howey helped remove the traditional stigmata associated with self-publishing.
The publishers were caught flat footed.
While all this was taking place, the publishers also found out something.They were hated by large numbers of writers. It's almost a cliche to note that the publishers have served as the industry's gate keepers. In this article, I'm not going to get into issues of authors being screwed out of royalties a la Harlequin's sleazy ploy or the unending complaints by mid-list authors that the publishers never marketed their books. The reality is that there were and are major physical limitations on how many million pounds of paper the book business can haul around the world. The industry's publishing structure came into existence to manage this reality.
But part of this reality was to reject many books that were indeed very good but couldn't fit into paper's limited carrying capacity, refuse to market others because of a limited ability to address niches and genres, and create a royalty structure that left every writer scratching their head wondering how they ended up with 15% of a book's proceeds. Sometimes.
Now this reality is changed. Permanently. Paper book publishing is being supplanted by digital distribution and about the only thing that will change this is if a big meteor splats down on Earth and civilization collapses. And if that happen, I'm shutting down this blog and won't be following the industry any further.
And another part of this reality is that every writer who feels he or she was snubbed, neglected, or robbed now feels free to express their feelings. It's not a pretty sight to read some of the nastiness I've seen on some AAAG (Aggregated Amazon Ankle Grabbers) sites directed towards people from the publishers who attempt to explain their side of things (Hugh Howey's site has been particularly egregious in this regard). No one is afraid of the publishers anymore. After all, indies have Amazon.
In the initial euphoria that comes with any liberation, a lot of facts are being ignored. Such as while you may be able to write and distribute a book, you just may not be a very good writer. And that marketing and selling a book to the point that you can eat and pay the rent is hard. And that Amazon's deal is not amazingly great for indies.
What matters most is that if you feel you have a book in you, now you can finally take your shot. The hell with anyone who thinks you don't have what it takes (and that means you, publishers). And that's better than never being able to take your shot at all.
What Amazon is Doing to the Publishers
Amazon is innovating and changing the book industry at a rapid pace. It will not stop this process and nothing the publishers do will stop it either.This is fine. The current book publishing model is about two centuries old and that's long enough to keep doing the same thing. If the publishers will not innovate and change, then Amazon will do it for them and the publishers will be disintermediated from book readers and they will have no reason to exist.
In the software industry, SaaS (Software as a Service) permanently disrupted the on-premise software model. Instead of accessing programs on local machines owned by yourself or your business, you subscribed to software and used it via (for the most part) in your browser. (The mobile app market is a somewhat different beast and I won't discuss it now.)
To support this new model, SaaS systems rely on a series of service layers and models that are often invisible to the customer. These can include data integration and management, privacy and security, analytics and community management and more. Companies that manage key service layers can exercise a great deal of power (and make a great deal of money) in SaaS.
Amazon is in the process of creating a similar model in book publishing. It is creating new service layers for book reading and consumption and in the process stripping control of these layers away from the publishers (I tend to think of the process as a form of virtual "delamination.") Layers already stripped away or in the process of being peeled off include:
Digital distribution.Digital book consumption via the Kindle devices, readers, and the mobi file format.Customer data collection and management. Amazon knows far more about what book readers buy and why than the publishers.Digital book and art creation.Content creation. Amazon has several in-house imprints and is growing them.
Book agenting, as exemplified by its crowd-sourced Kindle Scout program.Digital book reviewing and management.
This is just the start. As Amazon identifies new service layers in E-book publishing, it will attempt to co-opt them and further disintermediate the publishers.
What Can the Publishers Do to Resist Amazon?
The first thing the publishers can do is realize that paper is now a trap. Yes, they still make good money selling print books and I calculate that they can do so for perhaps another ten years. But in the US and other main first world markets, societies are divesting themselves of paper. Fax, physical mail, bill paying, newspapers, magazines, post cards and decks, etc are examples we are all familiar with. Large business were early adopters of digital reading technology and this trend continues. Every state government has pilot projects to shift from paper to digital storage of records. The green movement dislikes paper mills and printing presses. Schools are wondering how they can save money by replacing paper text books.
As paper consumption decreases, the print industry will descale and need to raise paper and printing prices to make up the revenue lost in volume. Eventually, quality book printing will survive primarily as a craft, a means of artistic expression serving small niche and collectibles markets.
But the tide sweeping paper away as a mainstream means of consuming the written word is irresistible. New 3D print on demand (POD) systems that will enable book readers to create paper volumes if they want them and flexible display technology are two additional technologies that will help seal paper's fate. One by one, the major publishers will begin to wind down print operations, possibly by spinning off their E-divisions from their paper counterparts. That is, they will if they hope to survive into the future.
In the last entry in this series, I'll examine what types of services and programs publishers need to consider implementing if they wish to survive the Amazon challenge.
I've worked extensively in software and high technology since the mid-70s and have become comfortable with disruption. In high tech, nothing is stable and tried and true business models, empires, and technologies are constantly being overthrown. Here are just a few choice examples:
The toppling of IBM from the apex of corporate power and respect. Before Microsoft displaced IBM from its throne, a change of CEO at "Big Blue" was front page news. Now, IBM is just another company.The disruption of the retail market for software. In the mid 90s, you could have walked into one of several big box computer stores dominated by row after row of boxed software. Today, all gone. The amount of software carried on the shelves of Staples and Office Depot is shrinking steadily and will soon approach zero.The rise of the Internet, a technology which was first conceived of in the 60s and began to disrupt conventional wholesalers and retailers in the early 90s. The disruption continues today in media, shopping, the taxi industry, hotel rentals and on and on.
The breakdown of Microsoft's Windows monopoly. The company that stole IBM's imperial crown in high tech is itself being torn from its perch atop the industry by Google, Apple, and the rise of new devices such as smartphones and tablets, markets where Windows has negligible market share.
By contrast, the book publishing has seen one major technology disruption in the last 100 years. The introduction of the Kindle, in 2008. As I've written before, an earlier effort to kickstart E-book adoption in the 1999-2001 timeframe failed (I document the attempt in the second edition of In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters and predicted the effort would restart in 2010. It's not the first time I've misjudged the speed of change.) At the time, the publishers relaxed and assured themselves all was well. The book industry seemed to be immune to all the bits and bytes whizzing around and reshaping other businesses.
Yes, Amazon had disrupted book distribution via its online purchasing and delivery model. Borders had collapsed and he independent bookstores massacred and this was disturbing. Still, this was primarily a channel problem. The publishers still controlled the critical part of the industry, content creation. And there was an upside to all this channel fuss! The less places you needed to ship books to, the more you saved on that aspect of the business. But paper books would never die.
But those of us in high tech knew they were wrong. Technology doesn't give up. Technology keeps coming at you. In 2008, it arrived.
The arrival of the Kindle shook the publisher's control over content. As the device took off and a massive infrastructure began to form around the system, more and more people took advantage of its downloading service to independently sell their books directly to readers. Competitors to Kindle appeared and more outlets for independent publishing appeared. The success of authors such as Hugh Howey helped remove the traditional stigmata associated with self-publishing.
The publishers were caught flat footed.
While all this was taking place, the publishers also found out something.They were hated by large numbers of writers. It's almost a cliche to note that the publishers have served as the industry's gate keepers. In this article, I'm not going to get into issues of authors being screwed out of royalties a la Harlequin's sleazy ploy or the unending complaints by mid-list authors that the publishers never marketed their books. The reality is that there were and are major physical limitations on how many million pounds of paper the book business can haul around the world. The industry's publishing structure came into existence to manage this reality.
But part of this reality was to reject many books that were indeed very good but couldn't fit into paper's limited carrying capacity, refuse to market others because of a limited ability to address niches and genres, and create a royalty structure that left every writer scratching their head wondering how they ended up with 15% of a book's proceeds. Sometimes.
Now this reality is changed. Permanently. Paper book publishing is being supplanted by digital distribution and about the only thing that will change this is if a big meteor splats down on Earth and civilization collapses. And if that happen, I'm shutting down this blog and won't be following the industry any further.
And another part of this reality is that every writer who feels he or she was snubbed, neglected, or robbed now feels free to express their feelings. It's not a pretty sight to read some of the nastiness I've seen on some AAAG (Aggregated Amazon Ankle Grabbers) sites directed towards people from the publishers who attempt to explain their side of things (Hugh Howey's site has been particularly egregious in this regard). No one is afraid of the publishers anymore. After all, indies have Amazon.
In the initial euphoria that comes with any liberation, a lot of facts are being ignored. Such as while you may be able to write and distribute a book, you just may not be a very good writer. And that marketing and selling a book to the point that you can eat and pay the rent is hard. And that Amazon's deal is not amazingly great for indies.
What matters most is that if you feel you have a book in you, now you can finally take your shot. The hell with anyone who thinks you don't have what it takes (and that means you, publishers). And that's better than never being able to take your shot at all.
What Amazon is Doing to the Publishers
Amazon is innovating and changing the book industry at a rapid pace. It will not stop this process and nothing the publishers do will stop it either.This is fine. The current book publishing model is about two centuries old and that's long enough to keep doing the same thing. If the publishers will not innovate and change, then Amazon will do it for them and the publishers will be disintermediated from book readers and they will have no reason to exist.
In the software industry, SaaS (Software as a Service) permanently disrupted the on-premise software model. Instead of accessing programs on local machines owned by yourself or your business, you subscribed to software and used it via (for the most part) in your browser. (The mobile app market is a somewhat different beast and I won't discuss it now.)
To support this new model, SaaS systems rely on a series of service layers and models that are often invisible to the customer. These can include data integration and management, privacy and security, analytics and community management and more. Companies that manage key service layers can exercise a great deal of power (and make a great deal of money) in SaaS.
Amazon is in the process of creating a similar model in book publishing. It is creating new service layers for book reading and consumption and in the process stripping control of these layers away from the publishers (I tend to think of the process as a form of virtual "delamination.") Layers already stripped away or in the process of being peeled off include:
Digital distribution.Digital book consumption via the Kindle devices, readers, and the mobi file format.Customer data collection and management. Amazon knows far more about what book readers buy and why than the publishers.Digital book and art creation.Content creation. Amazon has several in-house imprints and is growing them.
Book agenting, as exemplified by its crowd-sourced Kindle Scout program.Digital book reviewing and management.
This is just the start. As Amazon identifies new service layers in E-book publishing, it will attempt to co-opt them and further disintermediate the publishers.
What Can the Publishers Do to Resist Amazon?
The first thing the publishers can do is realize that paper is now a trap. Yes, they still make good money selling print books and I calculate that they can do so for perhaps another ten years. But in the US and other main first world markets, societies are divesting themselves of paper. Fax, physical mail, bill paying, newspapers, magazines, post cards and decks, etc are examples we are all familiar with. Large business were early adopters of digital reading technology and this trend continues. Every state government has pilot projects to shift from paper to digital storage of records. The green movement dislikes paper mills and printing presses. Schools are wondering how they can save money by replacing paper text books.
As paper consumption decreases, the print industry will descale and need to raise paper and printing prices to make up the revenue lost in volume. Eventually, quality book printing will survive primarily as a craft, a means of artistic expression serving small niche and collectibles markets.
But the tide sweeping paper away as a mainstream means of consuming the written word is irresistible. New 3D print on demand (POD) systems that will enable book readers to create paper volumes if they want them and flexible display technology are two additional technologies that will help seal paper's fate. One by one, the major publishers will begin to wind down print operations, possibly by spinning off their E-divisions from their paper counterparts. That is, they will if they hope to survive into the future.
In the last entry in this series, I'll examine what types of services and programs publishers need to consider implementing if they wish to survive the Amazon challenge.
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