Hidden Revolution: POD distribution goes mainstream

[fjtorres]

From the latest Business Rusch:
http://www.kristinekathrynrusch.com/

This story is complicated but Ms Rusch is a good storyteller so the hidden events and the consequences starting to play out can be understood. Exactly where this will take publishing, though, is unknown to pretty much everybody.

My take is this is act three of the Digital Revolution, coming after the Online pbook retailing revolution (1995-2000+), the ebook mainstreaming (2007-2009+), and now (2013 and beyond) the mainstreaming of Trade Paperback POD books.

The story starts out:

Earlier this year, Baker & Taylor changed its policies in regard to self-published titles. Instead of segregating them to a different part of their website (as if all POD books smelled bad), B&T mixed the books into the general population. Then, B&T changed its discount policy on POD books. Now, POD books qualify for the hassle-free returns policy. Certain bookstores—those with good credit, who ordered a lot of copies through B&T—qualify for as much as a 45% discount on any POD title. These gold-plated bookstores can get another 6% discount off their bill if they pay within 30 days.

And the bookstore can return one copy for the full price if that copy doesn’t sell.

...no surprise, when...

Ingrams, afraid of losing business, immediately followed B&T’s lead. Both distributors offer preorders the moment the POD goes live with Createspace—if, of course, the distributor believes there’s a demand for the book.

The reason why distributors can afford to treat Indie POD trade paperbacks the same as BPH titles?

I wondered again what I had missed.

I stayed up all night on April 29th, researching even more. And I finally found part of what I was looking for, buried in a Statshot report from the American Association of Publishers. The report, based on information from approximately 1,200 publishers. The AAP relies heavily on information from distributors of trade publishers (i.e. B&T and Ingrams, etc.). I had read this on Publishers Marketplace when it was actual news. The item said:

In adult books, gross shipments to retailers actually declined by one percent, but returns came down by $318 million (with over half of the inventory savings on mass market returns). On a dollar basis, returns comprised 27 percent of gross print sales. That’s the greater efficiency of digital and online sales at work, seen in the positive earnings reports at many publishers.

When I initially read that, I took “the greater efficiency of digital and online sales at work” to mean that more books sold through online bookstores like Amazon and Barnes & Noble. Customers expected those books to arrive in a slower fashion than they would out of a brick-and-mortar store.

What that phrase actually means is that booksellers have changed their ordering habits. Some are learning this on their own, but others are learning it through the American Booksellers Associations various programs, particularly something called The Winter Institute (which I will discuss more thoroughly in a future blog.)

Booksellers no longer order ten copies of a book that they think might sell. They order one, and put it face-out on the shelf. When that book sells, they order another which arrives from the distributor within one or two days.

Booksellers are learning how to run a leaner business. This cuts down on big orders (and we’ll discuss the implications of that in future blogs), but it also cuts down on returns. Returns, which had stabilized at 50% or more, were by the end of 2012, down to 27%.

Remember how the big shock of holiday 2012 sales was that B&N had reduced traffic and losses while indie bookstores did reasonably well? That is why. They've changed the way they do business. They are running lean and mean and rely a lot less on bestsellers or returns. And in the process, (almost) everybody wins; bookstores get much better use of their shelf space, B&M customers get access to a deeper catalog, and returns have quietly dropped from 50% of print runs to the equivalent of 27%.

BTW, the indie bookstores reported about 8% year to year increases last XMAS. Well:

Here’s the quote I want you to see, from Publishers Marketplace’s report on BookStats:

In the AAP data, as we extrapolated, it was clear that the adult trade grew by roughly the gross revenues of the Fifty Shades Trilogy, and the children’s/YA business grew by just a little more ($30 million, or 2 percent) than the gross revenues of the Hunger Games trilogy — leaving the rest of the business flat. But the BookStats models posit that all the non-reporting publishers grew by about $550 million (or 7 percent); and thus that they grew in ways that most of the publishers who report to the AAP did not.

The road ahead?

I’ve given you a lot of numbers here, and shown you in detail how the sands are shifting. But here’s the thing I want you to take from this article:

It is now not only possible, but likely that an indie book with good word-of-mouth will sell as well or better than a book with the same word of mouth published by traditional publishers. Why? Because indie books won’t go out of print quickly. They don’t have limited press runs (see Dean’s post from last week), and they don’t have useless stock sitting in warehouses.

Indie writers, indie books, indie publishers now have the same access to bookstores that traditional publishers do.

The playing field has just leveled.

Ms Rusch has a lot more background info and further thoughts and details on what is going. Definitely worth reading.

Also the companion article at THINK LIKE A PUBLISHER:
http://www.deanwesleysmith.com/?p=9148

Sometime in the last year or so, B&M retailing changed completely--thousands of bookstores changed the way they do business--and the ripples are now becoming noticeable.

The emerging result is that traditional publishers are no longer the *only* effective way to get pbooks into bookstores.

Consequences to follow...