[DMcCunney]

Originally Posted by pwalker8

Right now, the publishing industry is in a bit of a flux. What publishers publish is pushed by the big stores (B&N) and the smaller book stores are really struggling to stay alive. It is my understanding (I'm not in the industry, so all I know is what I read), that much of the business practices for publishers is set by tax laws and the problem of returned books. Since no one wants to keep books in stock, due to the tax laws, book stores are quick to return excess books and tons of books are destroyed each year, so there is a tremendous amount of wastage.

Look up the "Thor Power Tools decision". A Tax Court decision in an unrelated industry affected the way publishers valued inventory, and a whole load of stuff went out of print very quickly.

Book publishing is in a massive state of flux. Publishers don't sell to consumers: they sell to wholesalers and retailers, who then sell to us. The rise of big chains like B&N and Borders has squeezed the smaller independents, who can't match the pricing the chains can offer. There is also significant pressure from discount retailers like Costco and Sam's Club, who are major customers of the publishers. Publishers issue stuff they think they can sell, and the number of folks who make the decisions about what the retailers buy is shrinking.

And for bookstores, the question isn't even one of unwillingness to keep inventory. It's less that they don't want to than that they can't. A bookstore has only so much shelf space, and new books are constantly coming out. They have to send back unsold older ones to make room for new releases. Any book that doesn't sell out of the first order is unlikely to be re-ordered. The worst case is probably airport newsstands, where the average shelf life of a mass market PB the last I knew was about two weeks.

The last figures I saw (likely out of date due to the emerging superstores) was that the average bookstore had shelf space for 5,000 to 8,000 titles, and about 50,000 titles were published each year. Do the math...

One of the biggest problems is that too many books are chasing too few readers. Everyone in the industry knew it, but nobody wanted to be the first to trim their lines. They were afraid of losing shelf space. That's beginning to change.

Also, the publishing industry has traditionally operated on a 100 percent returns policy. This is beginning to change, and publishers are toying with a tiered pricing structure where retailers can get lower wholesale prices (and therefore higher margins) on titles where they agree they can't return all unsold copies for full credit. It shifts some of the risks to the retailer to make more informed decisions about what they think they can sell.

Because of all of this, best salers carry the industry. With this combination of rises in book prices, making it less likely that a customer will take a chance on an unknown author and the tendency for big stores to only order books based on the numbers that author has sold, we have a vicious circle.

Once upon a time, backlist carried the industry. Best sellers are a crap shoot. Publishers will think a book has best seller potential, print large numbers, and promote it heavily, but it isn't guaranteed to work. There used to be a publisher called Lyle Stuart. They specialized in exposes, "unauthorized biographies", and the like. They would publish about a dozen books a year, print scads, promote them heavily, and hope a few would become best sellers and cover the losses on the rest. They got away with it for years, but eventually hit a bad patch where they didn't have best sellers and had to fold.

While all publishers want best sellers, steady income from mid-list titles keeps them afloat.

And bestsellers can be a two edged sword. A few years ago, the then President of Scholastic Books resigned after revenues and profits were off. Why were they off? Scholastic publishes the Harry Potter books. The next Harry Potter novel was late, and didn't make its contribution to revenue and profit in the expected time frame, so the numbers were way down for that year...

(You can bet there are folks at Scholastic losing sleep at night worrying about what they'll do now that the Potter series is over.)

From a consumer point of view, a tiered approach makes sense. Best salers would be at one price, name authors would be at the next level and everyone else would be at a third. But more than that, most books should be priced at a point where I would be willing to take a chance on it. Looking in my book collection, I have paperbacks from the mid 70’s that were priced at 75 cents. For the longest time, paperbacks stayed under 2 dollars. As a rule of thumb, the majority of books should cost less than lunch.

Ahhh, the good old days. Unfortunately, costs rose, and in many cases sales dropped. I've heard of mass market PB editions with print runs as low as 15,000 copies, which would have been unthinkable not that many years ago. Given that costs to acquire and produce a book remain pretty much the same, what does your price on a title have to be to cover costs and make money if you are printing and selling less copies?

For eBooks to take off, I think they will need to drop the idea of pricing based on what works in the big store fronts, and go with something like iTunes. Price the majority of books for less than eight dollars (a sandwich, chips and drink at the local sandwich shop) , build up a huge back list, let people read the first chapter online to see if they might like the book and lastly allow the customer to download the book in multiple formats, not just one proprietary format. I can export my iTunes songs onto a cd, which means that I can rip in back in mp3. Thus, even if Apple were to abandon iTunes, I still have access to my music. Audible, which markets audible books, has been around for a while, but they didn’t really take off until they expanded beyond their own proprietary format and supported iPods. I had bought a couple of books from them a number of years ago, but stopped using them because using their proprietary software to burn cd’s what a royal pain. When I found out that they had added iPod support a couple off years ago, I started using them again and have spent quite a bit of money with them since. Oh, I have all sorts of ideas of how I would put together such a store. It’s not rocket science and if you focus on what the consumer wants rather than what’s the minimum you can get away with, it’s all pretty obvious.

For ebooks to take off, a lot more people need to want to read books that way, and have the equipment to do so. And publishers really need to support a common ebook format. Right now, I might have to maintain several different ebook readers, and remember which book is in which format read by which reader, to handle all of the content I might like. That's simply absurd.

There have been previous attempts at dedicated ebook readers, like the Franklin eBookman and Rocket ebook reader, and current ones like the Sony reader, the Cybook, and the iLiad, but these are all essentially niche market items. I'm not interested in any of them because I want a device that does other things as well, so I read ebooks on a PalmOS PDA. I don't need Yet Another Electronic Device to carry around.

I think the most likely place for ebooks to penetrate will be cell phones and iPods, simply because everybody has them. The reading experience may leave a lot to be desired because of small screen size, but that may not be a big factor. Japan has large numbers of folks reading books on things like cell phones during commutes.

And tiered-pricing is a nice thought, but founders on how, exactly, you will implement it. Highest price for best sellers? Those tend to be most heavily discounted by brick-and-mortar bookstores, to draw traffic into the store where they might buy other books as well. Second tier for "name" authors? Er, which ones are "names"?

The big win in ebook publishing is that you can have backlist, and keep titles available. In fact, publishing industry contracts are now changing because of it. It used to be that when a publisher let a book go out of print, the author could ask the the rights back and try to resell the title elsewhere. What does "out of print" mean for an ebook? Current contracts tend to use a formula mixing sales of paper books and sales of electronic editions to determine what a book may be considered out of print with rights reverting to the author.
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DEnnis