David vs Goliath at Digital Book World

The schizoid nature of today’s business – the electronic/print divide amid the electronic/print marriage of necessity – was anatomized, predicted upon, and everywhere in evidence during two packed days of trade-centric Digital Book World in New York.

 In case we needed reminding about the stakes involved, a few days later the front-page story in the Sunday New York Times business section, “The Bookstore’s Last Stand,” highlighted the struggle of Barnes & Noble – “David vs. Amazon’s Goliath.”  What to do about Goliath was a subtext of many DBW conversations. 

This third event was the largest yet, with 1600 attending – 300 more than last year. CEO sightings were scarce, but a few levels down - as one marketing v-p put it - he felt he had to be there, “to keep up and to keep my job.”

Certain major themes sounded across sessions. Although nobody can control the constantly-morphing electronic dragon’s wild ride, publishers might self-help by being more open to cooperation, more disciplined, more proactive and willing to invest for the long term - in harnessing metadata, analytics and algorithms, and in facing up to issues of quality control not just in e-files but in interactions with writers and readers. They need to make the case – with authors and the public - for what they do and why they matter.

In a panel on that last subject, Random House’s Madeleine McIntosh (who left RH and returned after a stint in Seattle) admitted that if authors are confused about what a publisher does for them and its value, “then shame on us.”

 Clarity is needed around words like “customer” “supplier” “banker” “investor,” Harper’s Carolyn Pittis noted in the same panel. It’s “amazing” what authors don’t know: “you can quantify things like marketing reach - in one imprint, 60 people touch a book.”

McIntosh and Little, Brown’s Michael Pietsch defended author-publisher financials against the spectre of self-publishing and the pressure for authors to get a bigger chunk of ebook royalties. Houses today operate on an advance model “where the royalty rate has very little to do with the effective compensation rate,” McIntosh said. Pietsch asserted that across the Hachette list, the revenue share going to the author in the last 15 years grew to “30% to north of 40% - we’re giving them more and more money.”

On the other hand, Pietsch admitted, “You can never overstate the extent to which the author’s experience of the publisher is periods of long silence,” or as one bestselling author told him, Spider-Man scaling the outside of an opaque black-glass skyscraper

Nielsen Book’s Jonathan Nowell summarized a study of the U.K.’s top-selling 100,000 titles of 2011 to show the critical role of metadata. Average sales per title with incomplete BIC Basic and image data were 1113 units, but with a complete record the figure rose to 2205 units. Counter-intuitively, a complete record increased offline sales more than online sales: 124% vs. 48%. The greatest boost was seen in fiction.

Enhancing BIC Basic metadata with a short description, long description, author biography and review boosted sales 55%. But the effect of enhanced metadata is greater online. Records with all four elements saw average sales increase by 178%. The biggest negative for adult titles is omitting the long description; for children’s, omitting the short.    

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 Many sessions made clear that the time is now for publishers to commit to direct web selling, bank the names they collect, and use them - regularly. F&W’s Sarah Domville, on the subject of breaking out of the box to find new sales channels for content, said she has come to look on her editors as “personal shoppers” taking the consumer to the next level.

 Publishers may be searching for open sesames to unlock effective discovery online, but meanwhile they must continue to look after the best tool currently available - bricks and mortar. The question DBW resident guru Mike Shatzkin posed early on - How can you throw away the expertise of established sales teams just when new accounts need to be opened up on the ground to promote discovery? – was widely echoed.

In his solo presentation, B&N’s Jim Hilt said that if 2011 was all about the device (and according to the NYT feature, an important new one is coming), “2012 will be a lot more about the value of the content. Information about customers’ reading habits will help us shape our programs, and the use of data needs to become much more open across the industry.”

Indeed, “information collaboration is the future of bookselling” was the big B&N takeaway, the weapon they will engage to fight Amazon. Whether that collaboration will involve just publishers or also independent booksellers and others – we know it will involve going global – remains to be seen. Hilt referred to the power of the indies as discovery engines and made a point of saying, “the notion that we are competing with each other is untrue. We want to work together.” 

Certainly collaboration will involve authors. “The beauty of digital is that it allows the writer to modify the book over time. It will transform the way the author communicates with the reader, and it opens up new buying models,” Hilt asserted.

He emphasized “browsability” and the fluidity of the store-online relationship. Hilt mentioned a couple initiatives: a “Nook Daily Find” to introduce value-oriented customers to the broader program, and “instant collections” for crossover buyers that the company launched during the holiday season.

 “How do you help 40-year-old Twilight fans uncover other books to buy?” he asked. B&N is introducing “dozens of collections” not by traditional category, but according to topics or themes that will mix fiction with history, biography, etc.  

Hilt maintained, as did other B&N executives at the event like Patricia Arancibia, that 2011 “was a banner year for us.” Despite the ever-hungry capital-gobbling maw of the device business and its effect on the B&N stock price, the message was that people are working tremendously hard and the mood is up.

Hilt said the company has learned that “heavy content consumers on full-fledged tablets show much greater content consumption than on other devices.” B&N learned to its cost this holiday season that people who love books “are moving into color readers at much more rapid numbers than we had assumed.” The lesson - that “the very assumptions that we think are real are very different when the devices are put in front of the customer” – won’t be forgotten.    

Russ Grandinetti held the floor to speak for Amazon, which expects its “print book business to grow for many years to come around the world.” As has been evident since its birth, the one constant law in Amazonia is that “the best way to predict the future is to invent it.” The company is “optimistic” that it will grow the children’s business; kids’ picture books are “up 16 times” with the Fire launch.

Grandinetti highlighted the new “X-ray” feature on the Kindle Touch that “extracts the bones of a book – it can bring up a character list or key terms and connect to Wikipedia entries” etc.

He also pushed the controversial Kindle Owners Lending Library, claiming that KOLL brings “incremental revenue for publishers”: 19% of those who borrowed Hunger Games bought the second book instead of waiting to borrow it, and 19% bought Mockingjay rather than waiting to borrow as well.  “Very early data” indicates that after first use of KOLL, “30% more books were purchased” by Prime members.

As for Amazon’s global ambitions – “500 million to 1 billion people speak English as a second language,” Grandinetti reminded his listeners – making them eminently clear.

There were far too many sessions to cover, but two standouts were Anobii CEO Matteo Berlucchi’s one-man anti-DRM band and a bricks-and-mortar panel on experimentation featuring some of America’s most prominent indy booksellers.

 Berlucchi politely set off a firecracker by suggesting that trade books rid themselves of DRM, in that way preventing silos and monopolies - take that, Amazon! There would be benefits for customers to own rather than license ebooks. And what about the benefits of open competition, where anybody could sell to Kindle users and vice-versa. With Kindle accounting for 92% of ereaders sold during the U.K.’s Christmas, “vice-versa” is hardly relevant, and the monopoly threat – sans Nook - all too real.

To fight piracy, Berlucchi argued, we should replace the “M” of “management” with “morality,” and educate consumers while taking the really bad guys to court. He did allow the need for DRM in selected situations – like public libraries.

In the bricks-and-mortar panel, Mitchell Kaplan of Florida’s Books and Books, Roxanne Coady of Connecticut’s R.J. Julia, Suzanna Hermans of upstate New York’s Oblong Books, and Brad Graham of Washington, D.C.’s Politics and Prose, described the kinds of individual initiatives that are revitalizing the independent sector. After a difficult August and September up against Borders’ liquidation sales, the holiday season proved great. A lot of indies now are benefitting from former Borders customers, although as Verso Media’s Jack McKeown pointed out in a later panel, most of those customers haven’t settled – many were “casual” buyers - and are still up for grabs.

Hermans added 1000 square feet to one of her two stores and devoted it exclusively to children’s books. The store “facelift” has made an “incredible difference.” She is heavily into Facebook and Twitter, which has proved “hugely successful” in connecting with locals and building brand around the country.

Graham - a lifelong Washington Post journalist – together with his wifebought P&P from the founders. Having witnessed the decline of the newspaper business, he knew he had “to look for new revenue streams to bolster against the day book sales decline.” The store invested in an Espresso Book Machine and has found a large majority of the use is from customers wanting to self-publish.

P&P previously had offered a smattering of courses. The Grahams hired a staffer to focus on expanding them – and now daytime courses on topics ranging from “literary Washington” to “Parisian literature” are oversubscribed. The challenge is to find a dedicated space in the neighborhood to host more and to extend into the evening. 

Coady started a parallel company in fall 2010, an online personal shopping service, Just the Right Book.com. In September, they launched a personalized book-for-the-month program, where the average customer pays $160 upfront – renewals are at the 50% rate. “We developed a human algorithm – a fun quiz online – we take 40 books that are new in hardcover and paperback, and based on how the customer does on the quiz, come up with three titles for them.

“Twenty thousand people have taken the quiz, and the most interesting statistic is that 67% who took it bought or borrowed the books – not necessarily from us. The lynchpin: we continue to need avenues of discovery. There are a gazillion recommendation engines, but ours waits on a customer in a way that is unique to them.”  

Kaplan had three stores in Florida when he was asked to open one in the Cayman Islands. Later he opened in Miami International Airport, then in a museum in Fort Lauderdale – a full store, not just an art-book boutique. Then he collaborated with former publishing and Verso exec Jack McKeown, who wanted to use the B&B brand to start a store in tony Westhampton Beach, Long Island.

 Now Kaplan has established a Books &Books Press after a customer came in wanting editorial help to self-publish a local photography tome, and has brought out two more books since then. With a sister in the movie business who introduced him to a producer, four years ago he began to option books – he saw them as early as anybody in Hollywood. In March, his first option – The Guernsey Literary and Potato Peel Pie Society –is to start filming, starring Kate Winslet with Kenneth Branagh directing.

It’s not a path open to every independent store owner, but it does show where thinking outside of the box can get you. Consider new models: access to capital instead of credit, or using a consignment model for part of the business, Kaplan urged.

Although January has been iffy for some, there was a realistic optimism in the air, more than an assertion of “I’m still here.” Coady hadn’t seen this kind of customer awareness and gratitude for her store in years. Kaplan – who was also a founder of the Miami Book Fair – summed it up this way: he saw “the possibility of revisiting that golden age of bookselling” that brought him in to the business in the 1980s.