Penguin

Go Read This | Bookish Acquired by Zola

Interesting piece of news this:

Michael Pietsch, CEO of Hachette, said the founding publishers “never intended to run Bookish forever,” and that their objective of starting a first-class recommendation engine has been achieved in the current Bookish version. Despite the problems, and costs, of getting Bookish off the ground, Pietsch said the founding publishers would tackle the venture again. “We saw a need for a great discovery engine and that is what we created. We are happy to see it move to Zola where we expect it will thrive.”

With Bookish, Zola will be able to expand on existing elements of its social networking capabilities. Chiefly, the acquisition allows Zola to incorporate Bookish\’s book recommendation technology into its site. (That technology is a proprietary algorithm pairing users with content.) Regal said this is “the most exciting aspect of the Bookish opportunity. ” The recommendation engine Bookish has built will be incorporated into Zola’s site and this, Regal thinks, “is going to be really significant.” While Regal could not share details about how the Bookish algorithm would be added to Zola, he said it will happen “in the months to come” and he could explain more once “we have more insight into their technology.”

via Bookish Acquired by Zola.

How Capital Is Behind Large Publishing Mergers

One of the least explored and analysed questions of the Random House/Penguin merger is why? Why did these two giant publishers feel combining and increasing their scale was so important? Because scale is the key to understanding the merger, just not the scale you think.

Scale is not always good, at a certain point scale can actually create its own problems, especially when scale attracts regulatory attention and increased oversight. Scale also creates management problems and scale created through mergers offers the possibility of management turf fights as rival teams deal with the inevitable right-sizing of the new combined entity. So why merge at all? What scale was being sought?

To Battle The Tech Giants

The most regular suggestion offered was that the companies wished to brace for the forthcoming battles with tech giants like Amazon, Apple, Google and others. I find this somewhat plausible but not really convincing, any alliance between publishers would still be in the ha’penny place with regards to those giants.

Even more though I think publishers are not in Amazon’s business (despite Amazon’s efforts to in fact be in everyone’s itself which you can take seriously or treat as a very clever distraction tactic), nor Apple’s, nor Google’s nor do they have the resources internally to be in those businesses. Barnes & Noble have shown us just recently what happens when you try to compete in a business you don’t know, it can be costly even when you do it very, very well. So scaling to compete in a field you don’t really have skill or abilities for would be exceptionally foolish.

To Save Money

Another possibility floated was that by combining they could make savings and that has more justification  Sales teams will surely be slimmed down where there is duplication, IT infrastructure can surely be streamlined and cost savings made. All that has value, but equally the risk of not being able to carry off those savings, of instead finding it difficult and failing is pretty high. Many a merger has fallen down on the lack of delivery on the promise. I think if they merged just for savings then the merger will probably be a disappointment.

Where does that leave us? Well we know, from subsequent actions, that Pearson was keen to move further into educational publishing and services and keen to shift its trade publishing assets. I wrote about this urge some time ago. That explains one side of the deal, but not the other and even then we might expect Pearson to seek the highest bidder rather than a merger or alliance. Still not getting very far along the road, are we?

Assume Intelligence

Let’s assume that the leadership at Random House and Penguin (or Bertelsmann and Pearson) are smart capable folks who can to some extent look at the future trends and sense where their industry might be going. One important aspect of those trends is for content that plays well across platforms. Not just a book, but an app that does something interesting maybe even a casual game based on the book and, if everything looks right, a movie.

The cost of developing such content (at that point intellectual property or IP is probably a better term) is dramatically higher than the cost of publishing books. Developers, designers, producers and a host of other skilled and expensive staff are required just to get the IP to market in salable form. This is not an attack on editors or narrative books in general, just that on average the cost of developing a book is predictable within a certain range. Obviously some books are more expensive than others but few require the scale of investment a well thought through app or game requires.

Combined with this rising cost of creation, the cost of acquiring content from authors, as I mentioned earlier in the week, is increasing especially for those with proven market power. The more likely a property or an author’s work is to translate across platforms, the more expensive it is likely to be.

Marketing To Everyone

Finally in cost terms, marketing across platforms is also expensive. This is a double pronged problem. On the one hand different platforms have different demands for marketing and different costs too. What works for a book will not always work for an app or a game. The second problem is that the cost of production being higher means that revenue expectations for a product will be higher too, hence the audience required to generate that revenue is larger meaning that niches probably won’t suffice(1) and marketing to a wider audience becomes much more important.

These kinds of projects can have lucrative pay-offs when they strike the big time. Harry Potter, The Hunger Games, The Twilight Saga and Fifty Shades of Grey have all moved beyond being simple books and into the realm of media franchises each with a different set of products on offer.

While I don’t yet have the evidence of it, I believe that these franchises are but the early examples of the trend towards bigger and more lucrative hits that will see publishing become an even more hit driven business than it currently is*.

If I’m correct about this shift I expect to see large publishers shedding distractions and concentrating more on their top brands or their brands with the most potential (occasionally producing titles/IP with prestige status). I’ve written before about the kinds of changes publishers must make and as Mike Shatzkin writes, they are beginning to make those changes:

Both Hyperion and Wiley are showing us what the publisher of the near future is going to look like. They will be more focused. They will be shedding overheads so they can expand or shrink their offerings more readily to respond to opportunities and circumstances. They will be less dependant on the trade bookstore and book review trade networks. And Hyperion’s decision says something more about the future that Wiley’s doesn’t: book publishing will increasingly be an activity operating in tandem with or in service of other objectives of the owning organization.

But how does this relate to the merger? The biggest and most obvious demand that the increased costs suggests to me is for a significantly larger capital base to secure, fund, manage and protect IP projects that require much larger creation and marketing costs. Seen in that light the Penguin/Random House deal is not a defensive move designed to protect publishing from the technology sector but an offensive move that places the new entity as a leader of equal if not larger scale to the movie studios like Sony, Time Warner, Disney, NBC/Universal and the like.

Transmedia Takes Capital

As transmedia and cross-platform content becomes more important the real rivals of publishers are not the platforms that enable them to reach their customers** but the creators of content which might be chosen by those very consumers in the place of their own. In short the book publishing industry is facing convergence with other forms driven by digital distribution and consumption.

In that world, where all content is now in competition with all other content, publishers need to increase their firepower to enable them to acquire, create and market the best content they can and in so doing enable them to charge the highest price they can, all the time facing down their rivals trying their damnedest from the other direction.

That to me explains why Penguin and Random have chosen to combine. In short, it’s all about the money, but for investing in projects rather than profit (that will come later when they get some hits). I fully expect other publishers to do the same, we might even seen publishers combine with other major content creators be they games developers, movie studios,  I could be wrong of course, but I hope I’m right.

Money
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(1) To be clear, I don’t rule out the viability of certain niches, nor the ability of some publishers to thrive as more modest sized entities publishing across several different niches or indeed solely focused on a single niche, but this piece is about larger publishers.

* With the obvious caveat that not all books will be hits and not all writers and publishers will be able to compete in that pace. But that’s okay, some writers and some publishers will make a decent living in the space below, perhaps many perhaps few, that is yet to be determined.

** Of which I have long believed anyway there is only one, The Internet!

Go Read This | U.S. settles with publisher Macmillan in e-books case | Reuters

I think it’s fair to say this is more of a whimper than a bang!

Under the proposed settlement agreement, Macmillan must lift restrictions on discounting by e-book retailers and must report to the Justice Department its communication with other publishers.

Justice Department lawyers “expect the prices of Macmillans e-books will also decline,” as happened after settlements with the other publishers, Jamillia Ferris, chief of staff of the departments Antitrust Division, said in the news release.

via U.S. settles with publisher Macmillan in e-books case | Reuters.

Go Read This | Pearson buys stake in Nook Media | The Bookseller

On the face of it this seems an odd move for a company so keen to unload its trade business into a joint venture with Random House in the driving seat. However, the college stores and the fact that students and their instructors are rapidly moving online are clearly the driving factor on this deal, reminding us just how much Pearson sees education as its future:

Will Ethridge, chief executive officer of Pearson North America, said: “With this investment we have entered into a commercial agreement with NOOK Media that will allow our two companies to work closely together in order to create a more seamless and effective experience for students. It is another example of our strategy of making our content and services broadly available to students and faculty through a wide range of distribution partners.”

Worth noting too is the increased value now being placed on B&N’s Nook business. Seems that their device play has worked even better than might have been expected, even this time last year.

via Pearson buys stake in Nook Media | The Bookseller.

Stage One

Author Services In The Light Of Penguin’s Purchase

I started this post back in April, I REALLY wish I’d published it then! Following Penguin’s acquisition of Author Solutions (DBW, The Bookseller) I’ve reworked it somewhat and added a few ideas around that move.

It all started at the London Book Fair this year, an event which brought to the fore for me questions over what will happen to publishers during this radical digital shift? A number of times, either as part of a conversation or in response to questions about the publisher role in the future, I spoke about Author Services or as I prefer to think of it, changing the editorial department from a cost centre to a profit and revenue centre.

But what does that really mean? Well it turns out that in the background several companies have been thinking about exactly that. Some companies have been busy creating product suites that cater to the diverse needs of authors.

A really good example of someone who is moving into the space in a measured and clever way is Bloomsbury through their  Writers & Artists Yearbook site. What was once  a staid old handbook of contacts has, over the last number of years, been recast as something entirely different, something very impressive.

The property was acquired as part of the A&C Black acquisition is also home to a number of other print products that have since transitioned fairly nicely to digital or represent an impressive list for future transition (the company has a fascinating history, worth reading, here).

What they offer ranges according to what you think you need from the very beginning of the process (you can get a book idea assessed for only £119.99) to the end of it (a meet the agent, beat the rejection pile meeting for £199). The one thing they don’t yet offer is actual help with self publishing, but that is a fairly simple step beyond what they currently offer.

The big opportunity is not so much to draw in new content from those who might otherwise self publish, but rather to create viable and real businesses from the editorial (and I suppose the production) departments that currently cost so much money.

Offerings like that at Writers & Artists Yearbook and their existing and future competitors will, I suggest, probably form the front end of the editorial departments of many publishers when the transition is complete. It is entirely possible that they will be independent entities or only loosely aligned with publishers, but it is equally possible that at some point, a vast transfer of staff will happen that sees the editorial department of a publisher shifting towards the newly created services units.

Imagine how it would be if Penguin was to reshape its business so that Author Solutions (or whatever it is renamed) provided the editorial resources (staffed no doubt by Penguin editors) to Penguin as one client among many (perhaps with privileges the others don’t have) it would change the way the company thinks of editorial services.

If all publishers decided to take that radical step (and I admit right now it IS radical), it would enable publishers to subsidize new titles by generating revenue on what have been traditionally expensive services to provide. Of course it would certainly change the way everyone thinks of that department and would probably lead to some resentment both within those departments and between the authors who were made to pay for them and the lucky authors who publishers felt were safe enough bets to invest in themselves.

I think we are only at the beginning of this re-shaping of publishers but the first big change we are seeing is in how we think about the editorial department (though some changes are hitting home hard in sales and marketing too).

Go Read This | After viral e-book, Iowa author inks seven-figure deal | The Des Moines Register | DesMoinesRegister.com

I wonder how long before we stop reading these types of stories, either because it has become so established a route to publishing success that it’s not worthy of comment or because no author would be crazy enough to do the deal?

I suspect publishers will just have to keep paring back their at operations edges (the fat if you will, though i sure in some cases they’ll be cutting muscle) in order to offer enough cash and royalties to sink these deals:

“It’s life-changing,” said Graves, who chronicled her path from rejection to viral e-book sensation last month in the Des Moines Register. “I’m happy for my good fortune and humbled by it. I’m not sure what happened.”

What happened is this: The 45-year-old Clive mother of two rose before the sun and work at Wells Fargo every day and tapped out a steamy novel about a 30-year-old English teacher shipwrecked on an island with a 16-year-old student. She was rejected by 40 book agents and 14 traditional publishers so she spent $1,500 for editing and formatting and posted the e-book on Amazon.com. It sold only 100 copies in the first month, then took off by word of mouth and thousands of positive online reviews from readers.

A paperback was offered and by last week the title rose to No. 7 for e-books and print sales combined on the New York Times best-seller list.

via After viral e-book, Iowa author inks seven-figure deal | The Des Moines Register | DesMoinesRegister.com.

Go Read This | It’s on — US sues Apple, publishers over e-book prices — paidContent

I tells ya, some fun will be had with this one methinks! I hope Agency falls, I really don’t like it!

The Justice Department has at last filed an anti-trust complaint in New York against Apple and five publishers over an alleged price fixing conspiracy. (Update: Three publishers to settle)

The decision to sue comes after weeks of media leaks that suggested the government was trying to pressure the parties into a settlement.

The issue turns on whether five publishers illegally colluded with Apple to implement “agency pricing” in which the publishers set a price and the retailer takes a commission. (see here for more details)

The lawsuit has yet to be posted on the Justice Department’s website but Bloomberg News says Apple and five of the “Big 6″ publishers are named as defendants. The named publishers are Macmillan, Penguin, Hachette SA, HarperCollins, and Simon & Schuster. (Update: a Bloomberg report says the latter three will settle. This is consistent with a leak earlier this month).

via It’s on — US sues Apple, publishers over e-book prices — paidContent.