Tuesday, January 31, 2012

Crisis versus opportunity

One man’s crisis is another man’s opportunity.

Joe Konrath or somebody predicted that the big publishing crisis would occur in mid-2011.

In some ways he was right. Borders disappeared, taking about 650 brick-and-mortar bookstores with it.

In Canada, a major distributor, who handled pretty much all the traffic between publishers and bookstores, also bit the dust, when H.B. Fenn filed. The month before, their own imprint Key Porter shut down after laying off two-thirds of staff.

Yet other sources predicted the big crisis would come in 2012, without specifying any particular scenario. Presently there is much talk of Barnes & Noble either suffering falling share prices based on uniform doom and gloom across the industry, (plus their own challenges,) ultimately disappearing from the landscape, or in another scenario, taking on the new giant on the block, Amazon, who launched a number of their own imprints in the last year. Barnes & Noble’s Nook reader may or may not be enough to save the company.

At time of writing, e-book sales are quoted at about 17 % of market share, presumably in developed markets. Yet in undeveloped markets, the share might soon be much higher, this in a kind of bypass-effect. People who could never afford a personal library of hard-covers and paperbacks, could very well buy into e-readers, some of which are as little as $30, and slam them full of free and $0.99 e-books, without ever in their lives purchasing a new book from a bookstore. I have seen a $30 e-reader, but is this where the market is headed? On the high end, e-readers and manufacturers are looking for more interactive features. There is a case for utter simplicity in developing markets. People may be more dependent on the local library, where they might plug in and borrow a book rather than purchase by wireless or internet hook-up. It’s also a cheap device to make, especially if you’re not subsidizing customer purchases like some of the really big makers.

Then there’s Apple, with a whole new take on text books. Their new product is hypertext translated from esoteric multi-stream fiction, its previous realm, into a kind of multi-media teaching method. My brother Chico and I discussed this, his point being that textbooks are traditionally expensive—because of small print runs, and a captive market. If you knock out the price of ink, paper, distribution and major labour costs, the price comes down significantly. Imagine what happens once there is sufficient market saturation in a country like India or Bangladesh for cheap e-readers. Throw in sound, colour and movement, and you really have something.

Education has always been the poor man’s wealth, and poor people are going to figure that out in vast numbers. For that reason, there will be an explosion of non-fiction in any market you care to name.

In an anonymous article a putative industry insider claimed that ‘Amazon is killing us.’

(On another level, cheap literacy is a threat to established orders, and as far as this writer is concerned, it’s about time.)

What happens when the markets for short fiction dry up? There is a kind of trend where people are self-publishing a lot of short stories in places like Smashwords, and simply taking their chances. This is understandable in a world of $5 and $10 fiction markets, with many magazines start-ups in their own right, ‘fledglings.’ There are two factors, one, the print magazines are facing the same sort of cost/distribution structures as book publishers, and two, this self-publishing of short works by the author is a whole new market of unknown potential. No one knows what is going to happen there. Rather than buy one magazine, a customer may well browse a site much like Smashwords.

If it’s free, you can always delete it and try another one. It’s just that simple.

While it is true that established authors have an advantage to begin with, (not exactly a new thing,) because of name recognition and the cachet of having been published by a major imprint, independent authors sense a real opportunity to carve out a niche of their own. It’s a matter of foresight and patience. At some point, there won’t be anyone with name recognition left. Simple human and corporate mortality will take care of the old paradigm.

Like the dinosaurs, the vitals of the industry will be gnawed away by hordes of cheerful little varmints, who can move faster, adapt faster, and have bigger brains in proportion to body size, which as everyone knows, have to be fed with real resources.

If the industry goes the way I predict, big publishing will find it increasingly difficult to prop up share prices, service existing debt, pay out $25 million dollar yearly executive bonuses, or live on an ever-squeezening margin. Remember, they also have to produce new books as well. At some point mergers and acquisitions will happen. There will be takeovers, friendly and otherwise.

If you have a big pile of cash laying around, you might want to consider this: once you fire all the people, sell off the buildings and the trucks, and send the printing press to the scrap-yard, what you are left with is a treasure trove of intellectual properties including some of the brightest lights in the galaxy, in all formats and all media, in perpetuity. The downside is that conversion is labour intensive. On the upside, whenever you want some more money, you simply release a few more exclusive titles.

A relatively small staff, a good website, and you’re back in business—selling e-books—just as you should have been all along. Industry execs know that in the future, reading will be 95 % digital.

The future has caught up with them. If nothing else, major publishers are and should be putting out e-books on a priority basis, both as to urgency and content/title selection. They must go for the other 17 % of market share that they will miss without e-books, and forget about desperately trying to justify continued investment in traditional ink and paper products.


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