Don Linn's seen most angles of the book business as a publisher and distributor. He's also been an investment banker, and explored briefly a promising digital publishing start-up venture, before pulling out. We are at an inflection point in this business - we all know that - so I'm fascinated by Don's take on what's happening, on why Quartet didn't make it, and where he thinks the risks and opportunities are in publishing. I follow Don's blog, and Twitter stream for sensible and level-headed views on the publishing biz, which can be a rarity in the world of online crystal ball prognostications.
1. Quartet, your short-lived digital-only publishing venture, had many people excited about a publisher that was going to do everything right, but you decided to shut it down before it even got started. What happened?
I suspect you'd get a slightly different answer from each of the principals, but fundamentally from my perspective, as we got deeper into the project, we learned that (a) our per title pricing projections were overly optimistic because of continuing declines in digital book pricing generally, (b) we were going to be more dependent than originally forecast on third parties for distribution (reducing further our net receipts per sale) and (c) it was going to take considerably longer to ramp up to a critical mass of titles available for sale than we'd anticipated. The combination of those facts made it difficult for me to project any reasonable return on investment within a decent time frame and I felt it was better to pull the plug before (a) we'd signed up a large group of authors, editors, designers and other supporting players and (b) before we'd sunk too much capital into a business that, even if it was successful by some measures, would not be successful enough for the principals to have earned a reasonable return for the risks we were taking. Needless to say it was a difficult and unpleasant decision but I'm convinced it was the correct one under the circumstances.
2. What did you learn from your brief time trying to get Quartet up and running?
Well I've always learned more from things that didn't work out than from things that did so there was no shortage of lessons here. Apart from learning a great deal about the tools and services available to digital publishers and about the market's pricing expectations for digital content, the big lesson for me was that starting a new digital publishing business without an existing platform of some sort is terribly difficult. The reason is that for a digital publisher to generate decent gross margins at current price levels for ebooks, a substantial portion of its sales need to come from its own site directly to consumers rather than through third party distributors like Amazon, et al. It's why I think Harlequin's digital-first imprint, Carina Press, has a good chance at success (and also why we haven't seen a lot of other new digital-first presses emerge. The other big lesson was readers' desire for community and their support for a publisher that was open and transparent with readers and authors. I think that's a lesson that all publishers could learn from and build on.
3. You've written about the publishing industry having lots of tools and not enough change. If you could change three things about the way the industry works, what would they be?
I'm assuming you don't mean I could snap my fingers and change things like the antiquated sales and returns process go away so I'll try to constrain these to things that can actually be implemented by most publishers now. The first would be to publish each title you publish properly. By that I mean doing the things publishers have historically done well...acquiring intelligently, editing and designing properly and marketing appropriately. Too many titles now are bought (often at way too high a price), produced sloppily and just tossed into the market without adequate support. This benefits no one. Second, I'd like to see all publishers implement workflows (using XML or other flexible tools) and production processes that make their content more agile. Brian O'Leary has written extensively and thoughtfully about this but it but to maximize revenue, publishers need to be able to use it in every possible market and every available format. We can't afford to miss a single potential paying customer in this market. Finally, I'd just encourage more intelligent experimentation and attempts at innovation. I sense paralysis on the part of a large number of publishers based on a (not irrational) fear of making the wrong bet during this chaotic time. The good news is that, with the tools and platforms that are available now, you can afford to experiment 'on the cheap' around the margins where a failure is not a lose-the-company mistake.
4. What are the three biggest problems facing publishing today?
As I alluded to above, the single biggest problem I see is too many titles being published poorly. It's partly a function of volume (the market simply can't absorb the hundreds of thousands of books coming at it each year) but that issue would be largely resolved if each publisher made the appropriate commitment to each title. That's not to say we eliminate the midlist or trying new authors; it is to say we don't just put resources behind the Dan Browns, Nora Roberts and James Pattersons of the world. Other big problems are:
(1) ongoing and growing competition from other entertainment forms, particularly as all forms of entertainment converge (How will we distinguish, for example, an enhanced ebook from a movie or game?) and
(2) the huge investment in infrastructure the entire industry has in print distribution and sales channels that are fundamentally broken. How we unwind that as the inevitable shift to digital reading takes place is an enormous head-scratcher.
5. What are the three biggest opportunities?
The most important opportunity we have as an industry is that (sometimes in spite of ourselves) we still have a loyal audience of readers and evidence suggests that, while they're taking in their storytelling in different forms, young people are still devouring information. Our job is to build on our existing readership and train the next generation that our product is at least as attractive as their other options. Second, we as an industry have only scratched the surface of the demand for our content in the rest of the world. Central and Eastern Europe, the Middle East, Asia and Africa represent enormous potential markets, especially as content becomes more available on relatively inexpensive mobile devices. The last I'll mention here is enhanced digital books couple with social or group reading. I think publishers targeting educational markets with specialized products that can be used on multiple devices have an opportunity to revolutionize education worldwide. There are lots of others.
6. Are you optimistic or pessimistic about "the future of books"?
I think the next year or two, as the distribution channels continue to churn on the print side and as the format and device wars continue to play themselves out on the digital side, will be rocky and there will be a continued shakeout of players all across the industry. On balance, though, I'm confident new business models will emerge. Our product, which is fundamentally 'storytelling' has been around forever and it's not going away. I'm also one who thinks that print books and skilled booksellers will be with us for a long time, though there will likely be fewer of each.
7. There seem to be many armchair pundits ready make pronouncements about "what publishers should do." Why are there so many pundits and so few successful publishing start-ups?
Ha! You've apparently read my Bait'n'Beer post, The Peanut Gallery is SRO, where I rant about advice-givers who are short on information or expertise. Hey, it's the internet and everyone gets to have and express his or her opinion. It just troubles me that a lot of opinion gets passed off as information, leading some readers to form negative opinions about either traditional or digital publishing that are not based in fact.
The second part of your question is more serious and important. There aren't a lot of startups because at this moment, the risk/reward relationship is, in my judgment, way out of line in the publishing business. As I discussed earlier with regard to Quartet, even if you're efficient and do things right, the ability to earn a market return for the amount of risk involved in this business just isn't there. You can see that reflected in the lack of venture capital flowing to publishing startups (with the notable exceptions of Open Road Integrated Media and Vook).
8. If you were running a publishing house right now, who are the three people or companies you would watch most closely?
1) Google, because they haven't shown all their cards yet and they have the financial and market power to effect enormous positive or negative disruption if they choose to.
2) Tor and Tor.com, who are working a vertical category and market as well as anyone and showing great foresight in aggregating content on their site from their competitors as well as from their own imprints. I'm very interested to see how successful they can be in monetizing the community they're building beyond simply selling them books.
3) O'Reilly Media, because while much of what they do is applicable only to their customer base of early adopters and geeks, there are lessons for all of us in the business.
If I could insert one extra, the person I'd most like to watch closely is some unknown kid who is at this moment writing code or working on a product that will come out nowhere and change the way we're thinking today entirely. Who ever thought selling books from an internet store would have the impact on all our lives that Jeff Bezos has had?
9. DRM - yay or nay? Why?
It depends. Philosophically I have problems with it in most instances, the most prominent being that DRM doesn't really work in stopping a determined hacker and it can frustrate legitimate uses by honest consumers. That said, I'm reminded of a cartoon by Hugh Macleod at Gaping Void captioned, "It's easy to spot a purist...he's the one without any skin in the game." If I were a publisher selling high-priced product with a limited market (say, college textbooks), I might be inclined to make it at least a little more difficult for my titles to be passed around for free.
10. You've been an investment banker, a catfish and cotton farmer, an indie book distributor, a traditional publisher, and a principal in an aborted attempt at digital publishing. What are you going to do next?
I haven't quite decided but it's probably publishing-related since I seem to have contracted the disease that people who get into this business get. I've made some small investments in a couple of promising startups and am doing a little consulting with publishers and publishing service businesses at the moment. I'm counting on the right opportunity coming along; whether it's something entrepreneurial for my own account or whether it involves doing something for another company is unclear. What I've always observed is wherever there is chaos (and certainly that's true in the book industry at this point), there's opportunity. It'll be fun to see what happens.
NOTE: Cross-posted at the Book Oven Blog.
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