The Industry’s Future

Judging from the prognostications that Pat Schroeder remembers hearing at publishing conferences a decade ago, most people today ought to be reading e-books and regarding print as a quaint relic of the past. That hasn’t happened, of course, and the president and CEO of the Association of American Publishers (AAP) sees that fact as a useful caution when trying to predict the future of the industry. It’s easy to identify key factors, but misjudge their effect; trends that seem vitally important now could fade into obscurity, and the course of publishing could be shaped by things currently on no one’s radar screen.

With a number of historic elements coming together, from revolutions in production and distribution that promise to permanently reshape the author-editor-reader dynamic to an economic meltdown that is putting new investments on hold, predicting the future is no easy task. Will publishing be driven by reader habits? Digital media? Radical, new distribution models? Or is the appeal of books too wrapped up with the distinct culture of reading to ever become analogous to the salad-bar appeal of iTunes?

“It’s probably all of the above, and the problem is [that] we don’t know in exactly what proportion,” Schroeder says. “The technology companies haven’t come up with anything yet that will really replace books—in some areas [technology] will, and in some areas it won’t.”

Still, broader movements are easily discernible. If the major factors affecting book publishing can be compared to tectonic plates, the difficulty is in knowing whether some will push others down into oblivion as they roll along, reshaping the landscape, or if collisions will result in new mountains made up of everything that came before. Either way, there are sure to be earthquakes.

Give People What They Want
Many of the changes we can expect to see five, 10 or even 15 years down the road, experts agree, will be driven by expectations in a media market built around consumer choice, rather than top-down, push-marketing models.

“As consumers have grown accustomed to interacting with content on their terms with other types of media, they are coming to expect the same flexibility with books,” says Frank Daniels, COO of Ingram Digital. “For some consumers, this means an iTunes model for consumption, allowing for purchase of complete e-books or individual chapters as they choose. Other consumers will prefer to interact with printed content.”

Wed to an old model built around sales of expensive CDs, the music industry was swamped by a wave of consumer revolt—a reaction to the reality of being able to acquire high-quality audio by the song, and the industry’s initial refusal to legally allow it. Book publishers have the ability to learn from these mistakes and provide customizable content solutions where desired, an effort led by scientific, technical and medical (STM) publishers. “This has been the blessing of [book] digitization coming later [than changes in the music industry],” Schroeder says.

Still, the industry required a push of its own—namely, the Google Book Search lawsuit and settlement—to fully appreciate the potential of digital marketing and distribution. Just as, when the dust finally settled, iTunes turned out to be not such a bad thing for music (it took away much of the incentive for illegal downloading), the Google settlement will ultimately be good for books, Schroeder believes.

Google Book Search’s initial goal is to digitize millions of books stored in major research libraries. Books in the public domain can be viewed and downloaded for free in PDF format; under the recently-approved settlement between Google and book industry stakeholders, books under copyright can be bought or borrowed. A partner program makes books from authors and publishers available for search and download.

“People in very small towns will be able to research 7 million books. … That’s mind-boggling,” Schroeder says. “Then, if they want to print out a book to have a copy of it, they can do it for so-much [money] a page.”

Short term, expect initial attempts at monetizing this vast online database of material to be driven by print-on-demand (POD) solutions, she says. As the system is expanded and made available at libraries and other institutions, Google Book Search portals could be paired with book-at-a-time modules for instant book printing.

“In the near term, Google’s presence in the market will be a positive for many players in the channel, creating a rising tide of demand—much as the Kindle has increased Sony Reader and [other] e-reader sales,” says Daniels. “Longer term, we’ll see how Google squares off with Amazon for dominance in the retail book market, and how comfortable libraries are in ceding much of their collections and services to Google.”

The pace of growth will be, to some extent, determined by legal issues, as copyright laws will continue to be retooled in the face of the new system.

“You want to be able to create compilations on the fly,” notes Phil Madans, director of publishing standards at the Hachette Book Group. “The rights are so complex, especially if you are dealing with illustrated books. You might have the rights to the text, but not to the illustrations. … [There’s the issue of] where it’s going to be marketed outside the U.S., and who has the rights there. For educational publishers, even though they have all this content that they own, there are these stipulations that one author does not want to be in a compilation with another author. You’ve got to build that into the process, and it can be a real challenge.”

The desire for personalized options will contribute to the trend of custom content, pioneered in by-the-chapter book sales from STM publisher John Wiley & Sons, Schroeder says. Expect customized anthologies to become important in the higher-education market, followed by reference materials in the trade sector—such as recipes compiled in an e-book or custom-printed volume, she says.

In the trade world, much potential lies in serialization of longer works, says Florrie Binford Kichler, president of the Independent Book Publishers Association (IBPA). She expects services like Daily Lit, which delivers books in serial form by daily e-mails to subscribers (for a monthly fee), to become more popular and sophisticated as they tap mobile technology.

In order to make reading an important part of the digital future, “We have to deliver our content the way the reader wants it and when he wants it, both print and online,” Kichler says—especially in light of a continuing, and troubling, shift in reading habits.

“It’s hard to talk about the future of publishing without talking about the future of reading,” Kichler notes. A National Endowment of the Arts (NEA) report (“To Read or Not to Read,” published in late 2007) found that young American adults spend an average of seven minutes of daily leisure time reading, compared to two hours watching TV. The report also showed that reading scores among American adults of all education levels have deteriorated. (An updated NEA report is due out early this year.)

Retail and Marketing: The Focus on Tagging and Presentation
According to Madans, a major factor in future book sales will be XML tagging, which will increase the chances for someone to stumble upon a book they are interested in while searching for something else. “You want people to find your book while they are looking for things [online],” he says. “By putting it in contextual tags, you are making it discoverable when people need it.” An example would be a Google search on 19th-century whaling, which ought to bring up “Moby Dick,” or the search for a work of fiction leading to the discovery of related nonfiction books. Any search on any subject can lead to book sales—this, Madans says, is the promise of intelligent tagging, and the means by which a bookstore-browsing sensibility can be brought to the online experience. It’s already starting to happen with books scanned into Google Book Search.

The development requires significant changes in the author-editor relationship, Madans says, as editors will be expected early in the process to identify how a work should be marketed across multiple formats. Editors also must develop the ability to judge which of a range of presentations are truly best for a given work.

“Not every piece of content is going to be right for what you can do,” he says. “There may be some books where it makes sense to chunk it up, others not. It’s the editor working with the author right at the beginning to think about how you want to do this—starting with XML and tagging the content properly based on what you think you are going to want to do with it, and what the market is.”

Not surprisingly, book retailers also aim to encourage spontaneous book discovery during in-store browsing experiences, as well as to emphasize what they can provide that the Internet cannot. One of the important lessons of the Borders “concept stores” (launched in early 2008) is the need to emphasize presentation, according to Borders Executive Vice President of Marketing Rob Gruen. “How we present has been a key takeaway from that,” he says. Innovations include “plexi-fixtures,” which allow the store to display books stacked face out, as well as multimedia layouts targeted to specific interest areas, such as travel and cooking. The designs have helped to encourage impulse and cross-media buying, while enriching the customer experience, Gruen says.

Equally important is customer service, including help at digital media kiosks that offer services such as custom publishing (through a partnership with LuLu), music downloading and photo-album creation. Cafés and numerous in-store events are designed to transform stores into local destination attractions.

“Customers spend an average of one hour in our stores,” Gruen says. “I’ve worked for other retailers where they spend an hour because they couldn’t find anything or had to wait in line. The hour that they spend in our stores is because they love to browse.”

The chain’s new Web site, Borders.com, attempts to offer a richer user experience than offered by former partner Amazon, with interactive features, such as the “Magic Shelf,” which seek to replicate an in-store customer experience.

The Borders concept stores—which Gruen stresses are meant to be a laboratory for ideas that can be applied at all locations—are just one example of the reinvention necessary in a tough retail market.

“My biggest worry is what will happen to retail,” Schroeder says, “because I think there is a tremendous need for bookstores. They are community centers in so many places, and, unfortunately, they are having a tough go.”

Digitization: New Responses to External Pressures
The reach of what some consider to be the most promising of the electronic alternatives to printed books, the e-book, is contingent on factors such as cost and reader acceptance. In the near term, expect the e-book to continue to grow in popularity among those who can afford the devices, Schroeder says. Faster growth, looking beyond five years in the future, may be enabled by cheaper devices.

Kichler points to the International Digital Publishing Forum’s report showing 75-percent growth in trade e-book wholesale sales in the third quarter of 2008 over the same period in 2007, “in [what was] not a great year for publishing,” as evidence that the market will continue to grow. As additional e-book solutions enter the market, she believes the format’s share of total book sales will surely increase.

Some smaller publishers may be at a near-term disadvantage because of conversion costs in embracing the e-book format, Madans says, although, in general, digitalization will “really level the playing field” as far as making books available to readers.

The Internet has significantly lowered the barrier of entry into book publishing (almost anyone today can “publish” a book—making it available online for POD), driving an explosion of new titles—over 400,000 last year alone, according to R.R. Bowker. This trend can be expected to continue with the proliferation of self- and vanity-publishing, says Frank Gromling, head of Flagler Beach, Fla.-based independent publisher Ocean Publishing and immediate past president of the Florida Publishers Association, who is concerned about the perception of quality this creates. “Booksellers are now inundated by so many new titles, even the review sources cannot evaluate them all,” he says.

Adding to the noise is the fact that the old, reliable “filters”—book reviews and advertising in magazines and newspapers—are steadily vanishing. “All of us are concerned about … lost review space in newspapers,” Schroeder says. “People are looking for new models.” She says she expects more marketing partnerships with Amazon and publishers teaming up on Web sites on the model of CourseSmart, a joint effort between five higher-education textbook publishers, including Wiley and Pearson, which makes thousands of textbooks in e-book format available for sale in one location.

Schroeder also predicts certain public policy decisions will have an impact on the way publishers do business. Near term, the economic downturn will affect school budgets as property tax revenues erode; a longer-term factor is the skyrocketing cost of higher education, which may lead educational institutions to demand more of publishers in that market—entire courses designed and published online, an increasing array of supplemental materials and activities (labs, etc.), even class and lecture notes produced as part of a course package.

Distribution: A Changing Landscape
In late August 2008, a member of the IBPA found himself in an enviable position—possessing the only title in existence about Alaska Governor Sarah Palin, who had just been announced as presidential candidate John McCain’s running mate. Demand for the book skyrocketed virtually overnight. “[The publisher] knew the business, and he know how to deal with it, and was able to turn the book around and get out thousands and thousands of copies,” Kichler relates.

In an industry full of troubling news, such stories are a breath of fresh air, made possible by the flexibility of on-demand digital printing. Book-at-a-time printing stands to become increasingly important to the industry as publishers strive to avoid returns and warehousing costs associated with traditional print runs, printing books only when needed in the quantity necessary.

As long as offset printing remains cheaper, however, publishers will continue to utilize that option for large initial print runs, but there seems to be general agreement that POD will become more and more important as production costs continue to fall and quality continues to improve.

“One of the things we can look to is every offset printer offering digital to survive,” Gromling says. “You must be able to offer flexibility to publishers.”

A potential “drastic change” within a few years, suggests Gromling, may come with the growth of nontraditional book markets, such as pet stores, supermarkets, gift shops and the military. This will affect both retailers and distributors, as these venues do not rely on traditional book distribution models and, in many cases, lend themselves to disintermediation—direct distribution of content by the publisher to a retailer.

Gromling also believes the practice of accepting returns will be challenged more and more frequently as electronic media and other competing distribution models continue to challenge the traditional distribution marketplace.

Daniels, however, believes there is an important place for distributors going forward. Because the technologies required to distribute print and electronic materials are complex, such a role “takes publishers away from their core business—content—and forces them to act as a technology company,” he says.

“We believe that intermediaries such as Ingram Digital will continue to play an equally as important or perhaps a more important role in helping publishers and retailers balance the distribution of both print and digital content,” he says.

Overshadowing all of this, though, is the question of the effects of digital media. “I think going forward it will be interesting to see how the definition of what a book is changes in the next 10, 15, 20 years,” Kichler says. “Will we even still call it a book? Maybe it will just be called a content container.”

The consensus seems to be that, for books, content is the key, and the format in which the content is delivered is secondary. While the marketplace may shift and new content-delivery platforms may rise and fall, the content—whether fiction, children’s stories, educational texts or religious teachings—will prevail. The bigger concern for the industry as it moves into the multimedia future may be competing in a world where people are spending less time reading.

“You read all the time in the [media]: The book is dead, the book is dead,” Kichler adds. “The book isn’t dead, but readers are going to be [a dying breed] if we don’t give them what they want, when they want it.”