SPECIAL REPORT: Embracing the ‘Kindle Effect’

2007 might well be remembered as the year when, a few months after the final installment of “Harry Potter” hit the shelves to blockbuster acclaim, the “To Read or Not to Read” report was issued by the National Endowment for the Arts (NEA). The report raised serious concerns about the future of reading in this country: Amount and proficiency are on the decline, the report found, especially among young adults and older teens.

Then, there are new U.S. Census numbers, released in December 2007, that show that the number of hours per person spent reading consumer books has been basically flat over the last six years. The same report—“The 2008 Statistical Abstract”—records that per-person spending on books is rising modestly, though time with and money spent on books is dwarfed by the continuing rise in those numbers for television. Adjusted for inflation, American households’ spending on books, according to the NEA report, is near a 20-year low.

Given such sobering news, it can seem as if the book industry is at the mercy of larger social trends. Not so, according to industry executives and analysts, most of whom agree that the challenge for publishers today is essentially one of helping consumers discover the right book at the right time.

The situation is summed up well by Albert M. Greco, a professor of marketing at Fordham University’s Graduate School of Business Administration and a principal contributor to the Book Industry Study Group’s (BISG) “Trends 2007” report. “The industry has tried to come up with a lot of books that hopefully will appeal to a large segment of the population, but has never done serious consumer marketing research,” he says. Combine this with the fact that, of the nearly 300,000 books published in 2006, only a few thousand were reviewed, and a situation results where releases with a lot of potential appeal do not get on people’s radar screens, according to Greco.

“People don’t know what to read,” agrees Patricia Schroeder, CEO of the Association of American Publishers (AAP). The principal challenge for book publishers in 2008, she says, will be penetrating the “clutter and noise” of the contemporary media environment.

“It’s a very personal choice, and publishers are always frustrated by how to get the word out. There’s a renaissance in writing going on, and not enough people know about it,” Schroeder adds.

Mark Kuyper, executive director of the Evangelical Book Publishers Association, agrees. “Most of our potential audience does not know what exists,” he says.

He cites the success of Rick Warren’s “Purpose Driven Life” as an emblem of what can happen with the right synergy of marketing, networking and media buzz. “If it were possible to get the word out as was done through Rick Warren’s network of churches … there is a large number of people who are interested, they just need to know it’s there. That book has sold over 30 million copies. That’s just phenomenal. It lets you know the potential.”

The sheer number of titles being published makes this marketing challenge even more difficult, says Kelly Gallagher, general manager of business intelligence at RR Bowker. While figures for 2007 are not yet available, the number of titles produced has gone up “dramatically” because of print-on-demand and the breaking up of works for separate sale and distribution in digital format, says Gallagher.

“There’s been a very significant increase in what constitutes a valid ISBN,” Gallagher says. “We’ve known for a while this was coming—that it would not necessarily be paper and print defining that [ISBN] number—but it is really coming to fruition.”

The trend is driven by direct-to-consumer online book sales, now nearing 20 percent of total sales. The rate of growth in that segment over the past five years has, Gallagher says, been “faster than anyone anticipated.”

The industry’s growing reliance on online business is reflected in Barnes & Noble’s 2007 holiday sales figures, released Jan. 10. The world’s largest bookseller reported that its online sales jumped 10.9 percent over the same period in 2006, to $428.8 million. By comparison, in-store holiday sales were up 4.1 percent, to 1.2 billion.

Offsetting, to some degree, the explosion in titles is a growing tendency to consolidate categories—the most radical example of this being Thomas Nelson’s elimination in April 2007 of its entire stable of imprints—as part of a general effort to streamline marketing efforts to consumers, Gallagher notes.

“My sense is that if you factor out the breaking down of the book [for digital distribution purposes] … just looking at apples to apples, publishers are taking more seriously the effort to get more revenue from fewer titles,” he says.

Competition for Readers “Gets Hotter”
Because the market for books is not as big as for movies, it’s simply unrealistic to pin hopes on large-scale, movie-style advertising campaigns, Schroeder points out. This fact has led publishers to be on the forefront of new marketing strategies built around multimedia Web offerings.

“Competition for the consumer’s time and dollar is heated and getting hotter as the book competes with an astonishing and growing array of other media, from the Internet, to cable television, to the ubiquitous and multifunctional cell phone, and as books are sold in more nontraditional outlets than ever,” write Stephanie Oda and Glenn Sanislo in the BISG’s “Trends 2007” report.

The subtitle of their essay, a quote from HarperCollins CEO Jane Friedman, in many ways says it all: “The challenge is to be the smartest marketer.”

Rising to that challenge has led publishers to embrace a number of new media technologies, from podcasting and online video to blogging and social networking. As a positive consequence of the alarm raised by the NEA’s “To Read or Not to Read” study (which showed “startling declines” in how much and how well Americans read [in fiction and nonfiction, and in various formats—book, magazines, online, etc.]) and its “Reading at Risk” study (which showed a dramatic decline in the number of American adults reading literature), national organizations such as the Library of Congress and NEA are also getting in on the multimedia act.

The NEA’s “The Big Read” (www.NEABigRead.org) seeks to “restore reading to the center of American culture” by partnering with communities around the country to promote discussion around books. Elements of the program include a promotional kit with audio and visual materials (including dramatic readings by famous actors), movie screenings, book clubs, panel discussions, teacher’s guides and an interactive Web site.

A promising development in the effort to spread the word about new releases is the increasing prevalence of authors appearing on cable television news shows, Schroeder says.

“Writers are scholars. If you are a journalist, you can’t know about everything, so it adds an awful lot of depth to reporting to have an author who has researched a topic extensively. It’s good for all concerned to have these authors on these shows.”

Getting the late-night talk shows back on the air in the midst of the Hollywood writer’s strike just after Christmas was “a great New Year’s present,” Schroeder says, as authors’ appearances on these shows tend to be a boon to book sales.

Another promising development to kick off 2008 was the announcement (on Jan. 3) of children’s book author Jon Scieszka as the Library of Congress’ first-ever National Ambassador for Young People’s Literature. Scieszka is known both as an author and advocate for getting boys to read more through his Web-based, nonprofit literacy initiative Guys Read (www.GuysRead.com).

Statistics indicate that such an advocate is needed, Greco says.

“We know from statistical data that when you deal with juveniles between [the ages of] 7 and 8 to about 15 or 16 … girls read far more than boys,” he notes. “When you look at what boys are reading, they’re not reading much, but it’s mainly manga comic books.”

Schroeder says that, just as with adults, the key is to make kids aware of the choices available to them and connect them with books that interest them.

“One of [Scieszka’s] books was challenged in a library, so hopefully the ambassador choice will lead to a heightened consciousness about banning [books],” she says. “People say: ‘Write stuff that boys want to read!’ and so we get ‘Captain Underpants’ and ‘Harry Potter,’ and then they ban them. … Reading is not easy for a lot of people. If they’re not interested, they won’t read. You’ve got to have things kids really want to read, and give them a range of choices.”

Embracing E-Readers
In an age of multifunction cell phones and iPods, another key to the industry’s future is making books as convenient and easy to purchase as possible. On this front, things are looking up for 2008, thanks to Amazon’s November 2007 introduction of its Kindle e-book reader.

With consumer awareness of the advantages of e-book technology growing, prospects are good for continued rapid growth of this segment, says Ana Maria Allessi, vice president and publisher at HarperMedia, who works across divisions to guide the growth of this medium.

Amazon’s release of the Kindle means “all good things” for the format, she says, adding that publicity surrounding the Kindle, in concert with Sony’s efforts to promote and educate the public about its e-reader, is certain to lead more people to embrace the technology. “It’s a poorly understood format,” she acknowledges, “so any effort that is successful in educating and breaking down this mystery is, of course, of great interest to people like me.”

Allessi, who uses her e-reader every day during her commute to work, says questions from other commuters have in recent months changed from “What is that?” to “How do you like it?”—giving her a chance to evangelize for a technology she believes will play a huge role in the future of books.

“As both a book person and [an] e-book person, I believe there are many books that I want to own, that I want to be able to touch and feel, and have on my shelf, and I firmly believe there are many more that I want to read, and these devices make [that] reading very easy and convenient,” she says.

Kuyper says that the download capabilities of Amazon’s Kindle may prove to be the main driver of the format’s future expansion. “Business will trend toward the most efficient means,” he says. “Kindle, thus far, appears to be the dominant tool, probably because of being able to download books directly to the device.”

Gallagher agrees that the tipping point for e-books may be what he calls the “Kindle effect”: “merging technology and delivery methodology, giving the customer only exactly what they want when they want it.”

While still in the early-adopter phase—avid readers, business travelers and commuters, mostly—Allessi believes the appeal will grow as consumers recognize “liquid ink” technology does not cause eye strain. The key, again, is effective marketing, from simple strategies such as making sure e-book retailers feature titles prominently on their home pages after a mention on “Oprah,” to asking authors to publish first in e-book format before print.

Harper’s commitment to the technology is demonstrated by the company publishing “every single title we can”—meaning all except heavily designed titles—in e-reader format on the same day as print editions, Allessi explains.

“I really do think, once you explain it to people, it’s a straightforward desire,” she says.

Assessing the Long-term Digital Impact
In the face of opportunities made possible by technologies such as the e-book readers come challenges related to the proliferation of digital content and its (still unclear) effect on the industry. Especially in some of the more traditional parts of the supply chain, the question of how digital assets add value is an open one, Gallagher believes. “Will printers take on the role of digital asset distribution when they are not printing?” he asks. “Will wholesalers get more into print-on-demand? How, in general, will publishers be getting their products to market? It doesn’t necessarily mean a brick-and-mortar store anymore.”

Such upheavals demand innovations in both traditional supply chain efficiency and in the way the new digital supply chain operates, says Michael Healy, executive director, BISG.

Healy points out that the fragmentation of content into different forms as it goes digital creates the need for a new identification system to make this new supply chain work as efficiently as possible.

Recognition of this challenge is “growing and growing slowly,” he says, though mostly among larger publishers.

A BISG-sponsored discussion paper, “The Identification of Digital Book Content” (available at www.BISG.org), recommends retention of ISBN, along with the adoption of a digital object identifier (DOI) to facilitate the discovery of content on the Web, and a new standard text code to track various products emanating from a textual work. The BISG formed a digital standards committee with the AAP last year to develop specific standards for how digital publications should be searched and retrieved.

Explosive growth in title output across multiple formats also means quality product information is more important than ever, Healy adds.

“In a market … in which online retailers like Amazon.com and BN.com can give equal ‘display space’ to both a front-list title and a deep backlist title, the quality of product information is very important,” he says. “A title without a jacket image, or review, or description is severely disadvantaged in this setting.”

As part of a program scheduled to be launched this month, the BISG has developed best-practice standards for product information. As with efforts to improve marketing, these moves are directed at breaking down barriers between product and consumer, more critical than ever in light of ever-increasing media platforms competing for shrinking attention spans.

“It’s going to be a tough road for publishers overall because of the vast amount of competition with media and the opportunities for people and how they engage with it,” Gallagher says. “To me, that’s the ongoing challenge—the proliferation of choice.”

On the other hand, as Greco notes, the industry’s core strengths make the overall outlook good.

“The book business is stable, meaning you have numbers that are quantifiable and that you can model, and that’s of interest to an awful lot of people on Wall Street,” he notes. “And it’s historically a growth business, unlike technology or housing. There are certain sectors [of the economy] that have boom years and bust years, and this is a business that is far more consistent when you look at who owns some of the major publishing houses—large, global conglomerates who are in this business because they like this business.”