Ebooks rewrite an industry

If one of the purposes of trade fairs is to create buzz, the organisers of BookExpo America could not have asked for a buzzier prelude to this week’s event.

In the run-up to the Manhattan show, Amazon.com announced its Kindle electronic book sales were outstripping those of its paperback and hardback sales in the US; Liberty Media made a surprise bid for a majority stake in Barnes & Noble, the US bookstore chain; and, in the UK, a Russian billionaire agreed to buy Waterstone’s bookstore chain.

US e-book revenues grew 146 per cent in March, compared with the same month of 2010, according to the American Association of Publishers. For some commentators, this is the end of days. Yet, speaking at a forum in London this week to launch the Financial Times and Goldman Sachs Business Book of the YearAward, Nigel Newton, founder and chief executive of publisher Blooms­bury, said: “We should reflect on how lucky we are that we are winning this war and that the public accept they should pay something for e-books. If you look how other industries have been ravaged [by digital challenges], I think we’re in relatively good shape.”

Whether publishers subscribe to the apocalyptic or to the ecstatic view, they know they cannot stand still. The rise of digital devices is rewriting their business model. Both Barnes & Noble and e-book retailer Kobo launched new touchscreen devices at Book­Expo this week, upping the competition with the Kindle, iPad and other tablets. Publishers are having to seek different ways of linking author, editor, retailer and reader.

At the FT forum, bookstores were urged to become “consultants”, editors “curators”, and publishers “customisers”. Earlier this month, Markus Dohle, chairman and chief executive of Random House, told staff the acquisition of digital media agency Smashing Ideas would allow the publisher, part of Bertelsmann, to develop “high-end, engaging interactive products ... that will benefit from the re-imagining of the digital content format”. His memorandum used the word “book” only twice.

The Random House deal is one sign that publishers are searching for op­portunities as well as reacting to threats. Cutting the cost of printing, shipping and storing books releases funds for investment elsewhere – although those activities represent only 10 per cent of a book’s retail price, according to one publisher – but digital distribution also opens new markets and gives established houses more data about who is reading what.

Yet, says Stefan Mc­Grath, managing director of Penguin Press (part of Pearson, like the FT), many e-books are similar to early films – staged like a play with a static camera – before “gradually, people realised what they could do to exploit the medium”.

Academic publishers have been the trailblazers. They recognised years ago that researchers, students and professionals would pay to download the parts of the books and journals they used. Springer, the scientific and technical publisher, expects to reap 40 per cent of book revenues and 70 per cent of journal revenues from electronic sources this year.

Children’s book publishers are also exploiting the potential of digital ap­plications. One Random House/Smashing Media collaboration is – appropriately – a mobile application for the original “touch and feel” book, Pat the Bunny, first published in 1940.

Enders Analysis, the media and technology research group, expects the transition to be “genre-driven”, with travel books and business books ripe for transformation to tablet form. Kogan Page, an independent UK-based publisher, recently launched Bold, Shaun Smith and Andy Milligan’s analysis of branding case studies, in print and as an e-book alongside a free, complementary iPad app.

One question is whether publishers have the right skills to make these digital connections as fast as they should. At a Westminster Media For­um seminar on e-books last week, Hugh Look, non-executive director of the Publishing Training Centre, point­ed to gaps in companies’ ability to manage change, projects and partnerships, especially in information technology. “Dealing with geeks is a problem for many people in publishing – it’s not something they have to do.”

Some publishers dispute this. Bigger ones can buy in the skills they lack. Helen Kogan, managing director of Kogan Page, points out that independent companies are already used to forging partnerships – such as its relationship with Spacebar Interactive, developer of the Bold app.

Another challenge is “discoverability”: publishers will have to spend more on marketing to prevent e-books sinking beneath an ocean of apps and online services.

The biggest threats to the traditional industry come from aggressive pricing and the related risk of piracy. Caroline Michel, CEO of literary agents PFD, warns that “if we get the pricing wrong, we will see the same problems that they had in the music and video industries”. Enders says the test is to “find the right scale and the right cost structure to cope” as readers become their direct customers.

One problem is e-books’ lack of what Richard Mollet, CEO of the UK Publishers Association, calls the “on-the-foot-dropability factor”, which means consumers fail to take account of the intangible cost of publishing content, whether in digital or print. It is a small step from this attitude to readers’ demanding books should be free, and seeking out both licit and illicit sources.

Arguments that book publishing is less prone to piracy than the recording industry might be flimsier than they seem. It is said that readers will not try to copy their existing library for sharing online – as music-lovers did with albums. But George Walkley, head of digital at Hachette UK, told the FT forum that a surprising number of copyright infringements started with people who laboriously scanned original books. He says publishers must move towards selling additional services. “The product is easy to replicate, the service is more difficult.”

That is easier said than done for publishers of consumer fiction. As Mr Newton says: “You wouldn’t want to ‘customise’ War and Peace.” He is confident, however, that it would be hard to split publishers’ core functions – choosing books to publish, advancing money to authors, editing, marketing and positioning their work. It would be “like splitting up heart surgery – going to one place for the anaesthetic and to another to be cut open”. Something like this did happen to the record industry, though. Music itself did not die but some record companies lost a lot of blood.

Functional distinctions in publishing are already blurring, as online and digital sales rise. Amazon’s appointment of Laurence Kirshbaum, a publishing veteran, to head its new general interest imprint was the talk of BookExpo earlier this week. It is another sign that the digital battle to shape the 21st century publishing industry has truly been joined.

Additional reporting by Andrew Edgecliffe-Johnson