TeleRead: Bring the E-Books Home

Slasher story for publishers: The Tor lady’s right about costs–but here’s how to cut expenses and boost profits from both e- and p-books

By David Rothman

A Tor staffer has documented the scary economics of today’s book-publishing industry. Anna Louise’s essay is becoming Exhibit A for some who wonder if e-books can live up to the ballyhoo and drive down the costs for readers. Paper, printing and binding expenses are, yes, just a fraction of the cover price of a typical p-book.

Even so, we editorial types should worry less about our wants and needs, and more about those of our readers, whether the books are paper or electronic.

Most U.S. families probably don’t even buy books in a typical year if you extrapolate from statistics. And within e-books, a study tellingly quotes one consumer: “Prices are still too high for eBooks. iTunes, for example, prices music less than CDs, but with eBooks the price is hardly less than a paperback.” Remember what counts in the end–not actual value, but perceived value. Especially if readers must buy books for school or work, they are not wild about prices paid.

If I were king and Bertelsmann’s CEO were a mere prince

So with textbooks and the rest of the industry in mind, here is how I would restructure the publishing system if I could dictate to the heads of Bertelsmann and the other large conglomerates that dominate the U.S. book industry.

I would slash costs, especially in New York City, where publishers are enriching landlords at the expense of authors and shareholders. Contrary to the old stereotypes, American publishing does not benefit from so many of its participants being close to each other. Forget the old 9/11 rhetoric; the publishing industry’s loyalty should be to itself, not Manhattan, which has plenty else going for it. The U.S. publishing industry could truly come out ahead if it were less incestuous, less Manhattan-provincial, and if editors spent less time lunching with each other and more time editing. I myself enjoy the literature of the Northeastern U.S., the masterpieces of, say, Philip Roth. But the best books will transcend geography. Perhaps, moreover, relocated publishers would be more appreciative of the literature of the American heartland.

Moving out of New York City, publishers would also find it easier to pay editors and staffers fairly. Typical publishing salaries are skimpy; and I’m not suggesting they be reduced, just that conglomerates not fixate so much on locations with such high living costs. For reasons of both compassion and practicality, large publishers could carefully phase in the moves rather than abruptly departing Manhattan. They could still guard their prestige and keep their headquarters there in name. But almost all of their staffers, especially new hires, would be elsewhere.

Lessons from eBay

At the same time publishers could reduce the number of people hired–by turning publishing into more of a distributed industry, picking up lessons from eBay. Right now the publishing industry is paying for an army of editors and readers to find talent. But what if big publishers stopped stigmatizing self-publishing and instead encouraged it as a way to identify writers who could actually, not just theoretically, win readers?

Major publishers could establish their own online communities and participate in others and widely publicize specific editorial needs–something that normally isn’t done today. Access counts could spotlight books most deserving of actual readings. Meanwhile literary agencies could use similar techniques. As for editors, many would still work for publishers and literary agencies, but others could function individually or in groups as book packagers for authors and publishers.

No, under this system, the big publishers would not vanish. While they might not make up as high a percentage of the market, they would grow their earnings faster, in line with their fiduciary obligations to shareholders. They could still add value through promotion and editing and their ties with distributors, not to mention their brand names. Far from forsaking old editorial traditions, Random House and the rest could take them more seriously, with truly immaculate editing, even of works already self-published.

Meanwhile, like it or not, publishing already has a baby eBay in its midst. Check out Publisher’s Marketplace, where agents, writers and others hawk their services and wares. The man behind it is Michael Cader. Publisher’s Lunch, his e-mail list and blog, is said to enjoy a larger readership than does Publisher’s Weekly. Even the specialized TeleBlog on a few days will draw more online readers than either PW or Library Journal. That is what happens when physical investments and old-boy’s-networks count less. Simply put, paradigms are changing, and rather than fearing this, publishers of all kinds and sizes should embrace the new opportunities.

P- vs. e-books: A needless issue in the end

But what about paper books vs. electronic books under my vision? If I had my druthers, most books would start out in electronic format, with reader feedback encouraged in almost all cases. That way, publishers could save themselves from many expensive surprises of the kind that the Tor editor discussed in her essay. No, the audience for e-books isn’t the same as for paper books right now; but the two readerships will grow increasingly alike as the technology improves and the average reader grows more accustomed to the screen.

I would also like to see U.S. publishing continue to experiment with inexpensive paperback originals of serious literature–as has long been long done in Europe. This would reduce the costs of experimentation and the shockingly high rate of returned p-books, enabling publishers to reduce prices or at least not raise them as quickly.

But electronic books would be an even better way to lower costs than paperbacks would–for both serious and popular books. Furthermore, as e-books became more paperlike through technologies such as E Ink, complete with flippable pages and vividly colored covers, I’m not certain that the two media would be that different. We may yet see the day when paper books are the equivalent of the horses and buggies in Central Park–wonderful for recreation in a limited way, but hardly in the mainstream.

In electronic books at least, we could also drive down costs by reducing the slice that distributors took from publishers. Yes, distributors contribute value. But should distributors take 50 percent of revenue? I’m not sure how much that slice can be reduced in the paper area–only that the electronic area should not use p-books as a guidelines. Electrons are not atoms; the former costs far, far less to store and transport.

A growth approach, please–not a Dobermanish one

Last but hardly least, the e-book side of publishing should work to protect publishers’ profits and authors’ earnings by truly growing the market for books in a positive way rather than relying so heavily on negative reader-hostile tactics. With sufficient volume, profits could mushroom even if per-book costs declined. In pondering the Dobermanish approach, I am reminded of a merchant in a hot Southern state who failed to spend money on a customer-friendly amenity like air conditioning but prided himself on his expensive safe. That’s not the way to grow profits. Too often, however, publishers are imitating the store-owner’s follies or thinking like Dobermanish cops.

I agree with publishers on the need for anti-piracy laws, but the current DMCA has encouraged overkill in DRM. If you can’t reliably back up your book or pass it on to your friend–a different matter from sharing it with hundreds or thousands through a Napster-style network–you do not own the book for real. To use Roger Sperberg’s phrase, today’s DRM often subtracts value, a point confirmed by the findings of a reader survey for none other than the International Digital Publishing Forum, a hotbed of DRM lovers. The technology can never be totally effective, as Roger points out, and Michael Cader has agreed. If publishers feel they must use DRM, which I believe is their right, then let it be of the less Draconian variety. Ideally publishers will also work with the OpenReader Consortium to slash the costs of DRM, which at times can even exceed the 10 percent of the price of the book–in other words, what some writers may earn as royalties. In an often-low-margin business, DRM gouges are inexcusable. I realize that publisher can pass DRM costs on to distributors and stores, but the effect is the same–less money for book people, more for technology giants such as Adobe and Microsoft, which, ironically, also suffer when they care more about here-and-now revenue than about truly growing e-books.

In place of the DMCA and strict DRM, or maybe future legislation to discourage the growth of the used book market, publishers should support book-friendly computerization initiatives at home and in the Third World. Most U.S. families to do not frequent bookstores, and one way to reach them would be through a well-stocked national digital library system, with provisions for purchases of books that were not available through libraries. Piracy would be less of a problem if legal copies of e-books were obtainable at libraries. Yes, I know about the risks–government censorship and the like–and that is exactly why I believe there should be many other sources of books, not just libraries alone. If publishers and librarians spent as much time lobbying for a TeleRead-style approach, as opposed to their endless copyright wars, then industry would be far better off. Imagine a whole generation of children growing up with tablet PCs optimized for reading books–ergonomically they would make far more sense in this regard than laptops. Via detachable keyboards and wire stands, the tablets would still be useful for writing. Publishers should lobby states to adopt tablet programs, and if they really want to do a Doberman act, they should save that for a campaign against taxes on downloadable books.

A Publishers’ Peace Corps

Overseas, American publishers and others should support initiatives in the vein of One Laptop Per Child (yes, the laptops could also be used as book-optimized tablets–which seems to be within OLPC’s plans). Why not accustomed students to reading books off screens? That would be a far better way to reach them than worrying about bookstores in jungles. In the end, moreover, such an approach would be far more cost-effective than a print-on-demand. Significantly, with enough volume from Third World users, publishers could reduce prices for all purchases of e-books–even in the States. The whole planet ultimately could share common prices for e-books. With other measures in place, such as relocation from Manhattan, London and other high-priced cities, earnings if anything could be higher. I’d also suggest that Western publishers work to create or nurture publishers in developing countries and invest in such start-ups, while working with schools and libraries to grow the book-buying market. A Publishers’ Peace Corps, blended with appropriate investments, would cost more but in the end yield far more earnings than the current obsession with copyright enforcement.

Yes, this is an ambitious, long-term plan. But if Anna Louise and colleagues want their P&Ls looking better, they should ask their employers to consider it.