When Amazon offered in December to reward customers who scanned book bar codes in bookstores and then bought the book on Amazon instead, we wrote “Amazon’s strategy could backfire.”

“When Amazon’s sales reps call for an appointment to pitch their list,” we pointed out, “they may find the owners’ phones turned off.” (See Please Shut Off Your Cellphones. This is a Bookshop)”

They did. Barnes & Noble will not carry books published by Amazon’s publishing imprints.

“In a sharp answer to Amazon and its expanding publishing efforts,” writes the New York Times‘ Julie Bosman, “Barnes & Noble said on Tuesday that it would not sell books released by Amazon Publishing in its bookstores. The ban includes books released by New Harvest, a new imprint of Houghton Mifflin Harcourt that recently struck a deal to publish and distribute books released by Amazon Publishing’s unit based in New York.

“’Barnes & Noble has made a decision not to stock Amazon published titles in our store showrooms,’ Jaime Carey, the company’s chief merchandising officer, said in a statement. ‘Our decision is based on Amazon’s continued push for exclusivity with publishers, agents and the authors they represent. These exclusives have prohibited us from offering certain e-books to our customers. Their actions have undermined the industry as a whole and have prevented millions of customers from having access to content. It’s clear to us that Amazon has proven they would not be a good publishing partner to Barnes & Noble as they continue to pull content off the market for their own self interest.’”

B&N’s decision may impact negatively on the authors and their agents contemplating selling their authors to Amazon Publishing.

Though some publishing executives may take a measure of satisfaction that B&N, now the victim of Amazon’s aggressive marketing strategies, is paying dearly for its own predatory practices when it was the ruthlessly dominant bookseller of the twentieth century, consumers will rally around it and its more helpless independent bookstore cousins. Publishing industry old-timers like to say “What goes around comes around” and for Amazon it has come around.  We hope however that Amazon Publishing will itself come around – to an open policy of mutual cooperation in the fragile ecology called publishing.

Details in Barnes & Noble Won’t Sell Books From Amazon Publishing

Richard Curtis

We’ve spilled a lot of E Ink projecting that 2012 will be the year that Amazon starts giving away the Kindle as they realize that there’s more money to be made from the content than from the gadget it’s read on. (See Kindle Wants to Be Free) We took our eye off Kindle’s rival, Barnes & Noble’s Nook, but it looks like the younger warrior has stolen a march on Goliath. The Nook is being given away, at least in one instance. But if there’s one instance, more are probably more on the way.

“When customers subscribe to The New York Times ($19.99 per month), they get a Nook Simple Touch for free,’ writes Dara Kerr on CNET.

Can B&N, Amazon, or any other e-reader manufacturer afford to give away its hardware?  Sure.  Because as time goes by, the value of the gadget declines and the value of the content bundled on it rises.  And in the case of the free Nook Simple Touch, it’s a way of giving away an e-reader that may be a bit of a drug on the market anyway.  Sales of black and white dedicated reading devices like the Simple Touch or the original Kindle are sagging as consumers opt for the color and hyperactivity of tablets.  This was confirmed early in January when E Ink holdings reported an 84% drop in sales. E Ink is the print technology that powers black and white reading devices.

Read Barnes & Noble offers free Nook with NYT or People subscription

Mr. Leonard Riggio
Barnes & Noble, Inc.
122 Fifth Avenue
New York, NY 10011

Dear Mr. Riggio,

I am founder and CEO of E-Reads, a leading independent e-book publisher. I’ve just learned that Barnes & Noble has put its Sterling Publishing subsidiary up for sale (Barnes & Noble Said to Put Publishing House Up for Sale). I would like to tender our offer for the company, and though the deadline for bids has passed, I hope that when you hear our proposition you will extend the closing date for us.

When I read the Sterling announcement in the trade news I could scarcely believe that you would contemplate shedding a publishing company boasting a backlist of 5,000 titles, one of the most valuable sources of content to come on the market in the Digital Age. While your principal rival Amazon builds its publishing list incrementally, you possess a ready-made trove of e-book content that is the envy of every competitor. The fact that both this treasury and the Internet channel to distribute and retail it are controlled by one and the same corporation gives B&N an almost unimaginable business advantage.  Yet you are prepared to abandon it in order to concentrate on marketing your Nook e-reader. No one I know understands the strategic or financial benefit of dumping all those books. Is content no longer king in your value system?

Well, Mr. Riggio, it is in mine, and thus with this letter I am happy to extend our offer to acquire the Sterling list for one dollar plus 50% of our revenues in perpetuity.  Though this may seem facetious we are absolutely serious and confident that you will make more money this way than the best buyout offer on the table. If you project the annual sale for each of those 5,000 titles at somewhere between 1,000 and 10,000 e-book units – a far from unreasonable projection — and the average net revenue per sale at $5.00, the potential annual revenue is in the hundreds of millions of dollars. Of which Barnes & Noble’s share would be 50%. Compared to the return on investing in hardware, the yield on book content is laughably superior.  If you can’t see it, give the content to someone who does.

I trust you will take our offer under the most serious consideration, and I look forward to hearing from you.

Sincerely,

Richard Curtis
President and CEO
E-Reads

Play nice!

When Amazon selected Laurence Kirshbaum to head its New York-based book publishing initiative, many publishing people greeted the news with unalloyed enthusiasm.The former CEO of the Time Warner Book Group is one of the few truly branded personages traditional publishing and it was hard to imagine a better choice to amalgamate the two cultures of pre- and post-Kindle. It still is, and with the spring 2012 debut of Kirshbaum’s first list we’re ready to welcome it with a cheer.

Not everyone else is, however. Articles describing Amazon’s move from retail partner of publishers and bookstores to feared rival have become a genre of their own, and journalists are vying with each other for purple prose awards. Hide your children. Amazon is coming to get you was the subheadline of an Atlantic Monthly editorial on the subject by Rebecca J. Rosen. Rosen’s remarks typify the terror expressed by fellow pundits: “Amazon’s conquest of every step of a book’s journey into existence is nearing its final stages. First, it pushed out the brick-and-mortar bookstores, shuttering even the giant Borders. Next, with its Kindle it began to step on the toes of book publishers. But now, it is going right for publishers’ hearts: their authors.”

These concerns are far from groundless, but what we have lacked so far is an objective evaluation of Amazon’s performance to date as a publisher.  Given Amazon’s notable secrecy, there’s little point in looking to the company for help.  But Laura Hazard Owen, writing for PaidContent.org, has rendered a masterful analysis drawn from a variety of sources, plus inference, intuition, educated guesswork and good old journalistic shoe leather.

Owen’s conclusion? “Amazon Publishing hasn’t killed print yet.” Like its legacy publishing competitors, Amazon has won some, lost some, and broken even on some others.

In order to play on the same stage as Knopf or Farrar, Straus, there is one major obstacle for Amazon to clear away. It will have to reach out to bookstores and chains, who have been so traumatized by Amazon’s steamroller approach that many, including Barnes & Noble, refuse to buy anything with the Amazon imprint. B&N insists that Amazon retail its titles on the Nook, the same as other trade publishers like HarperCollins or Simon & Schuster are permitted to do.  Amazon needs to woo some major authors away from their traditional homes, says Owen.  But if those writers fear that their books will not be distributed in stores, or that their e-books will not be sold on the Nook, it may be that no amount of money will lure them into Amazon’s camp.

If anyone can successfully navigate these rapids it’s Larry Kirshbaum. But he and his team have their work cut out for them.

The Truth About Amazon Publishing

Richard Curtis

Amazon and Barnes & Noble collided recently in a fearful clash. A lot of damage was inflicted but predictably the biggest victim was the customer.

The first shot was fired when Amazon acquired e-book rights to a trove of superhero graphic novels from DC Comics. Some one hundred volumes featuring Superman, Batman, Green Lantern, Watchmen and Neil Gaiman’s Sandman were secured to promote Amazon’s newly released tablet, the Kindle Fire.

All well and good – except that Amazon’s e-book rights were exclusive. Meaning that rival Barnes & Noble would be deprived of the right to carry the titles on its Nook e-reader.  B&N could still sell the print editions, however. But that’s a big however. B&N told DC that if they couldn’t have e-book rights they didn’t want anything. Whereupon they pulled the print editions of those DC graphic novels from 1300 stores.

The result was a lose-lose-lose-lose-win situation.  DC lost sales – as well as face for “placing greed over its fans.” in the words of New York Times‘s David Streitfeld. Barnes & Noble lost bookstore and Nook sales too, plus the nose it lost to spite its face.  Customers and fans lost access to the books in Nook (and Sony and Kobo and Apple iPad). And at least one author is unhappy – Neil Gaiman, who was blindsided by Amazon’s ploy. ““I was very excited when I heard that Sandman was coming out as an e-book, but was heartbroken when it was announced that I and my kids won’t have it on our readers.”

It will come as no surprise that the lone winner was Amazon, which nailed the exclusive and got a boost from B&N’s abandonment of the print edition.

This is just the first of many such battles. Says Streitfeld: “As Amazon seeks over the next few years to expand its tablet line, these collisions over content are likely to become routine.”

Details in In a Battle of the E-Readers, Booksellers Spurn Superheroes

Richard Curtis

The investment world is abuzz with the news that John Malone’s Liberty Media, a conglomerate that owns Starz and QVC among other holdings, has made an offer to acquire Barnes & Noble.  B&N’s value ebbed as rival amazon.com soared to dominance through brilliant technology and marketing.  The launch of the Kindle and its preeminence in the e-book space set a torrid pace that the traditional book chain could not keep up with.

But B&N’s stock value has been climbing back spearheaded by its own digital strategy built around its Nook E-Reader.  It may be the entertainment potential of the Nook that attracted John Malone.

RC

A trade publishing industry staggered by the paradigm shift from tangible to virtual suffered a major body blow today as America’s second largest bookstore chain sought protection under Federal bankruptcy laws.

According to Publishers Weekly, on the strength of a $505 million pledge by a corporate refinancer the chain elected reorganization (Chapter 11) rather than liquidation (Chapter 7), hoping to shed highly devalued real estate holdings and other liabilities including underperforming stores among the 674 currently on its roster. But Chapter 11 isn’t a slam dunk: As Publishers Weekly explained, “It is believed an agreement by publishers to resume shipping books to Borders will be necessary to obtain debtor-in possession financing that will allow it to reorganize under Chapter 11.”  Hopefully Borders achieved this goal.

But the $230 million it owes publishers for the stock of books it recently acquired, and the fate of the books themselves, will not be sorted out at a pace that will do publishers or authors any good. Federal bankruptcy laws favor secured creditors like bank lenders, while unsecured publishers have little leverage even though books are what bookstores are all about. Authors of course are at the end of the line. After all, all they did was write the books.

Despite job cuts, store closings and budget slashes the chain has been sliding to oblivion for years and has been the subject of bankruptcy speculation. Even during the 2010 Christmas holiday, it suffered a 15% drop in sales over the prior year’s revenues. The gathering storm clouds of bankruptcy only added to Borders’ woes as publishers withheld vitally needed shipments of new releases. Unlike its principal rival Barnes & Noble, which has the Nook to help B&N’s transition to an e-book business model, Borders’ alliance with Kobo was too little too late to bootstrap itself out of woe.

The handful of major publishers that have survived the upheavals of the last decade probably have adequate resources to get through this latest one too, but marginal presses that have barely hung on may be sucked under for good. Big or small, no one will escape unharmed. Publishers Lunch‘s Michael Cader lists the publisher creditors in a veritable bloodbath of debt:

Penguin $41.1 million
Hachette Book Group $36.9 million
Simon & Schuster $33.75 million
Random House $33.5 million
HarperCollins $25.8 million
Macmillan $11.4 million
Wiley $11.2 million
Perseus $7.8 million
F+W Media $4.6 million
Houghton Mifflin Harcourt $4.4 million
Workman $4 million
McGraw-Hill $3.1 million
Pearson Education $2.8 million
NBN $2 million
Norton $2 million
Zondervan $1.9 million
Hay House $1.7 million
Elsevier Science $1.6 million
Publications Intl. $1.1 million

It’s going to be bad.

Richard Curtis

Taking an electronic leaf from rival Barnes & Noble’s playbook, Amazon has announced a lending feature for its customers.

‘The Kindle Book Lending feature allows users to lend digital books they have purchased through the Kindle Store to their friends and family,” says a recent Amazon.con release. “Each book may be lent once for a duration of 14 days and will not be readable by the lender during the loan period.”  As loans are not sales, authors will receive no additional royalties, but it is hoped that loaned e-books will attract new reading audiences.

For would be lenders and borrowers, details may be read here.

Richard Curtis

From time to time we bring back some of the more popular articles and blogs posted on E-Reads.  This one is from November 2009.

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“All is vanity.”
Ecclesiastes

The uproar over Harlequin Enterprises’ launch of a self-publishing venture reminded me of something my father used to say. He was an honest businessman, but every once in a while, when he saw an unscrupulous competitor getting stinking rich, he would shake his head and say, “I’m in the wrong racket.”

I sometimes wonder if I’m in the wrong racket too. Maybe I should have gone into vanity publishing. I’m sure I’d have made a fortune. Everyone who’s gone into it has made one, so I can’t blame anyone for succumbing to its allure.

And now mainstream publishing has jumped on the bandwagon, with respectable firms like religious publisher Thomas Nelson and, most recently, Harlequin Enterprises picking up the banner. The line that once sharply separated traditional publishing (“We pay you”) and vanity publishing (“You pay us”) has all but dissolved in this corrosive environment of fabulous riches.

My early exposure to the power of vanity occurred when I joined Scott Meredith’s literary agency after graduating college. Meredith had a fee-reading operation that ran like a turbine engine. Using his agency’s track record as bait – his brochure was a collage of six- and seven-digit checks paid to professional clients – Meredith attracted countless would-be authors prepared to shell out hundreds of dollars for a manuscript reading they hoped might lead to acceptance for representation and an eventual professional career. I don’t believe I ever saw a book accepted for representation out of the fee-reading program in all the years I worked there. Meredith’s operation made tons of money and he died a wealthy man.

Around 2000 a number of enterprising business people recognized the profit potential in self-published books utilizing digital media. (For purposes of this piece I draw no distinction between self-publication, subsidized publication and vanity publication.) Until then the most famous name in subsidy publishing was Vantage Press (which, significantly, is still going strong). But companies like iUniverse, Xlibris and an outfit called Fatbrain offered a variety of self-publication services. How well did they do?

Well, Fatbrain with its subsidiary Mighty-Words, which published technical and professional material online (someone described it as Amazon for geeks), was sold to Barnes & Noble for $64 million. Xlibris? Acquired by Random House for an undisclosed sum, then sold to Author Solutions, the vast self-publishing empire which embraces iUniverse, Author House, Wordclay, Inkubook and Canadian vanity publisher Trafford Press. Kevin Weiss, CEO of Author Solutions, projects $100 million in revenue in 2009. Last year, Author Solutions released more than 21,000 new titles, according to Mediabistro, “including one out of every 20 new titles put into distribution in the U.S. Overall, ASI’s catalog now includes more than 120,000 titles from more than 85,000 authors.” Author Solutions is partnering with Harlequin in its soon-to-be-renamed Horizons self-publication program.

But there’s more. Publishers Marketplace publisher Michael Cader recently reported that “Ebook distributor and online self-publishing platform Smashwords announced late Friday that BarnesandNoble.com will sell titles from the company as part of its new ‘premium feed.’ Smashwords, which says they publish about 2,600 titles electronically, will sell to BN.com at a traditional discount… Founder Mark Coker says that ‘additional distribution relationships are forthcoming.’ He says that ‘until today, it was difficult if not impossible for independent authors and publishers to gain such mainstream digital distibution.’”

Yet another company, Scribd, calls itself “the largest social publishing company in the world, the website where tens of millions of people each month publish and discover original writings and documents.” Scribd boasts “10 million documents published” and “5 million Scribd document reader embeds.” Last spring it was reported that Scribd was partnering “with a number of major publishers, including Random House, Simon & Schuster, Workman Publishing Co., Berrett-Koehler, Thomas Nelson, and Manning Publications, to legally offer some of their content to Scribd’s community free of charge. Publishers have begun to add an array of content to Scribd’s library, including full-length novels as well as briefer teaser excerpts.”

With so much money being thrown at subsidy publishers, and with the blessing of mainstream publishing, the evolution of vanity from the margins to the center of the publishing universe is complete. The erosion of traditional gatekeepers like reviewers, critics, newspaper book editors, and other refined literary tastemakers makes it clear why even a conservative publisher might lose its head over the prospect of all that money – and be tempted to go into another racket.

Richard Curtis

Earlier this year, when the Borders bookstore chain seemed to have entered the death-rattle stage of its troubled life, we posted an article suggesting that the perfect rescuer would be a book publisher.

Today, as Barnes & Noble faces the prospect of being put up for sale, it seems appropriate to propose the same solution.

We’ve reproduced pertinent passages of the Borders article below, with Barnes & Noble bracketed to make our point.  We think it would be smart business for Borders, we think it would be smart business for Barnes & Noble, and we think it would be smart business for a publisher. Or is “smart publisher” an oxymoron?

Richard Curtis

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When Galley Cat invited me to make some predictions for the coming decade, I conjectured that sometime in the near future we would see the merger of a major retailer and a major publisher. Here was my reasoning: “A combined publisher/retailer solves many problems for both.The retailer owns the content and doesn’t have to pay a premium for it. The publisher does not have to pay a premium to distribute its books. There would be huge efficiencies of manufacturing and distribution.”

I’ve had about a month to think about what I said, and I want to revise it. The efficiencies of a retailer/publisher combine would not merely be huge. They would be decisive. If you don’t believe it, ask Amazon.

Amazon started as a retailer but has become a publisher too. It started with its Encore program aimed at identifying overlooked books and authors. That was followed by the creation of a service called CreateSpace aimed at self-published authors. And now Amazon has begun publishing mainstream authors.

Though Amazon has no qualms about becoming a  publisher, publishers are terrified of becoming retailers for fear of provoking the wrath of their key accounts – B&N and Amazon. When publishers do dip a timid toe in the water and try to sell their books direct to the consumer, they offer them at full list price, which cannot possibly compete with the deeply discounted prices charged by B&N and Amazon. Yet, if they wanted to, publishers could sell their books directly to the public at 40% discount or higher and thus level the playing field.

The solution? To survive, to remain competitive, publishers may have no choice: they must either become retailers or end up being acquired by them.

At this moment Borders [Barnes & Noble], one of the best and most popular bookstore chains in the business, is in a life and death struggle to remain viable. If a publisher were smart it would rescue Borders [Barnes & Noble] and go into the retail business.

Retailers, I said a while ago (see Direct Sales: Publishing’s Last Stand), are intermediaries in a world that is rapidly disintermediating. As big as they are, retailers are vulnerable to market forces bent on eliminating middlemen, and that’s precisely why they have begun publishing books. The digital revolution demands a direct relationship between content provider and consumer. Merging a publisher and a bookstore chain like Borders [Barnes & Noble] would bring both struggling enterprises a little closer to that direct relationship, to profitability and to competitiveness.

Do I hear any bids?

Richard Curtis