Monday, November 11, 2013

Publishing is a business, too—get used to it


Innumerable business models have been created, destroyed, and significantly altered by the growth of the Internet since the mid-1990s. I hate to resort to the cliché of early twentieth-century buggy manufacturers being bankrupted by the automobile, but there is an element of truth there. The Internet has meant new opportunity for some, and the end of a good thing for others.

The balance between “opportunity” and what economists call “creative destruction” depends on the industry you’re talking about.

Let’s look at an extreme “opportunity” example: online dating. While there were brick-and-mortar dating agencies before the Internet, they were almost all bit players, operating within a small geographic area. Certainly none of them were at the scale of Match.com.

So while Match.com undoubtedly put some small players out of business, most would agree that the Internet has been primarily positive for the business of charging a commission to hook people up with potential romantic partners.

Now let’s consider an extreme “creative destruction” example: real estate sales. Although few would admit it, I suspect that most real estate agents would gladly scrap the entire Internet and set the calendar back to 1995 or so. The Internet has been mostly downside for real estate agents, who must compete with FSBO sites that charge a fraction of the customary 6 to 7 percent commission that real estate agents habitually charge. The Internet also enables home sellers and buyers to conduct independent research on home prices, listings, etc.—something that was once very hard to do without the help of a human real estate agent. 

Sure, you can still make money as a real estate agent, but you no longer have the stranglehold on the market that you once had. As a result, some agents have been forced to work for lower commissions. If you happen to be a real estate agent, that is most certainly not a positive outcome.

But what about publishing and bookselling? Sure, there have been some legitimate downsides: I’ve written before about the demise of the independent bookseller, which I believe to be permanent (with the exception of a few niche sectors). If your dream is to open your own corner bookshop/coffee establishment, then you’d better have a very unique business plan, or find another dream.

The Internet has also removed “the gatekeepers” of publishing. Until the growth of the Internet, there was really no viable way to self-publish a book and bring it to market. Epublishing has changed that, of course. It should be noted that most self-published ebooks sell only a handful of copies. It should also be noted that a few of them become bestsellers.

But independent epublishing aside, corporate publishers still have many advantages. There are no self-published books on the shelves of Wal-Mart or Costco. Nor are there likely to be any in the foreseeable future. While there are now viable sales and distribution outlets for independent publishers, those outlets are almost entirely online. For various structural reasons, corporate publishers still monopolize offline book distribution channels. This enables them to monopolize a certain percentage of the reading public. (This is neither good nor bad, by the way, it’s simply an economic fact.)

The Internet has undoubtedly reduced the market for certain kinds of content, in certain formats. I wouldn't want to be in the business of selling bound atlases nowadays, or encyclopedias, for that matter. But there are still many kinds of content that can be successfully sold, or otherwise monetized.

Yes, doing so may require some modifications to a business model based on the economic and technological realities of 1985 or 1992. But it can be done, and corporate publishers should be in the best position to do so.

Nevertheless, all you hear from the publishing industry (and its cronies in professional journalism) is whining. Consider this piece from The Guardian in the UK:


"Ebooks and discounts drive 98 publishers out of business 
Number of closures is 42% up on last year, as digital books and huge pressure on margins push companies over the brink"


My first question is: What are they doing to adapt to the new business climate, which has been coming over the horizon at them for at least fifteen years now? In the United States, most publishing companies and literary agencies are still based in New York. That might have made perfect sense a generation ago. Today it’s simply an unproductive drain on the bottom line.

Then there’s Jonathan Franzen, who does admittedly know a thing or two about writing compelling fiction, but not much about economics. He complains,

"In my own little corner of the world, which is to say American fiction, Jeff Bezos of Amazon may not be the antichrist, but he surely looks like one of the four horsemen. Amazon wants a world in which books are either self-published or published by Amazon itself, with readers dependent on Amazon reviews in choosing books, and with authors responsible for their own promotion."

Franzen was a mostly unknown midlist novelist until his breakout book, The Corrections, was noticed and then championed by Oprah Winfrey. Winfrey gave The Corrections a significant plug on her television show. This convinced large numbers of readers to give a then unfamiliar author a try. The Corrections also happened to be a good book. The rest is history. But The Corrections might never have taken off had it not been spotlighted on Oprah.

(Franzen, a snobbish contrarian to the last, was actually foolish enough to resist Oprah’s help. This was not only a case ingratitude—but pure stupidity on his part.)

Jonathan Franzen (and others like him) view publishing as a rarified world in which a small coterie of men and women with MFAs lounge around and say witty things to each other all day, with occasional breaks for wine and cheese. This alternative version of reality simply isn’t so—not unless every author is to have a permanent day job at Starbucks.

If you want to actually sell books, you’ve got to turn it into a business at some point, and that means marketing. Jonathan Franzen’s marketing breakthrough occurred on The Oprah Winfrey Show. Since the launch of the Internet, some other writers have achieved their breakthroughs through blogs, Twitter, and even YouTube. These are different forms of marketing, but marketing nonetheless. 

Somehow, Franzen misses this.

Franzen also shows his reality disconnect when he prattles on about Jeff Bezos and the “demise of a literary culture” (!) But what has Jeff Bezos actually done? Bezos has made it far more convenient (not to mention cheaper) to buy books. That will probably result in more readers buying more books, which will in turn result in an expansion of what Franzen calls “literary culture”. You aren’t going to have much of a “literary culture” if few people buy books, which is inevitable if you try to sell them undiscounted $29.95 hardcover novels.

This doesn't mean that there aren’t a few aspects of the Internet that are thoroughly negative for authors and publishers. Piracy is theft, plain and simple; and it would be escapist of me to deny that the Internet facilitates the distribution of pirated works.

On the whole, though, the Internet should be a boon for the business of writing and distributing books. And no—I’m not talking only about scrappy, independent self-publishers. The “traditional” publishers and “established” authors actually stand to benefit the most from the Internet, if only they could detach themselves from their long-held and unwarranted pretensions.