The Digitizers: Lexcycle's Neelan Choksi on e-publishing strategies, ePub, Stanza, territorial issues and more

For her new TeleRead series, The Digitizers, Kat Meyer will talk to developers and designers who are forging the future of e-reading. Neelan Choksi, COO of Lexcycle, the creators of the Stanza e-reader for iPhones and Touches, is her first interviewee. He handles Lexcycle’s marketing, business development and strategic management. Kat is a book marketing professional who, in her spare time, blogs at The Bookish Dilettante. Welcome to the ranks of TeleContributors, Kat!

KM: It seems that there is a certain amount of resistance among book publishers to going full speed ahead with e-books and other digital publishing options. While some of the opposition is just human nature and the tendency to resist change, it’s also true that publishers face some very real obstacles in going from a purely print-based production and distribution model to incorporating digital into the mix. Would you agree?

NC: Totally. Often the very thing that has made you successful for so long often is the thing that makes it hard to handle chaos and change. I think it is one of the hardest things to do especially when the formula has worked for so long. Heck, in Austin where I am based, the exact thing that took Dell from nothing to what I think is now $60B dollar business is the thing that is stifling its growth. And that’s not even a company that has reached its 15th birthday. So it should not be a surprise that incumbent publishers are struggling a bit with the changes that are taking place.

And then publishers have to face upstarts like Smashwords who are completely putting the traditional model on its head. Eighty-five percent of what Smashwords receives go to the authors.

KM: What strategies would you recommend to publishers for proceeding into the digital age—what questions do they need to ask themselves to determine where they should start?

NC: I think the first place any publisher should look is to do an honest assessment of their ability and comfort level to change. Establishing those parameters for some span of time is very important to provide a framework and bounds to work within.

KM: Is there any one thing that all publishers should be doing, or is each and every publisher’s situation going to be different enough that they need to do it all from scratch?

NC: I fundamentally believe the one thing every publisher needs to do is to figure out their overall strategy and see how digital publishing fits into it.  Right now, the sense I get is that each digital group is not really part of the overall picture but more of a skunkworks, or side project.

I think a major publisher should go hire a McKinsey & Company or an Accenture or some other strategic change agent that the publisher CEO will listen to. Examining their traditional business for cost savings and determining how much to invest in growth areas like Digital Publishing is exactly in the sweet spot of most strategy consulting shops and the bottom line is it is human nature that the CEO will be more apt to listen to an outside consultant than internal employees.

For full disclosure: I worked for Accenture (at the time it was Andersen Consulting) Strategic Services, and my wife worked for McKinsey, so those companies weren’t random but whoever the CEO trusts is who should be involved.

If publishers aren’t willing to look at things in a strategic light, I think there are a few tactical things all publishers can do:

• Find a cost-effective way to convert their titles (backlist / frontlist) to electronic formats. Doing so gets the publishers in the game. I think many publishers are doing frontlist titles but maybe the backlist titles can be organized based on current popularity to prioritize which books get converted first and which ones get converted second and so forth. If the publisher has a relationship with a distributor, push the distributor to help more on converting titles and to charge less. If the distributor isn’t getting it done, or is charging too much for conversions, find a distributor who can get it done. Outsource it if they have to. It’s just not that hard to take a .LIT file, and with the tools that are available today, convert it to an ePub.
• Support ePub. The more successful ePub is the less work publishers have to do long term. Delivering books in ePub and driving vendors to support ePub will hopefully mean less conversion work for the publishers/distributors long term.
• Start cutting / adjusting deals with authors and agents to go DRM-free. In particular, with backlist titles, if you can get rid of DRM, you remove 3-5% of the cost which means either more profits or better pricing to the reader.
• Demand that their retailers price e-books properly. There is no world where an e-book should be priced at $24.95 when a reader can buy the physical book with shipping for $12.99 (often because the paperback was just released but the e-book retailers either haven’t been given updated pricing or haven’t updated their prices). How many people never come back to e-books when they try to buy an e-book and find the physical book is cheaper?
• Demand better reporting and better information from their partners (in particular distributors and retailers). Then make sure people at their firm do something with that information.
• Be willing to dabble. Try out different things with different vendors. See what works and what doesn’t.
• Have a budget for marketing e-books. One of the most shocking things I heard recently was that a publisher has a budget for doing storefront marketing in physical stores but doesn’t have similar budgets (even if much smaller) to help promote their e-book initiatives.

KM: Seeing how it may be some time before publishers have their e-book act completely together, do you have any suggestions for the reading public on what they should reasonably expect/demand as consumers?

NC: I think consumers need to drive the publishers to support the behavior they want. If consumers accept the status quo, they will continue to get the status quo. I think the reading public needs to be active in letting publishers, retailers and anyone who will listen what they want:

• If titles aren’t in the format they want, they need to let the world know that. I bet nothing will drive a publisher to release a book to digital or to particular format than demand.
• I hope the reading public is vocal about standards (ePub) and vocal about DRM-free. Every time I ask about DRM, the publisher usually points to authors and agents as the culprits who want DRM, and the authors and agents point to the publisher. I think if the reading public (it’s got to be broader than Teleread) starts to ask for ePub and DRM-free, you will eventually see some movement.

I think the most that readers can expect in 2009 is a lot more books available digitally.

KM: What is your take on the Hachette territorial digital rights issue?

NC: I don’t know enough details about the specific issue to comment on it. In fact most of what I know has actually come from TeleRead.

I think the territory rights issue is crazy in the digital world. Whereas it made perfect sense in the physical world since shipping is so expensive anyway, I think it makes very little sense in the digital world where shipping costs are completely non-existent. That said, it is the reality of the world we live in. I think there are going to be opportunities for publishers who secure digital rights globally to have a role (like I believe Angry Robot is trying to do with science fiction).

KM: Are territorial issues something that could or do affect how Lexcycle/Stanza is planning to proceed with their larger publishing partners, and if so, how?

NC: Territory issues are clearly affecting folks who have catalogs for Stanza. Most of the information that I learned about the Hachette territory issue was actually provided by Bob LiVolsi of Books on Board. Fictionwise was mentioned several times in the TeleRead blog associated with it. From what I understand, the issue hasn’t completely run its course, and like you, we are anxiously awaiting more information from those involved.

I can comment on what Stanza has in place to address territory rights issues. We have an early internal prototype of Stanza that can use I/P geo-location to identify where a user is and using that information either display a particular publisher’s books or not display them in a given catalog. We haven’t had a reason to finish the development and complete the quality assurance to roll this out because no one has asked us for it yet.

Stanza currently does something similar with language—e.g., if a user’s language is set to Russian or Czech, we display different catalogs in our Online Catalog from what you see if your language is set to English.

KM: And, finally, what do you want publishers to know about Stanza and how it can be integrated into their digital publishing initiatives?

NC: I think the advantage that Stanza provides publishers is access to over a million users who are iPhone or iPod Touch users. Stanza offers multiple routes to get to the iPhone user (whether through the Stanza partner catalogs or direct through the iTunes App Store like we did with the iPhone: the Missing Manual Application which has been a top 3 paid application in the books category in the App Store since we released it). We will be expanding Stanza to other platforms like Google Android and Blackberry throughout 2009 as well as further improving the complete reader experience with Stanza. Finally, we are big proponents of standards as evidenced by our support of the ePub standard.

Moderator’s note: We’ve added hyperlinks to Neelan’s comments. – D.R.