The publishing industry is all screwed up, and whose fault is that? Perhaps at least partly the fault of all the publishing execs who are stepping down right around now, blogger Agent Orange suggests in a post on FutureBook entitled “The Elephant in the Graveyard.” While they did great things in their time, they were too inculcated in the culture of bricks and mortar to be able to adapt to the potential of an electronic world.

When the paradigm shifted, which significantly predates the global recession – Amazon first turned a profit way back in 2002 – they comprehensively and continuously failed to understand the challenges of the new world. Why should they – they were schooled in the old and had already presided over one paradigm shift – the end of the net book agreement. Is anyone capable of presiding over two?

And so they got distracted by the threat of piracy and the apparent panacea of DRM, “which has wholly played in to Amazon’s hands and has suicidally helped them create their monopoly.” Not only has this ended up with publishers getting hit with huge fines in the wake of the price-fixing scandal, but it’s also led to rampant consumer mistrust and the very erosion in the perceived value of books that publishers wanted to prevent. (Yes, I know: only five of the “Big Six” actually colluded in the price-fixing ring. But all six publishers were guilty of all the obnoxious behavior that led up to that point, including Random House.)

As you’ve gathered by now, I like to harp on how utterly and completely the publishers have failed to understand and take advantage of the e-book market, and worse, also failed to find common ground with consumers. They’re some of my favorite things to talk about, because they represent the accrued frustration of fifteen years of watching publishers consistently screw the pooch, and I don’t know if I’ll ever get catharsis enough that I’m not ready to go off into another rant at the drop of a hat.

Publishers made the perfect storm of mistakes in failing to recognize what the future could hold. In fact, they did pretty much what Mike Masnick describes Kodak and Blockbuster doing in this Techdirt piece that I quoted in my article about Route 66 and film cameras. They misjudged the speed of the trend toward e-book adoption (because apart from the lack of a suitable display technology, their own prices were all that was standing in the way of it taking off), they didn’t get the hands-on experience necessary to learn to innovate, and they tried to protect their cash cow instead of cannibalizing it. And Amazon proved the truth of that EDS commercial about the running of the squirrels—it’s not the big lumbering companies you know about that you have to worry about, it’s the quick little startups that come out of nowhere. And with Jeff Bezos at the helm, Amazon was nothing if not nimble.

The interesting thing is that it seems like only in recent days have publishing-industry insiders actually begun to acknowledge this. I read with interest in Andrew Albanese’s The Battle of $9.99 that an executive from Penguin actually admitted Penguin was “not very focused on e-books.” And here Agent Orange, whose identity I do not know but who is apparently enough of an industry insider to have been at last year’s HarperCollins summer party, is saying much the same thing. The retiring generation of publishing executives, respect their more positive accomplishments as he might, nonetheless did screw the pooch.

What should publishers have done? It’s easy to Monday-morning quarterback, and of course it’s all easy for me to say given that I wasn’t the one making the decisions at the time. But publishers, taking the stick at least partway out of your butts would have been a good beginning.

You could have priced e-books lower than print books, for starters. Not necessarily as low as Amazon, but knock a few bucks off to show you’re trying at least. (Though even as late as the imposition of agency pricing and MFN, publishers still didn’t get this—just look at how they felt even Apple’s proposed $13 and $15 price points were too low for e-books, and they wanted to price them at $18 to $20!) Start preparing to wind down print early so you can make a more orderly transition. Even if you didn’t price e-books lower, just pricing them consistently would have been enough.

It would have gone a long way toward easing frustrations if you’d just lowered the e-book price at the same time as the print book price lowered from hardcover to paperback, for crying out loud, even if you kept paper and e- at exactly the same with no e-discount! I mean, seriously, we understand prices fall over time—or at least they’re supposed to. Letting the e-book price stay hardcover-high just showed your contempt for e-book lovers. Not too surprising they’d start holding you in contempt right back. That’s when the whole e-book piracy thing got started, you know, even if you didn’t notice it until the Kindle made e-reading popular—at which point, gosh wow, it was “suddenly” everywhere.

You don’t have to look any further than Baen to find a publisher who handled every aspect of e-books and the transition absolutely right. Jim Baen, God rest his soul, saw more clearly than most the potential of e-books. He also saw that very few people actually wanted to bother with them at the level of display technology they had back then, which was either reading off a computer screen or off a hand-held device with about the same resolution as a pocket calculator—but the ones who did want to were by and large fanatical about them.

So Baen Webscriptions and the Baen Free Library were born, which treated e-books as promotional and we darn well knew it—charging essentially a pittance for all the Baen e-books we could ever want, DRM-free, as well as giving scads of them away free—either in the Free Library or via CD-ROMs bound into hardcover books. Jim knew that even people who didn’t care to read whole e-books might be willing to try one out free or buy one for a few bucks to start reading to see if they liked the story—and then they would buy paper copies to read with less eyestrain.

It was the original “loss leader” strategy that Amazon would later employ to such devastating effect, except Baen did it with all its books—brand new hardcover and paperback alike. And since Baen treated the e-books as promotional, not charging them a huge share of the fixed costs of creating the print book because they would have made the print book anyway, they were considered profitable even at tho
se low prices.

And did it help? By God it helped. Baen had the sales figures, and they didn’t lie. Even as early as 2001, a New York Times article made it clear that Baen was seeing a substantial paper sales benefit from its e-book program:

It is a striking puzzle: the more e-texts Baen Books makes available cheaply or free, the more it has been able to sell the most expensive kind of printed book. ”We are drifting from being a paperback house to a hardcover one because of the Net,” Mr. Baen said.

The view that Baen’s electronic-publishing efforts have improved its market for printed science fiction books is shared by Charles N. Brown, a observer of that category. ”Baen has shown that putting up electronic versions of books doesn’t cost you sales,” said Mr. Brown, publisher and editor in chief of Locus Magazine, a monthly publication that closely tracks science fiction. ”It gains you a larger audience for all of your books. As a result, they’ve done quite well.”

Why couldn’t you big publishers have done the same thing, huh? And perhaps reaped the same benefits?

Of course, we Baen Barflies always knew that this situation could only last as long as the majority of people didn’t want e-books as their own “thing,” but rather as a gateway drug to paper. Every so often, someone would pose the question to Jim Baen in the Baen Bar forums: what happens when people actually do want e-books? Alas, I no longer have a citation for his exact response, but as I recall it was usually something noncommittal, to the effect of crossing that bridge when they came to it, but that he didn’t see any reason they wouldn’t be able to keep selling e-books inexpensively and DRM-free even when everyone was reading them instead of print.

And the day finally arrived at the end of 2012, at which point Baen had to make some changes to the way it sold books in order to cut deals with Amazon and other vendors. And, overall, Baen handled the transition about as well as any publisher could have hoped to manage: prices went up across the board on backlist and frontlist titles (though only as far as $9.99 for any new hardcover-equivalent e-book, not just bestsellers), a lot of Free Library titles vanished at least temporarily, and the Webscription bundles were now only available for a limited time each.

A lot of Barflies grumbled (especially since Baen did a piss-poor job communicating the changes in a timely manner to all its customers), but Baen managed to keep enough of the old good things that other publishers didn’t—the relatively low prices, the bundles for as long as they were available, the lack of DRM—that few people were seriously put out. And that’s how you do it, publishers. Baen went from using e-books as a throw-away marketing tool to selling e-books at all major e-book stores across the board as smoothly as a silver medal Olympic athlete dismounting from the parallel bars. (I’d have said gold medal, but there were those communication problems…)

Of course, Baen only had the flexibility to do that because it was its own company; it distributed through Simon & Schuster, but didn’t answer to them. The Big Six were in the pockets of megacorporation conglomerates with far too many cooks to make a good broth. The one time one of them, Tor, tried to meet Baen halfway, it was able to sell its titles DRM-free in the Baen store for about one day before a horrified stuffed-shirt executive shut it down.

But what would the world look like if all the publishers could have gone Baen’s route—selling e-books cheaply and DRM-free to promote their print sales? There would have been a lot more e-books available, for one thing—and more impetus for research into e-ink and better readers, so perhaps we could have had a Kindle equivalent several years earlier. Perhaps the publishers could have taken more of a role in that and come out with their own readers before Amazon ever got the chance, gaining the experience they needed to sell e-books aptly. Maybe they could even have figured out how to partner with bookstores to cut them in on e-book sales early rather than frantically trying to poke thumbs into Amazon’s dike to protect them later.

It’s all academic at this point, of course. We know what you publishers did do—you hemmed and hawed over DRM and high prices—keep those uppity e-books below half a percent of the market, don’t rock the boat. You didn’t even pay attention to the e-book market; you went haring off after Google for having the audacity to scan all your books to provide you with the service of letting people search them. Never mind that they were going to help you sell more books, they were going to make money from it too and nobody has any right to make money off of your content but you!

You also didn’t bother to think about the fact that Amazon, who’d ballooned up from a cheeky little monkey into an 800 pound gorilla as if it was made of latex and someone stuck a bicycle pump in its mouth, was going to come out with a $400 dedicated e-book reader, treading the same tired old ground as Sony and countless others have before. This was the company that had already been giving you fits discounting your print books to just a couple bucks above wholesale and damaging print bookstores’ business. Did you honestly think they were dumb enough to try to sell a $400 device just so people could pay the same prices for your “hardcover” e-books? If they wanted to pay that much, they’d just buy the books. Amazon was certainly selling them cheaply enough.

Of course, you know those are all rhetorical questions—because of course you thought that. You threw Amazon right into that briar patch where it wanted to be more than anywhere else in the world. And it ended up sitting so pretty there that the only way you could think to root it out again was to collude with each other and Apple and break the law of the land.

You publishers are so lucky that the DoJ let you settle for, effectively, a slap on the wrist—a temporary return to status quo, plus having to give out a few e-book coupons and put up with a nanny for a while. Your executives are lucky they didn’t end up with prison sentences. I suspect what happens to Apple may end up showing you fully just what kind of bullet you dodged.

What have you learned from this, publishers? Have you learned anything? Anything at all? You’d damned well better. If you keep making mistakes like you have been, the last few years, you may not be long for this world.

Here’s what you should learn. First: We want e-books now. Maybe not all of us do, or even the majority of us yet, but I can guarantee you that, as old people die [Update: at least, those ones who cling stubbornly to the “smell of books” rather than whole-heartedly embracing e-reading as many elderly do] and young people grow up, the percentage of e-book readers is only going to go up from here. Stop trying to protect the print bookstores. If we want e-books, you’re probably not going to be able to sell us a print book by making the e-book cost more. We’ll check it out or pirate it just to spite you, and you’ve lost a sale. Do you want that? And we have our own ideas about what a “reasonable” price is—we’re not some simpletons you can “convince” to want to pay more money by forcing the prices to go up.

Second: Ditch DRM. Take control of your fate the same way the music companies did, the way Baen did, and the way Tor (finally) has. Make your e-books platform agnostic, and break the shackles that tie consumers to Amazon. Do you really want someone to be able to compete with Amazon without having to resort to breaking the law? Unlock consumers’ bookshelves so they can take their libraries with them somewhere else.

This is the only way you’re going to be able to salvage something out of this Amazon mess—do like iTunes did and replace your DRM-locked books with unlocked versions. Because, by now, it’s too late for another competitor to come along and challenge Amazon if you don’t. Most of the people who love e-books have already gone with Amazon, and they’re not going to want to jump ship unless they can take their books with them. Of course, the more tech-savvy already can, thanks to Calibre and Apprentice Alf, but they’re the same minority that e-book adopters were in general before Amazon came along.

And that’s another thing. Do you know how drop-dead simple Calibre and Apprentice Alf make breaking your DRM? (Three words: “drag and drop.”) It might as well not be there at all for all the good it does to stop piracy. Sure, it keeps the average user from sharing books with his friends…but is annoying your paying customers while letting pirates flourish really a good move for you? And I guarantee you that, even if very few people are tech-savvy enough to know how to set up those cracking tools, you don’t have to be that tech-savvy to download the copy that someone else cracked for you and put on peer-to-peer. So fight piracy by making your work more attractive to buy than pirate. Or at least as attractive, so that people’s better nature can win out for you.

And third: Eliminate inefficiency. I know, this is easier said than done, thanks to the same inertia that kept you from taking advantage of e-books to begin with, but you’re going to have to do it sooner or later. This isn’t the Great Depression anymore, so get rid of over-orders and returns. There have got to be better ways of estimating demand and figuring out shipping quantities by now. Use them. Invest in print-on-demand systems like Espresso to fill shortfalls. It wastes money, gas, time, and CO2 offsets to print more books than you need, ship them out, ship them back, destroy them. Stop it. Save yourselves some money, so you don’t have to price your books as high.

I don’t know. I’m probably talking to myself here, fooling myself that anyone from the major publishers cares what I have to say. I’m just so sick of sitting by and watching the publishers screw things up. Seeing publishing-industry insiders like Agent Orange start to acknowledge the issues is heartening (they say that the first step is admitting you have a problem), but it’s going to take more than that. So old executives are retiring, how do we know the new ones aren’t going to be their carbon copies?

Still, I can hope Agent Orange and others like him (or her) will work to steer the publishing industry in a better, brighter direction. I will await future developments with great interest.

Update: The Passive Voice has posted an interesting response to the above.


  1. And yet, the big publishers are still making a profit.

    (That’s from 2011, but still.)

    My point is that none of what you wrote matters to them. They survived, they thrived. That they didn’t do it Baen’s way is irrelevant. That’s the nature of corporations, and it’s better to understand that because that’s the way they think and that is the basis for every action they take.

    Again, I’m not saying what you wrote was objectively wrong. But to understand why they’re not going read this, slap their heads and say “wow, what great ideas. Of COURSE we should have done it Chris Meadows’ way,” follow the money.

  2. @Bill: I never said they weren’t making a profit. I just said that they let Amazon become the dominant power in the e-book market, got scared, banded together to commit a crime, got fined tens of millions of dollars, and came off looking like a bunch of cowardly money-grubbing criminal scum in the eyes of the public as their reputation went right down the toilet. I wouldn’t be inclined to call that a win, overall.

    But by all means, if making a profit is the only important thing, hey, good for you, publishers. Rah rah. Keep on doing what you’re doing. You’re right up there with Ebenezer Scrooge and Montgomery Burns.

  3. As one of those “old people” you mentioned, I’m here to say great article and I read ebooks exclusively (with the exception of cookbooks). I used to always buy new releases for my favorite authors. I would pick up hard bound books at the bookstore, then I fell in love with trade paperbacks. Then one day I discovered I was older. My eyesight didn’t like the smaller font that was showing up in books. “Arthur” came to live in my hands. Reading became a chore and I stopped buying books.

    Then I got a Kindle as a gift. Now I never pay more than $7 for an ebook (and that has to be a top-notch author), I borrow from the library when possible, and I am a fan of Calibre and Apprentice Alf. I’ve learned to enjoy different authors and genres rather than pay the big boys prices or be forced to read a print book. I can adjust the font size to suit me. The arthritis in my hands doesn’t scream from trying to hold a big book open. I’m reading more than ever. My only regret? That I didn’t embrace ebooks early on — I’d have a larger library of purchased books.

  4. Sadly, I very much doubt this good advice will be heard by Mr. Riggio at B&N. I truly believe he is firmly entrenched in the idea of his bricks and mortar stores, abnd won’t let go. B&N’s mistake was growing their smaller stores into mega-stores. Now they are stuck with them, and haven’t a clue what to do. The NOOK is doomed, aas good as they all actually are, and will die a slow death…. thus we have sold all our iterations of it. But I refuse to buy a Kindle and add to Amazon’s power. So back to apps for eReading or paperbound for a while. They truly messed this burgeoning market up, didn’t they?

  5. I’m with MrsMac, some cookbooks and technical books in hard copy, everything else in e-book. Better reading experience. Lighter, and I can cary a lot of books with me in one small light device.

    Who needs the Big Six, (or is it 5 now?). There are plenty of good books that they don’t publish or price too high. There are some books I will pay the higher price for, but the are few and far between. My to read pile is now close to two thousand books.

    I have a Kindle keyboard for reading most books and a Kindle Fire HD 8.9″ for cookbooks and others that need odd formatting and color pictures. The Fire is also used for viewing PDF files of scanned product manuals, (much handier than having to look for them in a file cabinet), PDF files of electronic data sheets and schematics, (love the ability to zoom in and out).

    I am older, but embraced e-books with the second generation of Kindles and never looked back! I am not an outlier, but the new norm for reading. And don’t try foisting books as apps or ‘enhanced’ books on me. They get in the way of reading.

    Baen got it right. I bought a lot of their hard bound books to get the book and the CD ROM in the back. I would buy the Baen book rather than the other publisher’s book when choosing a book to buy. Baen treated me with respect and gave me good value for money and generated loyalty and my appreciation.

    There is a place for hard bound printed books for specialized types of books. For most books, the e-book is a better choice. Just as we moved from sheepskin rolls to paper books, to movable type and on to paper bound books and even penny dreadfuls and magazines of various sizes, the move to e-books becoming a major if not dominant form of book is inevitable. Technology doesn’t just go backwards because it upsets some.

  6. MrsMac and Mr. Bernheim represent a lot of us –I’m a Sci-Fi fan but most of today’s authors seem to like trilogys with each volume of 500 to 1,000 pages with small fonts and long lines — hard to hold, hard to read, hard to follow. I get an Amazon sample to see if I’ll get the series and only read ’em if I can get all the series at once.

    The smart authors have embraced ebooks, the rest rant and rave and loose followers.

    There’s a few words that summarize my 45 years in biz:

    * Don’t confuse effort with results
    * If you don’t cannibalize your customer lists, a smarter, quicker competitor will.
    * Embrace new technology: no matter what industry you’re in, sooner than you think you’ll be making the equivalent of buggy whips in 1915.

  7. It’s the e-book advocates that are getting old, not publishers or print readers. For starters they are continually frustrated with the future and the complex resilience of book transmission. They are also intolerant if you accept their agendas of mono delivery and display domination; just how much displacement, 1:1, of paper and audio book delivery would satisfy them?

    There are even symptoms of senility among the screen format advocates. A blog cache is not a book, a browser view is not a reading format, a crowd sourced authoring is not a monetized commodity, and a mixture of media is not a coherent publishing strategy.

    In my view the screen book advocates are the geezer dinosaurs. Whenever an enclave goes out of the way to demonize and debunk other specialists we can suspect they derive their projected profiles of others from personal familiarity. Just where did the revenue come from that has enabled screen book exploration? For Amazon, and for all other book, magazine and newspaper publications that came from print sales. In book publication it still does.

    So lets have more responsible projections of the future of books and more nuanced study of the resilience of book transmission and some exploration of such oddities as the strange complementary interplay of print and screen books. Be youthful.

  8. Here’s another thing I don’t get. When a book has gone the route of hardback, paperback, and is either out of print or doing marginally in paperback, the title’s competition for ebook readers (assuming ebook readers are still looking for this title) is now used books, which are generally about half list paperback price. Why aren’t the publishers dropping the price to half paperback list price (instead of raising it to trade papback prices as I have seen some publishers do), and get the money from the bargain seekers? After all, the publisher and author get nothing from the used book sales.

  9. Don’t diss the elderly. We’ve been among the most enthusiastic adopters of e-readers. It’s the adjustable type size, the convenience, the gradual availability of long-out-of-print backlists that include old favorites (not necessarily bestsellers) from our salad days. Of course, I’m writing of people who read a lot and like to keep a most of the books we buy to re-read. (and have been running out of shelf space and are contemplating not being able to take it all to assisted living quarters). I honestly don’t see the cost-effectiveness of buying an e-reader if you’re one of those people who buys and reads three bestsellers a year and that’s it. I bought my first e-book for my Palm Pilot in 2001 and rapidly started collecting stuff from the Baen Free Library and CDs. Incidentally, doesn’t Eric Flint deserve some credit for the BFL?

  10. Completely agree on pricing and DRM, Publishers make their living on understanding the market and did not understand the digital market (Although one could argue that as a new market they couldn’t understand it immediately). But, as I’m currently researching my dissertation on the entry of publishers into the digital market, slightly inspired by reading so much against them, there are three points I’d like to make:

    The first, publishers set the recommended retail price and fought Amazon to keep it high but -failed- as we saw with really low price wars. Retailers have the main control over the pricing and can apply great pressure. Also, publishers now do not have the control to take DRM off Amazon books. That DRM is inherent in the format. Not that they would just now (DRM is one on the most illogical things that the publisher has done for the reader and a private peeve of mine) but they point remains they couldn’t.

    Second, Random House, HarperCollins, Hachette and Penguin all tried in 2000 to enter the e-book market. The demand wasn’t there and they all lost a lot of money which made them hesitant the second time. They did, in fact when e-books failed to take off, say in media that they were going to use them as promotional tools. With e-readers it’s easy to say, it could have come earlier if… but really the market is bigger than just the publishers and just the tech companies. Industrywide there were changes in acceptance, readerwise readers became more used to reading on a screen.

    Third, Publishers prepared for the entry of the Sony reader into the market before even the Kindle. In 2006 all the big publishers were digitising their ists but found that the process was slower than expected and they had difficulty getting individual rights. But this also meant that when Kindle came a year later they had more content available. Ignoring the previous path that lead to the Kindle tipping point ignores the reason that it occured.

    • @Jeffrey: You make some fair points. I would be interested to see your dissertation when you finish it; I expect TeleRead would even be happy to post it if you wished. But on one point, I’m afraid, you are quite incorrect.

      DRM is not inherent in Amazon’s format. It is a choice publishers (whether self- or major) make when they submit a book to Amazon. They may have the book DRMed or not. And they may, apparently, remove it completely afterward. I call your attention to Tor’s complete removal of DRM from all its e-books on all stores, including Amazon, just over a year ago. They replaced the DRM-locked versions on their stores with unlocked ones so that people who had already purchased the locked ones could buy the unlocked replacements.

  11. Ah, always good to be corrected, thanks. I assumed that Tor’s removal couldn’t be applied to Amazon and that the DRM was in the format. At least I have more reason to dislike publishers’ insistance on DRM now.

    • No problem. It really is a marvelous thing that authors and publishers have the chance to go DRM-free if they want to, and an annoying thing that more of them don’t. Maybe with Tor’s success, more will consider it.

      I may have more to say in response to your other points when I am home from work and have more time to write.

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