Todd Communications

This guy Flip Todd up in Alaska is quite the character. You may recall that a week or so ago, our literary agent asked him to cease & desist in his illegal publication and sale of the October 2011 edition of “Butcher, Baker.” He replied the same day and, you know, it sounded hopeful.

From: Flip Todd
Date: January 4, 2012 10:59:27 PM EST
To: Robert Lescher
Subject: RE: Butcher, Baker

Thank you for considering our proposal.

I will tell our sales staff at our sales meeting on Tuesday (1/10/12) to stop all sales of Butcher, Baker.

Well, today is January 10th, so let’s review his follow-up report (see below for full text).

On close inspection, you will note some curious language in the last paragraph: “The authors, through their agent, have declined our offer to sell the book and pay them royalties…” I am having trouble reading this as anything but an attempt to get out of paying us royalties, on the grounds that we didn’t reach an agreement with him. Nonsense. We told Flip Todd to quit selling our book. How he interprets that to claim that he doesn’t owe us royalties is beyond me.

And of course, there is also the small matter that, as of today, his ILLEGAL edition of “Butcher, Baker” is still on offer on Amazon. Yeah, I know there are lots of moving parts.

I want to give this guy the benefit of the doubt. Sort of. Diminishingly.

From: Flip Todd
Date: January 10, 2012 6:18:26 PM EST
To: Todd – Entire Staff
Cc: Robert Lescher
Subject: Cease sales of Butcher, Baker mass market book

As a follow up to the announcement in our sales meeting this morning, let me repeat to the entire staff, we are to cease all sales of the
Butcher, Baker mass market paperback book immediately.

We have been informed that the authors have taken back publication rights to the title from Dutton, the publisher from whom we obtain sub-publication rights for Alaska several years ago.

Please do not sell any copies of the book, as was earlier announced, and inform anyone inquiring that we have lost the right to publish the book. The authors, through their agent, have declined our offer to sell the book and pay them royalties, so we may no longer sell the book.

Thank you.

Flip Todd
Todd Communications
611 E. 12th Ave.
Anchorage, AK 99501-4603 U.S.A.
(907) 929-5503 Fax (907) 929-5552

Back to the Audience

As an author, you think about your audience. Your “dear reader.” Or at least you should. Even if it’s only your inner audience. After all, there’s a reason you’re committing all those words to the page. A message, perhaps?

But getting your work published adds another dimension or two, enough so that you start to think perhaps the publisher is your audience. I say this from the perspective of someone for whom it took eight years from inception to publication. Twenty rejection slips. A complete rewrite of the entire work. The publisher held the keys to the kingdom and was, in a very real way, an arbiter between the author and her audience.

The rise of the internet and eBooks is supposed to change all that. Chris Meadows over at TeleRead takes it as a given that writers whose books the Big Six won’t take can sell directly to customers via Amazon, Apple and Barnes & Noble. The counter-thought, here from publisher Teresa Nielsen Hayden, is even more provocative:

Stated axiomatically: If you’ve written a book that people want to buy and read, you stand an excellent chance of getting it published by a real commercial publisher. If you haven’t, no clever workaround publishing scheme is going to help, because there’s no way to force readers to buy and read books they don’t want.

The backdrop here is whether or not publishers — traditional publishers — really care about “dear reader.” The accusation, which some in the industry (like Brett Sandusky) are taking seriously, is that publishers are not as customer-focused at they should be. If not, the argument goes, the customer is being underserved. This creates an opening for others. Are independent publishers more attuned to customers? Will they take over while the giants fail? Is Amazon poised to play a similar role?

The critical question is whether traditional publishers still hold the keys to the kingdom. Or even matter.

Certainly the pressure is being felt on all sides. Publishers are getting hit over agency agreements, which drive up prices. Authors are finding their work potentially highjacked by Amazon, which is pushing wholesale pricing at a cost to author royalties. Some customers are having second thoughts about eBooks themselves (though eBook sales are up 202%).

The tragic thing is what’s being lost in this conversation. All the forgoing “pressure” is focused on customers and the bottom line. Consumers want cheaper books. Authors want higher royalties. Publishers want profits.

But there is an older relationship that, I think, is more important. As an author, writing for your audience is paramount. They are more than mere customers. They’re your first duty. If you just write for the money, you’re a hack. Let me repeat. A hack. Good publishers — great publishers — recognize and support these obligations. And find writers whose work deserves a wider audience because it actually has something to say.

Teresa Nielsen Hayden puts it better than I: “Being focused on readers and their reactions is a marker for people who work in the commercial publishing industry. Reader-fixation is water, and [they spend] decades being a professional fish.”

Is the model that Hayden defends the only way? Heavens no. The internet is there, eBooks aren’t going away. But you better write the best book you can.

Tablet Update: iPad, Kindle Fire, Win 8

I care a lot about the tablet category because, quite selfishly, I see them (and eBooks) as a way out of the book sales doldrums. According to the Association of American Publishers, eBooks sales grew by 202% in the past year, while the Trade Category declined by 34%. It ain’t rocket surgery to figure out which way the wind is blowing.

So it is with great interest that I find not one but two reports out today, one about tablet sales, the other about tablet projections. Two very different reports, one with a consumer focus, the other with a business focus. Maybe not so different…

THE FIRST is from Amazon, continuing their positive reports for Kindle sales through the holidays. Amazon are typically cagey in their report, saying only that “customers purchased well over 1 million Kindle devices per week.” Those numbers are being helpfully interpreted as 4 million Kindle units in December, most of them the new Fire, according to Casey Johnston at Arstechnica. That projects to about 6 million units sold since the new Kindle Fire became available in mid-November.

By contrast, Apple is projected to sell 13 million iPads through the last quarter of 2011, according to JP Morgan analyst Mark Moskowitz, in a note that adjusted iPad numbers down from 13.3 million because of strong Kindle sales.

THE SECOND report comes from market research firm NPD. They’ve had some dodgy reports in the recent past, including one that excluded iPad sales from its research estimates. Ok, bygones be bygones. Whatever. NPD are reporting now on tablet purchase considerations in the business sector over the next 12 months. Their findings?

Nearly 75% of U.S. small and medium businesses (SMB) plan to purchase tablets over the next twelve months. That number goes higher as business size grows; among larger firms, 89 percent plan to purchase new tablets in the next 12 months. Average spend ranges from a high of $39K to a low of $2K (the latter firms with under 50 employees). Most of those tablets will be the iPad.

“Businesses of all sizes appear to be determined to capitalize on the tablet phenomenon,” said Stephen Baker, vice president of industry analysis at NPD. “The iPad, just as it is in the consumer market, is synonymous for ‘Tablet’ in the business market, leaving Apple poised to take advantage of the increased spending intentions of these SMBs. NPD’s research shows that iPad purchase preference is higher among larger firms than smaller ones, which is an important indicator that Apple is gaining traction far outside its typical consumer space.”

Given the “consumerization of IT,” we also expect a fair number of tablets to enter the business market through the hands of employees. We’ve seen it before. Which leaves us with a few questions.

  • Will the Kindle Fire Go Enterprise?
  • Too soon to tell, but if past is prologue, one will see employees bringing their Fire to work. The biggest near-term hurdle for the Fire is its lack of cellular (3G-4G) support, which in the past has enabled employees to get around corporate WiFi restrictions.
  • What about Windows 8 Tablets?
  • At least one analyst, Bernstein Research, is bullish on Windows 8 tablets. According to Todd Bishop, Bernstein believes Windows 8 tablets to be most attractive to business users, in part due to compatibility with existing line-of-business apps.
  • It’s not the big market chunk that the consumer opportunity represents, but it should give Microsoft a toe-hold where other competitors (Android, anyone?) have struggled failed. I am less optimistic that these tablets will come through the employee back door, however. I am predicting it’s an IT purchase all the way.

We shall see.

eBook Pricing

Dan Gillmor recently pinned a piece for The Guardian (UK), in which he describes the “great ebook price swindle.” The article struck a chord with me, because I am wondering about the best price for an ebook version of “Butcher, Baker.”

Gillmor’s argument is that (greedy) publishers have adopted the agency model and, in the process, driven up prices of ebooks to the point where they are equal to, and occasionally higher, than the hardcover version. I have written elsewhere that publishing is a three-legged stool — and that the author deals Amazon is offering are less than stellar. Most commentators (including Gillmor) conveniently ignore the author. Indeed, Gillmor makes an argument that I’ve rejected in the past, namely that the current ebook pricing model is solely anti-consumer. But he says one thing that gives me pause:

When new ebooks were $10, I was buying them all the time. In almost all cases, book purchases are impulse buys – something you want to have, right now. I was buying new best-sellers at a rapid rate, and happy to do so… No more. I still buy some e-books, but only at lower prices.

You know, as much as I hate ridiculous royalties, I have no interest in driving buyers away. So here’s what I’m looking at…

The paperback version of “Butcher, Baker” has been selling at anywhere from $8.99 to $25.00. The latter seems too high (and I think I know why that’s happening, BTW. Greedy publisher). The former seems like a bare minimum. And, of course, I know what I’m up against… According to a 2007 study, one in four Americans read no books in the previous year. The Trade Categories (hardcover, paperback and mass market) were down 34.4% from February 2010 from February 2011.

Dan Gillmor speaks to the “impulse buy” in ebook land. I think that’s where I’m headed. After all, “Butcher, Baker” is smack in his comfort zone.

The books I bought this way tended to be mysteries and thrillers – the kind of book purchases I treated like movie tickets, to be read or seen once and then put aside.

Kindle Fire: By the Numbers

The Kindle Fire is emerging as a certified hit for the holiday season. With a few lumps of coal thrown in for good measure. Here’s a look at the Kindle Fire, by the numbers.

No big surprise on the last one, except that Android is continually positioned as an “open” platform. Which implies that Kindle Fire users should also be able to get to the Google Android Market. They can’t. I guess that’s what “forked” means.

In the Consumer’s Name

First the civil suit in California. Then the European Commission investigation. Now, according to the Wall Street Journal, it is the U.S. DOJ. And the attorney’s general for Texas and Connecticut [1]. What do all these folks have in common? They are launching probes into alleged collusion between Apple and publishers over eBook pricing.

The dueling rhetorical exchanges put the consumer in the middle of this fracas. Here’s Hagens Berman, speaking on behalf of plaintiff Anthony Petru, a resident of Oakland, California, and Marcus Mathis, a resident of Natchez, Mississippi. Each purchased a least one e-book at a price above $9.99 after the adoption of the agency pricing model.

[Really? This is their plaintiff list? Or just the published plaintiff list?]:

…the publishers and Apple colluded to increase prices for popular e-book titles to boost profits and force e-book rival Amazon to abandon its pro-consumer discount pricing.

Here’a the corresponding statement from one of the named defendants, Hachette Book Group:

Hachette’s “decision to distribute e-books through agency distribution not only better serves our authors and customers, it has also helped to increase competition and consumer choice in e-books and devices,” a spokeswoman said.

So there you have it. As a consumer, you should only be concerned about discount pricing, says the plaintiff’s lawyer. Pretty much the Wal-Mart / Costco argument. No, say the publishers, as a consumer you should also be concerned about choice in e-books and devices. Why? Ask the Authors Guild, which is already recommending that authors not participate in Amazon’s lending library, due to Amazon’s confiscatory remuneration model (royalties based on wholesale rather than retail price).

The book business, like all of the arts, is built on a three-legged stool. Not to be pedantic, but there are creators (authors), distributors (publishers) and consumers (reading public) in the model. The consumer model that focuses on price alone is based on paying lower royalties (wholesale rates), which ultimately hurts authors. A consumer model that adds choice purports that the ability to do so is based on higher participation rates by authors, whose royalties are not discounted (retail rates).

Although I think publishers need to do a better job on their own side of the royalties picture, Amazon’s offer to authors is… well… considerably worse. The wholesale discount is anywhere from 55% to 20%, which means the author is giving away up to half of her money. Yes, that makes for a happy consumer. And a very unhappy author, who’s looking at a potentially deep discount in royalty calculations.

Amazon will argue that author’s (and publishers) will make up in volume what they lose in pricing. What they will have more difficulty arguing is that the agency model has hurt eBook sales, at least according to recent Association of American Publishers numbers:

According to the February results, once again e-Books have enjoyed triple-digit percentage growth, 202.3%, vs February 2010.

Author’s will add that the agency model treats all three-legs in the publishing stool more equitably. Well, at least this author will. We’re already seeing some publishers try to move us to the wholesale model. We no like it.

[1] The Connecticut AG can’t seem to decide which way its assets are pointing. First up, it was taking on Amazon and Apple for collusion. Now it’s going to the other party, across the street.

The Mess That’s Called eBooks

As we wrote back in November, there’s a battle going on in the world of eBook publishing. The topic then was Amazon using wholesale pricing as a benchmark for author royalties as it promotes its Prime Program (and juices sales of the Kindle Fire). The upshot for content creators: You probably want to review your publisher contract and make sure you are fairly compensated (as a percentage of the retail price, not wholesale).

The battle itself, however, is being fought on multiple fronts. In August 2011, the Hagens Berman firm filed a class-action suit claiming Apple and five top U.S. publishers “illegally fixed prices of electronic books, also known as e-books.” They are demanding a jury trial, always a sign that they want the most generous settlement possible.

The basis of the Hagen Berman complaint is the claim that the five publishing houses “forced Amazon to abandon its discount pricing and adhere to a new agency model, in which publishers set prices. This would prevent retailers such as Amazon from offering lower prices on e-books.”

If Amazon defied the publishers and tried to sell e-books below the publisher-set levels, the publishers would simply deny Amazon access to the title, the complaint details. The defendant publishers control 85 percent of the most popular fiction and non-fiction titles.

The publishers, the complaint goes on, feared Amazon’s pro-consumer pricing, especially as it threatened the established brick-and-mortar model.

Now it appears that the European Union’s antitrust commission wants a piece of the action. The E.U. investigation will look into charges that “international publishers… have, possibly with the help of Apple, engaged in anti-competitive practices affecting the sale of e-books in the European Economic Area (EEA), in breach of EU antitrust rules.”

As Philip Elmer-Dewitt notes in this Fortune piece, the E.U. appears dead serious. “In preparation for the formal proceedings announced Tuesday the commission raided the offices of some or all of the five publishers named in the probe.” [Actually, the E.U. press release calls them “unannounced inspections.” Ah, so diplomatic.]

In case that isn’t interesting enough, back in August 2010, Connecticut Attorney General Richard Blumenthal also investigated potential anti-competitive e-book practices. The A.G.’s complaint?

Attorney General Richard Blumenthal is investigating agreements between the country’s largest e-book publishers and two of the largest sellers — Amazon.com, Inc. and Apple, Inc. — that may block competitors from offering cheaper e-book prices.

WTF? Who’s colluding with whom?

Takeaways
(Hey, I’m no lawyer, but I am an interested party. At least I think I am):

  • If you are a content creator, an Amazon win here means get ready for wholesale to be the new retail.
  • If you are a consumer, an Amazon win means e-books will fly off the shelves at giveaway prices, as Amazon juices its Kindle sales.
  • If you are a publisher, an Amazon win means they are one step closer to moving into the publishing business. As Philip Elmer-Dewitt notes, Amazon is the 500-lbs gorilla in the e-book biz.

And who knows, at the moment, Amazon may need all the help it can get. There’s already speculation that as many as a half-million Kindle Fires will be returned post-holiday (via Philip Elmer-Dewitt). Usability guru Jakob Nielsen, meanwhile, is reporting that “Amazon.com’s new Kindle Fire offers a disappointingly poor user experience.” It gets worse… Over the Black Friday sales season, iPad and iPhone were dominant [Chart of the Day].

Even 500-lbs gorillas deserve some good news now and then…

Rights? What Rights?

The battle is on.

If nothing else, the battle lines over eBooks are being drawn, with authors, publishers and retailers staking out their various positions. The proxy war is being fought over the lending of eBooks. Seriously. No, I mean it. As we have noted here previously, Amazon is pushing a lending library as a way to promote Kindle sales. Here’s what they say about the underlying agreements that make their program possible:

For the vast majority of titles, Amazon has reached agreement with publishers to include titles for a fixed fee. In some cases, Amazon is purchasing a title each time it is borrowed by a reader under standard wholesale terms as a no-risk trial to demonstrate to publishers the incremental growth and revenue opportunity that this new service presents.

Not so fast, Amazon, replies the Author’s Guild.

The Big Six publishers have refused to participate in the Amazon program. Amazon then approached second tier publishers. Many of them also refused to participate. According to the Author’s Guild, however, many found their books enrolled anyway.

Amazon has decided that it doesn’t need the publishers’ permission, because, as Amazon apparently sees it, its contracts with these publishers merely require it to pay publishers the wholesale price of the books that Amazon Prime customers download. By reasoning this way, Amazon claims it can sell e-books at any price, even giving them away, so long as the publishers are paid.

More from the Author’s Guild: “Amazon, in other words, appears to be boldly breaching its contracts with these publishers. This is an exercise of brute economic power. Amazon knows it can largely dictate terms to non-Big Six publishers, and it badly wanted to launch this program with some notable titles.”

What about those few publishers who did sign agreements with Amazon? Well… They may have violated their own author contracts. Again from the Author’s Guild:

While these publishers generally have the right to license e-book uses for many of their authors’ titles (just as most trade publishers do), our reading of the standard terms of these contracts is that they do not have the right to do so without the prior approval of the books’ authors…

Under most (perhaps all) publishing contracts, a license to Amazon’s Lending Library is outside the bounds of the publisher’s licensing authority. This isn’t a minor matter – in order to protect the author’s interests, all publishers should be asking permission before entering into such a bulk licensing agreement, and most would need to seek a contract amendment to do so.

On another front, meanwhile, Penguin has pulled its books from both the Amazon and Overdrive lending programs.

The battle is on.

Content consumers are caught in the crossfire, for sure. One pathway to eBooks has been blocked for the time being. At the moment, however, it appears that author’s are the biggest losers, what with at least one retailer trying to foist off reduced royalties and some publishers apparently skipping the get-author’s-permission step.

This is screw-you capitalism at its finest. We don’t say this from a scholarly reserve, either. We’ve experienced it first-hand, from a print publisher no less. This cannot stand. It promises to be a protracted battle.

Consume + Purchase

We have noted in these pages that Amazon’s big bet with the Kindle Fire is a device that links consumers directly to the purchase experience. A cynical characterization calls it a contemporary Sears catalog. Now comes research indicating that at least one segment of device owners are willing to take that idea one step further.

As proof, the Association of Magazine Media (MPA) just released a study examining the attitudes and behaviors of a select group of consumers: tablet and e-reader owners who read app-based magazines on those devices. It’s in part a testimony to how fast things are happening in this space: a year ago, they lacked the critical mass to even conduct such a study. There are a number of interesting findings, but the data on purchase behavior was striking:

Significant to both publishers and advertisers, mobile commerce is a key point of interest to digital magazine consumers:  59% want the ability to buy directly from ads, while 70% stated that they want to be able to purchase products and services directly from editorial features.  At this point, most of the respondents (73%) typically engage with digital magazine ads.

The Kindle Fire paradigm is direct purchase: search a product listing and then purchase an item. For the study participants, at least, the indirect purchase experience is also meaningful. Here they may be reading a magazine article and either want to purchase something mentioned there — or see an associated ad that drives them to a purchase decision.

If the now vexing customer data issue can be resolved, some electronic publishing models appear to have a clear path forward. After all, customers who actually buy things are the most valuable to advertisers. The MPA survey even points to some implementation details: Most respondents want more electronic newsstands (76%) as well as the ability to easily find specific titles to download (79%).

Seems straightforward. Some caution is warranted. The MPA study is focused on early adopters; their behaviors don’t always illuminate what occurs at mass-adoption. But the signs pointing to new revenue models are encouraging. I’ll state the obvious: this isn’t your grandmother’s Sears catalog. But, then, neither is the Sears catalog.

Anti-Trust

I was working at Microsoft when the Justice Department lifted the consent decree during the early days of the Bush II presidency. For all the bile traded back and forth during that time, the news was eerily anticlimactic. There was a small cheer and then everyone just went back to their jobs.

But the antitrust charge was a serious threat that held the potential to break up the company. Bill Gates and others argued at the time that Microsoft’s dominant position was always at risk from emerging technologies. Ten years on and we now see that the “bully” Microsoft was perceived to be now finds itself in a market that has largely moved on.

As the worm turns, the next villain in sight seems to be Apple. As Frederic Filloux writes in his latest Monday Note column, Apple seems to have an anti-trust problem. Publishers, in particular, are feeling the squeeze. So much so that there is talk of possible legal action before the European Commission.

The problem, in a nutshell, is the Apple ecosystem as redefined by the iPad. Lots of power now resides in that ecosystem. This has led to a situation where many in the industry simply don’t trust Apple to address their business needs. Some specifics:

The iPad’s sales trajectory has been so explosive that the “joke” in Silicon Valley is that there isn’t a tablet market; there’s an iPad market. If you want to move to the world of digital publishing, this is the device you need to be on.

At present, moreover, the best way onto the iPad is through Apple’s AppStore, if only because native apps offer a much richer experience than web-apps. But the AppStore brings a whole set of its own issues. Filloux says it well:

“Let’s face it, Apple has life and death power over the apps it harbors in its store.”

Given the situation, it’s worth examining the scope of the threat, as well as potential solutions. I think the two are closely aligned. Note that my bias here is toward more publishing options for authors. My ideal is a healthy ecosystem that’s not dominated by any one player.

The Threat Has Its Weaknesses

  • As Bill Gates pointed out more than a decade ago, ten years is a long time in the tech industry. Emerging technologies, as yet unknown, may well disrupt Apple’s current position. Faint comfort, that, but worth remembering.
  • HTML5 is still in its infancy. As it matures, it will take web-apps to greater parity with native apps. This eases the requirement to go through the AppStore to provide compelling content.
  • Amazon is an alternative, albeit with its own set of worries. The Seattle online retailer has been steadily building a compelling alternative to the Apple universe. It is not identical, but that may be its greatest strength. Still, be careful what you wish for.
  • Don’t forget Barnes & Noble. B&N doesn’t have the breadth of Amazon’s catalog, but as a book distributor, they have great depth. Don’t stop at books. This is a case where having several friends is better than having one. Books A Million also comes to mind here.

I doubt any of this will prevent concerned parties from lawyering up. But as Bill Gates pointed out, the technology business is highly fluid. By the time the legal system gets there, technology will have already moved on.

The best strategy at the moment is for publishers to get their own houses in order, so they can take advantage of emerging opportunities. That means aggressively embracing new technologies and alternative distribution mechanisms. And building alliances that spread, not concentrate, opportunity.