Books, Authors, Readers and Disintermediation

I first met Ken Auletta at a reception on the Intrepid in New York in 1992. He is a brilliant and articulate observer of American culture and one should read his musings as they tend to reflect the changes that we as a society are going through. He may not be a great prognosticator of the future but he is superb in telling us how we got to where we are now.

In a current article in the New Yorker on the future of publishing he writes of the battle brewing between Apple and Amazon, a battle which may very well leave the publishers behind. You see Apple is trying to compete with Amazon with its iPad whereas Amazon has a business model which works.

Auletta states:

A close associate of Bezos puts it more starkly: “What Amazon really wanted to do was make the price of e-books so low that people would no longer buy hardcover books. Then the next shoe to drop would be to cut publishers out and go right to authors.” Last year, according to several literary agents, a senior Amazon executive asked for suggestions about whom Amazon might hire as an acquisitions editor. Its Encore program has begun to publish books by self-published authors whose work attracts good reviews on Amazon.com. And in January it offered authors who sold electronic rights directly to Amazon a royalty of seventy per cent, provided they agreed to prices of between $2.99 and $9.99. The offer, one irate publisher said, was meant “to pit authors against publishers.”

This means that Amazon is trying to disintermediate the publishers and generate a new distribution channel for authors. The issue is clearly that there are many authors out there, and to data the author in the trade press must get an agent who then gets a publisher and the process continues. Agents are gatekeepers, editors are funnels, and the publishers are all too often seekers of the hits very much akin to the old record business.

However one must look at the book business in a totality. The trade books the ones we read for pleasure are all too often short term hit businesses. On the other hand companies like Thompson make a fortune on text books, the prices of which are extortionary. For example calculus is calculus and has not changed in 200 years or more. So why pay $175 for a new calculus book when you can get a used one for say $5 at most. The universities are in collusion with the publishers and this just drives up the costs of education. Another example is economics. They charge a fortune for the current edition and yet the last edition is basically the same as were the last three before that. Supply and demand just has not changed that much in say ten years.

Auletta continues:

Asked to describe her foremost concern, Carolyn Reidy, of Simon & Schuster, said, “In the digital world, it is possible for authors to publish without publishers. It is therefore incumbent on us to prove our worth to authors every day.” But publishers have been slow to take up new technologies that might help authors. Andrew Savikas, O’Reilly Media’s vice-president for digital initiatives, is shocked that publishers have done so little to create digital applications for their books. “Nothing is stopping publishers from putting apps for books on iPhones,” he said. “There are fifty million iPhones in the world. That’s a great customer base.” Budget-conscious publishers have also reduced the editing and marketing and other services they provide to authors, which has left a vacuum for others to fill. Author Solutions, a self-publishing company in Bloomington, Indiana, has ninety thousand client-authors. For books that attract commercial interest, the company has partnered with publishers like Harlequin to release them through traditional channels, but with more generous royalties.

Yes with the Internet authors can publish independent of the classic publisher. Amazon allows electronic publishing by having a low cost distribution channel connecting author with reader. Yes it may eliminate the editor, a function which has value, but it makes a more timely dissemination of a product.

Auletta again states:

Most publishers mistrust Amazon and think it is unnecessarily secretive. It won’t tell them details about customer habits, or the number of Kindles sold, or what it costs to make a Kindle. It won’t even disclose the percentage of revenues its book sales represent, saying only that “media”—movies, music, and books—accounted for fifty-two per cent of sales in 2009.

Publishers say that the negotiations with Apple were less contentious. There were arguments over the price of e-books, with publishers wanting the top price set at seventeen dollars and Apple insisting on fifteen. “Once Apple had determined that they were going to accept the agency model,” a publisher said, “they were very tough: Take it or leave it.” But the Apple people “had a much more agreeable feel than Amazon did. They said they would share some consumer data about buying e-books. We have no such data from Amazon.”

But books have different uses. We read some for pleasure, we use some for learning, we use others in our profession, we seek old ones for wisdom, and the list goes on. I often use ABE Books as often as Amazon. Almost all, if not all of my books are for professional use. I am not a novel reader, have not read one in years, so as one who writes I use the book as a physical entity upon which I apply my yellow tags along with comments. For that I need a paper copy. Even if I have a soft copy I often print output a paper version for the purpose of marking it up. I thus use work back and forth with soft and hard copies. I see no use for either Kindle or iPad. Yet I use the computer almost always as a working source of documents. Kindle is great for novels, iPad for say text books. Yet neither is targeted to the writer as of now.

Yet Auleta recognizes the change in distribution channels. As the record companies lagged and did not respond the publishers are doing the same. They have even more at risk.

It will be interesting to see how this plays out. I suspect that authors and readers will meet in the 21st century bookstore named Amazon and not Apple.