[Ed.: Commenters have noted how hard it can be to get a handle on the current state of ebook sales from the shifting and volatile information available to us. Digital Book World is pleased to offer reports from Dan Lubart’s eBook MarketView, to help us see what stories the actual data has to tell. Using a proprietary market analysis tool, Dan pairs publicly available data from multiple ebook retailer bestseller lists with analysis and visual presentation to help publishers identify and understand emerging patterns.]

On June 1, Amazon launched a new promotion called “Sunshine Deals.” It was reminiscent of what they’ve done in the digital music space, where they offer lists such as “Top Albums for $4.99 or Less,” only in this case it’s “Over 600 Books On Sale for $0.99, $1.99, and $2.99.” It’s a great promotion and surely has exposed many titles to a wide audience seeking a bargain. In fact, it has catapulted a number of these titles to the top of the Kindle Bestseller list. What’s interesting to us is the prominent effect this promotion had on the landscape of their e-book marketplace.

Consider that positioning on the Kindle Bestseller list is very important for sales. It provides visibility as many customers scan the list, and we’ve established over time that position on the list tends to be self-sustaining. In other words, titles that make the list tend to stay on the list (i.e., they continue to sell well). So, for every new title that makes the list, another title already on the list must drop off.

First, let’s look at the effect Sunshine Deals had on the average price of titles in the Bestseller list.

Chart 1 – Daily Average Price – Kindle Bestseller List

The average price of the titles on the list dropped from $7.75 on early June 1, to $7.19 a day later, and continued to decline to $6.43 on June 4 – a decline of 17%. As you can see from the chart of the average daily price since January 1, this was an unprecedented change.

Let’s look at the impact another way now.

Chart 2 – Daily Price Band Splits – Kindle Bestseller List

Note the rise of titles on the list priced below $3 from 32 to 47 in those same four days. Initially, those slots on the list were occupied by books priced above $8.

But in the last few days, something interesting happened on the list. The number of books priced below $3 started to decline. And most interestingly, the number of titles priced over $8 grew, but the number of titles between $3 and $7.99 did not.

Perhaps the customers who normally are comfortable buying “full-priced” eBooks tried out the “cheap seats” for a few days, perhaps a week, but did not necessarily become customers that consistently went for that price zone, even as the promotion continued. Perhaps the Sunshine Deals promotion encouraged new, but limited-time bargain hunters: more likely, the promotion encouraged a rush of customers who were already accustomed to buying low-priced Kindle eBooks (now easier to find both because of the promotion itself and because more of them had crept into the Kindle Bestseller list).

Although the data cannot illustrate individual purchase behaviors over time, it does suggest certain things about the entire Kindle eBook market. So what may we have learned from this?

1. Amazon has tremendous power to change peoples’ purchasing habits in the short term (perhaps a week if we go by this example), but not necessarily in the long term.
2. The premium segment of the market is at least somewhat resilient, which is great news for the agency publishers.
3. Meanwhile, customers who are more bargain-conscious and used to shopping in the $3-to-$7.99 band (think mass-market paperbacks) more easily find titles they will like in the promotion.

We can expect more experimentation of this type and others from Amazon, and agency publishers have taken note. (They could hardly miss this one.) The battle over the value of published content in the digital space has reached a new phase, and it will be interesting to see where it goes from here.

Dan Lubart is the principal at Iobyte Solutions, an IT strategy firm with a specialty in publishing and entertainment media. Iobyte’s eBook MarketView tool enables publishers, authors, agents and others to study the dynamics of the ebook retail marketplace in various ways. Dan blogs at eBook MarketView.

[Ed.: Commenters have noted how hard it can be to get a handle on the current state of ebook sales from the shifting and volatile information available to us. Digital Book World is pleased to offer weekly reports from Dan Lubart’s eBook MarketView, to help us see what stories the actual data has to tell. Using a proprietary market analysis tool, Dan pairs publicly available data from multiple ebook retailer bestseller lists with analysis and visual presentation to help publishers identify and understand emerging patterns.]

If following ebook bestsellers is like announcing a horse race, then independent, self-published titles had the inside track early in 2011. The “agency-model” publishers’ share of the Kindle bestseller list from December 2010 into February 2011 declined steadily; the Nook list’s agency share held more or less firm after an initial January drop.

That early start, if it continued, would have been bad news for mainstream publishers; with individual titles, visibility on bestseller lists is critical for sustained sales. But since mid-April, agency-model publishers’ share of both lists has held steady, even improving for short intervals, indicating that we may have reached a stable point for now.

In this first chart, the most glaring feature that stood out early was the rapid decline of this share on Kindle in December into early January. Note: The Kindle share includes Random House even before March 1 to provide consistency.

But the story is much different on the Romance genre bestseller lists. Since March 1, 2011, there has been a pronounced shift on both retailers’ Romance lists away from agency titles. Looking at the second chart, you can see that the average combined share of both lists for all agency publishers is halved, from roughly 30 to 15 titles in this period.

This drop may be mostly explained by the rise in the average price of agency titles on this list, including but not limited to Random House’s changes after March 1. One item of note is that Harlequin (not an agency-model publisher) has also slowly lost share of the list as its average price climbed over the past few weeks. It is difficult to determine exactly, but self-published titles may account for up to half of the Romance bestseller list on Kindle today where exactly 50 of the 100 titles on the list are priced below $3 for an overall average price of $4.15 (as compared to 35 on the bestseller list; overall average price of $7.17).

As we round the first turn, then, it looks as if the agency-model titles on general bestseller lists are finding their equilibrium. In addition, buyers seem fairly insensitive to certain price gaps and are even willing to pay premium prices. Meanwhile, Romance is continuing to reward inexpensive titles with success, and it becomes increasingly challenging for premium titles to succeed there.

Dan Lubart is the principal at Iobyte Solutions, an IT strategy firm with a specialty in publishing and entertainment media. Iobyte’s eBook MarketView tool enables publishers, authors, agents and others to study the dynamics of the ebook retail marketplace in various ways. Dan blogs at eBook MarketView.

Ebook Piracy: How Do You Persuade People to Pay?

We’re picking up the issue of ebook piracy again this week because of Cory Doctorow’s piece in The Guardian, “In the Digital Era Free Is Easy, So How Do You Persuade People to Pay?”:

In this article, I take a first cut at a taxonomy of “value propositions for the purchase of digital goods” – that is, reasons you should spend money on digital files that you can get for free – and of the market strategies that enhance or undermine each strategy.

Positing 7 value propositions, ranging from “Buy this or you’ll get in trouble” to “Buy this and you’ll get more features than you would with the unauthorized version,” Doctorow’s taxonomy holds the promise of parsing out the discussion into more manageable statements about value. In an industry where the question is usually framed as “How do you stop piracy?” recasting the question as “How do you encourage legal purchases?” might be the solution, one that holds promise for many of the issues of this week’s roundup.

Will Publishers Find Sustainable Ebook Pricing?

Because really, the disconnect in pricing has a lot to do with perceived value, and it’s a disconnect being played in many arenas, but perhaps most noticeably at Amazon. At The Wall Street Journal tech blog, Jeffrey A. Trachtenberg brings in the example of John Locke, a self-published author that sells his books for 99 cents. According to Locke, the burden of proof regarding value falls not on him, but on the traditional publisher.

From the article:

“When I saw that highly successful authors were charging $9.99 for an e-book, I thought that if I can make a profit at 99 cents, I no longer have to prove I’m as good as them,” says Mr. Locke. “Rather, they have to prove they are ten times better than me.”

But, Mike Shatzkin at The Idea Logical Company brings up a great point about “what we know and how.” Even though discussion about ebook pricing has infiltrated mainstream media in force, there’s still a problem of scale. Talking about the pricing of individual authors like Locke is “anecdotal”; what publishers need to do is really experiment with pricing:

[P]ublishers don’t know nearly as much as they could and should about how price affects unit sales and total revenues.

Sooner or later, a big publisher or two will start seriously experimenting with this. They will gain knowledge that will enable them to tell an author or agent, “we know things about pricing that are worth real revenue to you if you publish with us.” When that happens, it will likely be more significant to an author than an increase in the ebook royalty rate would be. Maybe a publisher can even add enough value with pricing savvy to pay for their cut!

But, What About the Value of Books in General?

As if questions about value and ebooks were not enough, two stories about the value of print books caught my eye this week. The first involves Amazon’s $23,698,655.93 book about flies, a story shared by Michael Eisen, evolutionary biologist at UC Berkeley, who just wanted to acquire an extra copy of the out-of-print reference on fruit flies for his lab:

As I amusedly watched the price rise every day, I learned that Amazon retailers are increasingly using algorithmic pricing (something Amazon itself does on a large scale), with a number of companies offering pricing algorithms/services to retailers. Both profnath and bordeebook were clearly using automatic pricing – employing algorithms that didn’t have a built-in sanity check on the prices they produced. But the two retailers were clearly employing different strategies.

Showing in detail how he could determine the underlying strategies of the two retailers based on their automatic pricing behaviors, Eisen’s post is a fascinating look at how the resale market, or at least, the Amazon Marketplace, operates.

The apex of the price war over The Making of a Fly, however, far exceeded the estimated value of this 500-year-old copy of the Nuremberg Chronicle found in Utah. Missing pages and in poor condition, this copy might be valued as low as $50,000, but even one in good condition would “only” be worth up to $1 million. It turns out that “The rarity of the book has almost nothing to do with its value,” according to an antiquities and rare book dealer.

How does this relate to ebook pricing? Considering the ongoing discussion that an ebook purchase is not a sale of an object, but the granting of a license, the value of this 500-year old book highlights ambiguities about how we value books in general. Now that authors can autograph e-books on the Nook Color, what will the value of a personally autographed ebook be, especially since it can’t be resold?

How Can We Connect With Our Readers?

The topic of our last roundtable, “Direct to Reader: Best Practices for Publishers,” is very much part of an ongoing discussion in the book world about the apparent disconnect between the publisher and the reader. It seems an endemic problem for the industry, one that touches on so many other issues, including ebook pricing and piracy, author recruitment, and more.

But, it’s not just a problem in the US market. Writing about her experiences at the Leipzig Book Fair, Amanda DeMarco at Publishing Perspectives writes:

In Germany, the Leipzig Book Fair is known for being especially reader-friendly; it’s a wonderful environment for authors to connect with the public. But walking around the 2011 fair last month, I couldn’t help thinking that for publishers it was a massive missed opportunity to educate their audience, both at the seminars and in the stands. And that that missed opportunity represents a failure endemic in the industry, in Germany as well as in the United States.

Right now, we do a lot to inform ourselves about changes in the field, and we try really hard to market books to the public. What we do not do is make non-marketing efforts to inform the public about how publishing works and how it is changing.

However, it does seem that some publishing professionals see the writing on the wall, and this week several major players in the industry launched major initiatives designed to establish better connections with the audience.

The first, Penguin’s decision to launch Book County, an online community to support genre fiction writers, seems to acknowledge 2 basic principles about the current book market: first, that more and more readers are becoming authors themselves through self-publishing (and many are commercially viable) and second, that genre fiction, and the communities gathered around them, are especially vibrant areas of the industry.

That these communities should be cultivated was also on Macmillan’s mind this week, as it launched CriminalElement.com, to serve the crime book genre in a “publisher neutral” way, much like its sister communities, Tor.com and HeroesandHeartbreakers.com. Earlier this month, Hachette USA’s science fiction and fantasy imprint launched Orbit Short Fiction to get closer to its readers, and this week, too, F+W Media joined in the genre fiction market with the launch of F+W Crime.

In addition to community building done at the level of genres and imprints, niche markets too offer the chance of a more intimate relationship with the consumer. Take, for example, UK-based Gallic Books, which offers contemporary English-language books translated from French. In a companion piece at Publishing Perspectives, Edward Nawotka poses:

Certainly by developing an expertise in a particular market segment, publisher can exploit this to attract the best authors. In addition, by being so focused, they can hone their marketing programs to precision — something that is often lacking an publishing — and thereby develop a deeper relationship with an audience, a brand even, which can help them sustain sales in the long-term. In addition, several niches are simply too small for the large trade conglomerates to pay much attention to, thus leaving room for smaller publishers to take up the slack and thereby granting them an organic competitive advantage.

Is There Really Such a Thing as “Just Marketing” Anymore?

Finally, three links to affairs outside of the book industry, but with a great deal of resonance for book publishers. One of the complaints often heard about publishers’ inability to connect with readers is that whatever outreach they do is “just marketing.” But perhaps that’s an archaic view of marketing, downplaying the very real connections that marketers are forging between consumers and the brands they represent.

For example, video game producer Valve just launched a highly anticipated sequel to the first-person physics shooter (and personal favorite), Portal. For the release of Portal 2, in addition to colorful YouTube video extras, not-so-secret updates to the original title, and an alternate reality game that started back in March 2010. there was also “cross-promotional bundling” through Valve’s Steam distribution platform, that Chris Meadows at TeleRead links to the book publishing industry’s e-piracy woes.

Of course, the popularity of the Portal games is also heightened by its darkly humorous story world and how it is developed both within and outside of the game itself. The importance of story in branding extends into product marketing, too, as Sarah Doody at UX Magazine explains “Why We Need Storytellers at the Heart of Product Development”:

The first goal of a product storyteller is to facilitate collaboration and co-creation. Today, many companies have their product and marketing groups disconnected from each other. Marketing decisions are often made at the executive level—much higher than where product decisions are made. The result is that marketing tells one story, and the product tells a different story. In the end, consumers are left to put together the conflicting messages and try to determine why they should engage with the product. A product storyteller should be positioned in the company to help break down the walls between all groups, facilitate the development of a single story, foster collaboration between groups, and ensure that every interaction a consumer has with a product or brand maps back to that story.

A third look at the marketing world comes to us from Coca-Cola’s Executive Vice President and Chief Marketing and Commercial Officer Joe Tripodi, writing at the Harvard Business Review blog. Describing concrete ways to look at “consumer expressions” (consumer responses to marketing initiatives) in addition to “consumer impressions” (the number of consumers that encounter an initiative, Tripodi lays out the numbers:

We estimate on YouTube there are about 146 million views of content related to Coca-Cola. However, only 26 million views were of content that we created. The other 120 million views were of content created by others. We can’t match the volume of our consumers’ creative output, but we can spark it with the right type of content.

Tripodi offers great insights into how Coca-Cola has encouraged user content and engagement in social media campaigns (one of which is an anachronistic Twitter account for Doc Pemberton, the inventor of Coke’s secret formula). If a connection with readers is what publishers need to survive and to thrive, both Coca-Cola and Valve should provide inspiration for going beyond “just marketing.”

But, in both cases, the primary holders of the brand or IP, respectively, gave up a certain amount of control to allow consumers or other video game companies to create or collaborate, making those connections a productive way to market. Can the book industry do the same?

Tweet of the Week

That’s just a taste of what you may have missed this week. To stay on top of the most interesting news, commentary and tweets related to publishing, keep in touch via our RSS feed, follow us on Twitter, join your publishing colleagues in our LinkedIn group, and connect with the broader DBW Network.

The Roundtable

Topic: 2010: Highs and Lows

This episode of The Roundtable was webcast live at 1pm EDT on Thursday, December 2, 2010.

• Register to participate LIVE.
• Subscribe to the audio podcast.
• DBW Members can access the on-demand archive of The Roundtable.

Featuring:

Pablo Defendini, Interactive Producer, Open Road Integrated Media
Bridget Warren, Former Co-Owner, Vertigo Books

Special Guests:

Jason Boog, Publishing Editor, mediabistro.com
Matt Mullin, Marketing Manager, Digital Book World
Emily Williams, co-chair, BISG Rights Subcommittee

Moderated by:

Guy LeCharles Gonzalez, Dir. of Programming & Business Development, Digital Book World

Links:

The Most Dramatic Publishing Event of 2010? Easy, the Introduction of Agency Pricing for E-books
Mike Shatzkin, Publishing Perspectives

Adding to the drama surrounding the shift to agency was the fact that the biggest of the Big Six trade houses, Random House, sidestepped it. This put them in a position where they a) sell their books for more per unit, b) see their books offered to the consumer for less per unit, c) can tell agents their royalties are higher per unit, d) are not offered in Apple’s iBookstore (but are available on all Apple devices through Kindle, Nook, and Kobo, at least), and e) have earned the enmity of the other publishers in the Big Six. The Agency 5 see themselves, not without reason, as having sacrificed revenue at a difficult time for the industry’s long run good while Random House takes tactical advantage of the shift (and, in the words of one CEO, are “gloating” about it).

Apple iPad Steals Market Share from Amazon Kindle
Danny King, Daily Finance

As the e-reader market has grown, Kindle’s share has slid to 47% from 62% between Aug. 1 and Nov. 8, while the iPad’s market share doubled to 32% over the same period, according to the report. The survey also indicated that people intending to buy an e-reader during the holiday season are about 25% more likely to purchase an iPad than a Kindle. The report suggests that Apple may be threatening one of Amazon’s top profit centers even as the company continues to grow. Amazon, the world’s largest online retailer, posted a third-quarter profit that rose 16% as sales of electronics and other products, including Kindle, surged 68% from a year earlier.

RH and Wylie Come to Terms; Random ‘Wins’
Rachel Deahl, Publishers Weekly

We are pleased to announce that The Wylie Agency and Random House have resolved our differences over the disputed Random House titles which have been included in the Odyssey Editions e-book publishing program. These titles are being removed from that program and taken off-sale.  We have agreed that Random House shall be the exclusive e-book publisher of these titles for those territories in which Random House U.S. controls their rights.

Dark Horse Circumvents iTunes, Plans to Sell Direct
Guy LeCharles Gonzalez, Digital Book World

Launching in January 2011 with over 130 individual issues and “several dozen collections,” Dark Horse Digital Publishing will be a proprietary, web-based platform accessible via any device with a browser (but not Kindles, Nooks, or Kobos), as well as via proprietary apps for iOS, Android and others to follow. Their ecommerce model will be “very similar to the Kindle experience and as seamless as possible for the user,” with a Dark Horse-branded app replacing their title-specific apps (400,000+ downloads to-date), and an online store where comics can be purchased, downloaded and synced wherever they’re being read. Existing standalone apps will be upgraded and those comics migrated into users’ accounts in the new store. Hershman noted that selling direct gives them full control and flexibility on pricing and availability of their content.

I love giving books as gifts.

I love the excuse it gives me to wander the aisles of my favorite bookstores fondling the pretty print packages, thinking about my nearest and dearest and what would make them happy. I like spending my money on something I believe in, and the value of giving someone hours and hours of intimate mindplay for the reasonable price of $10 - $30. But the arrival of my baby son in March means we’ll be staying put this holiday season, which has tempted me online to search for that perfect gift for the booklover in my life, who happens to live a couple thousand miles away.

On the interwebs, I am a frequent Amazon customer, and B&N has been bombarding my inbox with great deals, but a holiday gift somehow begs a more meaningful buying experience, something more akin to those long sessions communing with the wares in the aisles of the local bookshop. In search of that elusive holiday meaning, I cast my browser toward the indies, hoping to find a gift with a whiff of the inventive, personalized spirit the best booksellers put into their business.

I​’m shopping for my dad.

He travels a lot but remains a faithful print consumer (a boon for me, since we swap books we’ve read). He’s a broad, general reader currently in search of great novels, constantly hitting me up for reading recommendations, and has been disappointed lately that the new fiction hasn’t quite been living up to his high expectations.

Perfect, I thought: what this man needs is one of those new-fangled subscriptions! A great book that arrives hassle-free on his doorstep every month or two!

The old-fashioned book clubs are on the wane, but with the ease of internet commerce a few brave publishers and booksellers are re-inventing the model as a book subscription, providing steady, predictable income for the seller, and steady, excellent reading for the buyer.

This Cyber Monday I poked around for a gift for my dad. Here is what I found:

I had high hopes for Powell’s Indiespensable subscription service.

I’m a fan of Powell’s, a Portland indie that did an early and excellent job of building a business online. Their Indiespensable subscription club promises “the best new books, with special attention to independent publishers” every six weeks, including exclusive printings and “inventive, original sets”. Each installment’s book selection is a signed first edition and comes with extra material like an author interview and a special gift – an eco-friendly tote bag, a canteen, a bag of coffee, an advance reader’s copy of a new book, you get the idea. But the price, $39.95 per shipment – yikes! It’s charged in installments as each package is shipped, and you can cancel at any time, but still a little rich for this year’s budget.

Decision time: Great selections, and the extras are nice, but ultimately for my dad it’s about the books. I can’t see paying a premium for stuff he may not want.

A Twitter friend recommended Kenny’s Book Club out of Galway, that tiny city on the battered west coast of Ireland where I studied for a semester in college.

Kenny’s offers more flexibility than any other plan – they leave the number of shipments and the amount you want to spend entirely up to you, and you leave the book selection up to them. (Cheapskate alert: you can even return the books after you’ve read them, paying only return shipping! It’s book rental on the down-low!)

Decision time: This is the opposite of local for my dad, though it’s true (as my Twitter friend pointed out) that Ireland could use some extra customers at the moment!

*Best in show goes to Just the Right Book! from Roxanne J. Coady at RJ Julia Booksellers in Madison, Connecticut.

This extremely well-thought-out service offers “book series” for adults, teens, kids and babies, in paperback, hardcover or mixed format, delivered monthly, bi-monthly, or quarterly, all at different price points. Each book in the series is gift-wrapped and chosen especially for the recipient by the RJ Julia staff based on a questionnaire filled out at the time of purchase. A bi-monthly paperback series for my dad would cost $135; he could return any unsuitable books free of charge and would be able to access his profile at any time to refine the selection process.

Decision time: $135 for 6 paperbacks comes to $22.50 per book, not bad at all considering that includes personalized service and shipping and handling.

N​ow we move on to the indie publishers.

Open Letter, Chad Post’s literary translation imprint at the University of Rochester, offers three different flavors of subscription.

Options: $75 for the Fall/Winter season (5 titles), $60 for the next 5 Open Letter books to publish, or $100 for the next 10. The books on offer range from Brazilian stories to Polish poems, Croatian essays to Kafkaesque Lithuanian fiction. Best value of the lot, and shipping is included.

Decision time: Impressive list and great prices, but probably not my dad’s cup of tea.

The local contender is Unbridled Books, a resourceful indie publisher that happens to be based in my hometown of Denver, Colorado.

Unbridled offers subscriptions of 3 books for $60 or 6 books for $100, all titles shipped ahead of their official release. Subscribers also get one free backlist title, a 25% discount on Unbridled books for the life of the subscription, and a subscribers-only e-newsletter. The Unbridled list is heavy on fiction with general appeal, a good match for a reader like my dad.

Decision time: Good books plus a local connection, though opting for a publisher limits the selection.

For my dad, it’s down to Unbridled vs. Just the Right Book. (‘Tis the season for indecision; advice and testimonials welcome!)

In general, this season has convinced me that subscriptions + online shopping are a fabulous way for indies to scale their personal touch. That said, most of the sites could stand to juice their ecommerce user experience for the season to make the gifts easier to find and understand. This is another key area where Just the Right Book is a clear stand-out.

For indie publishers with focused lists, it’s hard to think of a better way to build close ties with loyal readers.

And for indie booksellers: you’ll never compete with Amazon and B&N on sheer size and selection, but meaning and relationships are as key to the indie proposition as they are to gift-giving – and subscriptions allow you to serve up your hard-earned expertise to the reader across the country just as easily as to the reader down the street.

Emily Williams is co-chair of the BISG Rights Subcommittee and a former literary scout who currently works as an independent publishing consultant.

E​arlier this month, the folks at the Diesel eBook Store posted a must-read post mortem on their transition to the agency model with the Agency Five – the five major publishers (Hachette, Macmillan, HarperCollins, Simon & Schuster, and Penguin) who used the arrival of Apple’s iBookstore as a catalyst to switch from a reseller model of ebook sales to agency.

Under the agency model the publisher maintains control of pricing and the bookseller takes a commission. T​he whole point of switching to agency was to prevent an Amazon ebook monopoly – a goal that, in theory, should benefit both publishers and ebook retailers like Diesel and indie heavyweight BooksOnBoard.

So how’s that change been working out?

Well, as Diesel stated, “retailers don’t have to lose their shirts through price-cutting, anymore” and “providing a great customer experience is now much more valuable than underselling”. On the other hand, no promotional flexibility for the bookseller takes some of the fun out of the business, and as for the implementation… don’t get them started.

How Steep the Learning Curve

The short version is that publishers – who are, after all, brand new to the ebookselling business – stumbled badly as they made the switch, sending off mixed messages as they figured out their own end of the supply chain and undermining established indie retailers in favor of the device makers.

BooksOnBoard founder Bob LiVolsi laments the lack of direct communication. “Without communication with publishers directly on some of these issues that are strategic and mission-critical to them, misunderstandings can happen and inefficiencies are inevitable,” he says. “We have championed these publishers and their titles long before Barnes & Noble, Kobo, Apple and others came to the scene. On March 31, our ebook sales were much larger than Kobo, Apple and Sony. We lost that edge because those companies continued to receive product while we did not during the months that publishers negotiated with the wholesalers.

“This was very costly to us,” says LiVolsi, “over a million dollars in revenue, which is a major blow to a self-funded business like ours.”

BooksOnBoard suffered a drop in sales both because of the interruption in supply and because some long-standing ebook customers are put off by the higher prices set by publishers. “Agency titles represent only about 6.5% of our total catalog, although agency sales represent about 35% of our total revenue today,” says LiVolsi. ​ “It was 57% before they pulled product from us for an average of 4 months while they negotiated new agreements with Ingram and Overdrive. The fixed pricing itself has caused many older customers to defer purchases, but the publishers are not seeing those lost sales because, with a rapidly growing overall market, the lift in eBook sales in general masks the disaffection experienced by older customers.”

LiVolsi attributes most of the messy transition to the publishers’ “steep learning curve” and lack of open communication.

“The wholesalers and publishers spent four months incessantly modifying metadata and tweaking the format of their reporting requirements, resulting in frequent changes to our systems,” he says. “Communication from the publishers to us has been weak regarding agency issues, with our two wholesalers as the primary filters, so notice on these changes often was a matter of hours.”

As an example: “We received a threat to pull product regarding one change at 9:50am August 31st, and then received the very first notice of the change requested 80 minutes later. So the change notice came after the threat. We had no prior insight into that change, a significant one. Yet we completed and deployed the code modifications and testing by that night.”

Taxing New Requirements

S​loppy communication with the wholesalers put booksellers who depend on them for supply into a serious bind. “The wholesalers often had conflicting information​,” says LiVolsi.

“Both wholesalers had very different reporting requirements in the early months, causing us to build and maintain three different systems for accounting for book sales​ – one for each distributor/fulfillment provider and one for our traditional retail sales. It also threw a monkey wrench into our accounting because of changes in revenue recognition associated with being an agent versus a retailer for these books​ [and] the application of different sales tax rules per publisher.”

Diesel has also wrestled with the tax issue . “In the past, publishers did not collect sales tax for digital product,” explains Kelley Allen, Director of the Diesel eBook Store. “Digital retailers quickly had to comply with this new requirement. Not an easy task considering sales tax rates in the United States vary by county, municipality and, in some cases, subsections within a given municipality. So, if a customer from Plano, Texas buys an eBook, he or she will be charged the Texas rate of 6.25% plus the Plano county rate of 2%. Each agency publisher now supplies to us a list of the states in which we, as a retailer, must collect tax. We then use a tax research service that regularly compiles all state and local taxes rates into a feed for us.”

Digital DNA

Despite the trials of the transition period, both Diesel and BooksOnBoard see agency pricing as a positive in the long term. “Over the long haul, agency is a good thing for the collective ebook retailing industry,” says Allen, “and also for preventing Amazon from monopolizing the whole ebook pie. However, during the initial switch from wholesale to Agency, there were a lot of bumps that one could argue were detrimental, particularly to the smaller independent retailers.”

LiVolsi is likewise trying to move beyond the short-term negative consequences and look at the big picture. He points to BooksOnBoard’s agility as a born digital company as key to overcoming the setbacks they’ve endured in the past few months. “We’ve been at this longer than any of the big retailers and have deep DNA in the business​,” he says, “and our team owns this business, having built it with our own hands one brick at a time. We don’t have the financial backing of a billion dollar corporation. The members of our team have a very different level of commitment. Each of us, for example, angsts daily over individual customer issues. And when we have un-resolvable ones, we take it very personally.”

F​or his team and his customers to see the upside of agency, LiVolsi hopes that going forward publishers will see fit to talk to him directly to work out important issues – all in the interest of selling more ebooks.

“We think – and hope – that all of this is finally starting to settle down now. The change overall could prove to be good, but we’re looking for more direct communication with publishers at a strategic level. We have great communication with several at the marketing level, but that’s not where strategic decisions are being made, and our customers need us to be in that conversation so that we can better serve them as publishers learn from this experience and iterate in the future.”

Emily Williams is co-chair of the BISG Rights Subcommittee and a former literary scout who currently works as an independent publishing consultant.

Digital comics were one of the primary topics of discussion at this year’s NY Comic-Con, with the iPad in the spotlight and a variety of publishers and technology intermediaries offering up new announcements and intriguing bits of data, but the most interesting news arguably came from Dark Horse Comics.

Best-known for publishing high-profile licensed comics (including Star Wars, Conan and Mass Effect), Frank Miller’s 300 and Sin City and Mike Mignola’s Hellboy, and for ahead-of-the-curve approaches to digital media, Dark Horse’s VP of Marketing, Micha Hershman, announced their latest initiative as “the most ambitious, most exciting digital comics program on the market.”

Launching in January 2011 with over 130 individual issues and “several dozen collections,” Dark Horse Digital Publishing will be a proprietary, web-based platform accessible via any device with a browser (but not Kindles, Nooks, or Kobos), as well as via proprietary apps for iOS, Android and others to follow. Their ecommerce model will be “very similar to the Kindle experience and as seamless as possible for the user,” with a Dark Horse-branded app replacing their title-specific apps (400,000+ downloads to-date), and an online store where comics can be purchased, downloaded and synced wherever they’re being read. Existing standalone apps will be upgraded and those comics migrated into users’ accounts in the new store.

Hershman noted that selling direct gives them full control and flexibility on pricing and availability of their content:

“We don’t have to submit our comics for approval, and no licensing fees to Apple means we can pay our creators more while offering readers lower prices.”

Dark Horse’s digital comics will be $1.49/issue (vs. Marvel & DC’s $1.99 via comiXology) and they plan to sell collections from $2.99-$5.99.

Titles available at launch will include Hellboy, BPRD, Serenity, Fray, Mass Effect, The Guild, Conan, Grendel, Dr. Horrible, The Goon, The Umbrella Academy, and Creepy, featuring a mix of “new comics and backlist” and a “low-end estimate” of an average of 20 books added to the store each month.

Dark Horse’s digital comics will be in a “proprietary format, but our DRM will entail flexible allowances for viewing your purchased content on any supported client, as well as on the web.”

When asked about piracy concerns, Hershman said: “We’re having the same experiences that many other comics publishers are having: some obvious piracy, an unclear impact to sales and plenty of frustration. I anticipate that we – and most other publishers – will continue having the same experiences as platforms and technologies change.” He also noted that there would be “no sharing functionality at launch.”

Feedback to-date has been “warm and receptive,” most notably from tech observers impressed by Dark Horse’s plan to circumvent iTunes and sell direct: “They’re looking for innovation which doesn’t come in a monopoly.”

Hershman added: “It’s undeniable to say that the ability to reach a broader audience will also impact our acquisition approach.”

The announcement also included a bit of a cliffhanger, as Hershman teased an angle for brick-and-mortar retailers that would be part of the new initiative, but didn’t offer any details. Beyond integrating the Comics Locator Service into their apps, he said they also plan to offer “the most compelling retailer features available, including exclusives” that they would make “simple for the retailer” to implement.

They will also take a reverse approach to “enhanced” ebooks, selling inexpensive digital collections that only include the primary story, while the print collections will feature exclusive premium content and extras.

“We see digital comic books as a revenue generator, but also as a way to introduce new readers to our comics,” Hershman said.

Guy LeCharles Gonzalez is the Director of Programming & Business Development for Digital Book World, and a published poet, writer, and active blogger since 2003. An old and new media pragmatist, social media realist, and marketing strategist, he views publishing as a community service, and is optimistic about its future.

Contrary to rumors, books are not history
Mark Hertsgaard, San Francisco Chronicle

But Dave Eggers  is having none of it. The author and children’s literacy advocate recently told an audience at the San Francisco Day School that the conventional wisdom is wrong. “I’m optimistic about the future of books, both as an author and a publisher,” said Eggers, whose latest work, a non-fiction account of life in New Orleans after Hurricane Katrina, Zeitoun, has been chosen by the San Francisco Public Library for this fall’s One City, One Book program.

Ah, you might say, it’s easy to be optimistic about books when yours are mega-best sellers that attract tons of media attention. But Eggers insists that his optimism actually stems from “empirically provable” trends that hold true across the entire book business as well as anecdotal evidence gleaned from observing children at 826 Valencia, the nonprofit literacy organization Eggers founded under the motto, “We believe in the power of the written word.”

E-Reader Households More Likely to Read Newspapers In Print and Online
Jack Loechner, Research Brief

The study finds a strong relationship between e-reader devices and newspaper readership:

• 41% of adults in E-Reader Households visited a newspaper website during the past month, compared to 27% of total adults. They are 48% more likely than all consumers nationally to have visited a newspaper website during this timeframe
• Adults in E-Reader Households are 9% more likely than all adults nationally to have read a printed newspaper during the past week. Nationally, 71% of adults in e-reader households read a daily or Sunday paper during the past week, versus 65% of all adults
• 50% of these consumers read a Sunday printed newspaper on an average Sunday, as opposed to 46% of total adults

Gary Meo, senior vice president of digital media and newspaper services for Scarborough Research, observes that “…(the) data confirms the emergence of E-reader devices as an important technology for millions of Americans and… a natural companion to newspapers… creating a new opportunity for publishers to monetize content… “

The News of the World’s paywall and why, for Rupert Murdoch, the internet is so over
Dominic Ponsford, PressGazette

Without any inbound or outbound links, and invisible to Google and other search engines, the NotW, Times and Sunday Times don’t really have internet sites – but digitally delivered editions…

The “top people” who read The Times might get their credit cards out online, but will the mass-market readers of the News of the World? And shouldn’t a newspaper which sells advertising based on a huge readership as possible be trying to reach as many eyeballs as possible?

Up to a point…But red-tops have always been more subscription businesses than the “qualities”. Traditionally they have made about three quarters of their revenue from cover price, versus 25 per cent from advertising. So commercially the paywall move is logical.

Financial Times’ iPad App Brings In £1 Million
Mark Sweney, MediaGuardian

The Financial Times’ new iPad app has generated more than £1 ($1.59) million in advertising revenue since it was launched in May, according to the paper’s deputy chief executive. Ben Hughes, who is also the paper’s global commercial director, said more than 40,000 subscribers have signed up for the app. He added that it now accounts for 10% of the paper’s new digital subscriptions.

The agency model is the wrong trousers
Arthur Attwell

The real problems, though, are these: publishing staff rarely have retail skills and access to detailed consumer data. They just aren’t the right people to make pricing decisions. They must and will always set their own wholesale prices. But retailers will just be better at setting retail prices in ways that encourage sales. Random House CE Markus Dohle suspects it: “The question is if publishers know how to find the right retail price”. A key issue here, as Kassia Krozser explains, is that “Publishers have made bad arguments when it comes to ebook pricing. They confuse in-house value (often based on the price paid for the book) with consumer perception of value.”

Moreover, most retailers are closer to their customers not only in spirit but also in body. A retailer in Johannesburg knows a lot more about optimal retail pricing strategies there than a publisher in London.

Tweet of the Week

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eBook sales statistics for August 2010 have been released from the Association of American Publishers (AAP) who collects these statistics in conjunction with the IDPF. Trade eBook sales were $39,000,000 for August, a 172.4% increase over August 2009 ($14,300,000). Calendar Year to Date sales show growth of + 193%.

Source: IDPF

Myriad caveats aside, the latest AAP/IDPF ebook sales data for August 2010 shows a slight leveling off from July’s record high of $40.8 million to $39 million, making it the second highest month of tracked sales ever.

While few would argue anymore that ebooks are here to stay, Forrester Vice President and Principal Analyst James McQuivey raised a more intriguing question while previewing an upcoming report at yesterday’s Digital Book World Executive Summit in New York City:

“Agency model publishers have to ask themselves: which red line best fits my eBook sales growth curve? Both look good at first blush, but one suggests long term losses in share.”

The red lines he was referring to were hypothetical views of ebook sales compared to ereader adoption, with one tracking ahead, the other behind. While both showed impressive growth, the one that lagged ereader adoption suggested a publisher might be enjoying increased sales while simultaneously losing overall market share to its competitors, many of whom are not reflected in the AAP/IDPF sales data.

According to a report released earlier this week by Cowen and Co., “not only are sales of the Kindle device expected to grow 140% this year to nearly 5 million units from 2009, but digital book sales via the Kindle store are on track to grow 195% to $701 million in 2010.”

Cowen estimates Amazon currently having 76% of the ebook market, which would put the overall market at approximately $922 million, while the AAP/IDPF sales data is only tracking sales of $259.5 million year-to-date. Ebook sales of the twelve publishers they track  would have to average $132.5 million/month through the end of the year to match Cowen’s projections, a highly unlikely occurrence.

More likely is that gap is being filled by the many small publishers and traditional and self-published authors who are selling ebooks via Amazon and whose sales aren’t tracked by the AAP/IDPF.

Of course, lacking anything resembling reliable, comprehensive sales data for ebooks, this is the fuzziest of fuzzy math, but there’s an undeniable gap there that needs to be defined, and within that gap lies the answer to McQuivey’s critical question.

“Does ebook growth mask market share declines?”

And if it does, how would you know?

Guy LeCharles Gonzalez is the Director of Programming & Business Development for Digital Book World, and a published poet, writer, and active blogger since 2003. An old and new media pragmatist, social media realist, and marketing strategist, he views publishing as a community service, and is optimistic about its future.

If there’s one area of publishing where the “game-changing” hype around the iPad has substance, it’s comic books.

While comics have been in digital formats, legally and otherwise, for years, few would argue that Apple’s sleek tablet is the first platform to offer an optimal digital reading and purchasing experience, from comiXology’s innovative Guided View (TM) Technology that  powers some of the most popular apps (including Marvel and DC), to the potential for expanding the audience beyond its hardcore, superhero-centric base.

Kicking off the 2010 Comics & Digital Conference, on October 7th at NY City’s Jacob K. Javits Convention Center, ICv2′s President, Milton Griepp, set the stage with an overview of the market, and Comics Alliance’s Laura Hudson took better notes than I did:

Sales in the U.S. and Canadian comic book and graphic novel market are down 12% in the first half of 2010, with comic books seeing a small 1% increase while graphic novel sales have dropped 20%. In 2009, the total market was $680 million dollars, with $370 million in graphic novel sales and $310 million in comics. The decline in graphic novel sales was particularly steep in bookstores, which saw a 30% decline in sales, versus a 9% decline in traditional comic book stores…

Griepp suggested that there was a significant decline in graphic novel sales in 2009 as well, but that was masked by what he called “the Watchmen effect,” thanks to the enormous sales of the “Watchmen” graphic novel following the movie that accounting for 50% of bookstore sales in the first half of 2009.

The news was particularly dark for manga, which declined 9% in the first half of 2010, with an estimated 20% overall drop in 2010, making it likely that this will be the third bad year for manga sales in a row. If current trends continue, manga will drop 50% over three years, where we’ve seen the closing of Aurora, Go Comi, Dr. Master, and most recently DC’s CMX line.

It wasn’t all bad news, though, as Griepp noted that kids and YA comics were growing in popularity, highlighting the 350,000 print run for Yen Press’ Twilight:  The Graphic Novel (it sold over 66,000 copies in its first week) and projecting a ten-fold increase for digital comics, from an estimated $500k – $1m in 2010 to $6-8m in 2011.

While few of the panelists throughout the day’s program would give any hard numbers (at least one executive stated afterwards that “we can’t give any numbers because we don’t HAVE the numbers!”), none suggested Griepp’s projections were off-base.

Michael Murphey, iVerse‘s CEO, claimed over 3 million downloads of their various apps to-date, noting kids titles were their best-sellers and that “iOS and PSP have both been very successful platforms.”

David Steinberger, comiXology‘s CEO, was also optimistic, observing that the iPad was only the beginning: “We’re just getting started with devices; there’s huge growth ahead.” comiXology also received credit for its efforts to support brick-and-mortar retailers via pull lists and an in-app locator to “Buy in Print”, in contrast to Diamond Comic Distributors’ complete lack of innovation to connect their brick-and-mortar partners to a digital opportunity. (Disclosure: that was me doing the contrasting during the Q&A!)

Dave Gabriel, Marvel‘s SVP in charge of print and digital sales, seemed to share Steinberger’s optimism, claiming 2 million downloads of their app to-date, and announcing that, “because of what digital comics are doing,” they would be lowering the prices of some newly launched comics in print to $2.99/issue, starting in January.

(In a separate earlier announcement, Griepp noted that Dark Horse would be announcing that their digital comics would be lowered to $1.49/issue. Most Marvel and DC digital comics are $1.99/issue, while indies, including DC’s former Zuda titles, are typically $.99.issue.)

Ted Adams, IDW‘s CEO, offered some ballpark figures and insights on their Star Trek: Countdown mini-series, a four-issue prequel to the hit movie, the digital version of which “sold tens of thousands of each issue on iTunes.” This was back in 2009, pre-iPad, when there were far fewer digital comics available, but those sales “didn’t hurt print sales” as he noted the 4th issue outsold the 3rd in print, a rarity in comics.

Beyond well-known superheroes and licensed properties, Steinberger believes “there’s an opportunity for a lot more genres,” an observation Jim Fallone also made back in April:

To compete, smaller publishers need to begin to experiment with innovation of form. No longer bogged down in the swamps of print production and distribution, comics aren’t limited to distribution via 32-page chunks of story. Instead of monthly issues bought at the local comics shop, they can now be distributed directly to audiences in as little as a panel a day.

Dave Baxter, Robot Comics‘ deputy director, happily offered up some numbers, claiming the independent comic Robot 13 had achieved 200,000 downloads of its free sample, and had converted 5-6% of those to paid downloads at $.99/issue, while the print versions of the comics had sold out. (NOTE: On August 3rd, Robot Comics announced Robot 13 had achieved 100,00 downloads, so either there’s been a massive spike since, Baxter misspoke or my hearing is bad because I tweeted that figure right away. I’ve reached out for clarification and will update this accordingly, but even at 100,000 downloads, it’s an impressive figure for an unknown comic.)

Of course, digital comics aren’t limited to the iPad; webcomics have been around far longer, and the web is an equally compelling platform for publishers to consider.

Mark Siegel, First Second Books‘ editorial director, acknowledged some of the challenges that come with being part of a major publisher (Macmillan) taking baby steps towards digital initiatives, but offered some interesting insight on the success they’ve had with serializing upcoming books online for free.  In one case, Zahra’s Paradise, by the time they’d posted the third chapter, they’d sold the translation rights in enough languages to recoup the advance, and the book won’t even be published until next year.

Generally speaking, while there was a bit of lip service paid to the “print vs. digital” debate, most of the speakers throughout the day believed digital comics represented a significant opportunity to grow the overall audience for comics, and even the lone retailer in the mix, John Riley of Williston Park, NY’s Grasshopper Comics, said he’s had “people coming in to buy trade paperbacks of comics they were exposed to online.”

Towards the end of the day, IDW’s Adams summed up the underlying tone of the conference best:

“My job,” he explained, “is to find audiences for this content any way I can.”

That’s always been every publisher’s job; digital simply represents myriad new opportunities to find those audiences.

Guy LeCharles Gonzalez is the Director of Programming & Business Development for Digital Book World, and a published poet, writer, and active blogger since 2003. An old and new media pragmatist, social media realist, and marketing strategist, he views publishing as a community service, and is optimistic about its future.