Leading up to Digital Book World Conference + Expo, there was a person I had hoped I would be able to catch up with. I’ve heard him talk at events, I read his blog, and he always gets me thinking about what’s ahead.
That person is Mike Shatzkin, CEO of The Idea Logical Company. He has been part of the publishing business for 50 years. Shatzkin follows in the footsteps of his father, Leonard. From a printer, Leonard rose to become a publishing leader and founder of a major paperback imprint at Doubleday. Now Mike Shatzkin focuses on the digital. As a leading digital publishing guru, he analyzes trends and topics that affect authors and publishers everyday while keeping an eye on what is coming around the corner.
Shatzkin is the conference council chair of the DBW conference-expo, a major book industry gathering which takes place from March 7-9 in New York City. His speech will deliver the open the event on March 8. The conference will cover topics ranging from children’s e-books to social media strategies and ePub creation with Adobe InDesign. Among the other speakers will be Data Guy, often cited in TeleRead as a source of data on author earnings. TeleRead is a DBW media partner, and by using the code TELEREAD5, you can save five percent when you register.
TeleRead: Mike, your father was in the publishing world for a long time. Tell us about him and some of the jobs he held. What would he be doing today in the era of e-books? What lessons did you learn from your father that still apply in today’s publishing world?
Mike Shatzkin: Leonard Shatzkin started as a trained printer and began in production at Viking and Doubleday. He became Director of Research at Doubleday in 1953 or 1954 when he introduced statistical prediction methods to calculate what the advance sale would be to determine the correct first printing. He also put in vendor-managed inventory at Doubleday, whereby Doubleday reps left stores with inventory counts and staff at headquarters took that data and wrote the actual orders for the books, which the stores accepted. They had 800 stores on the Merch Plan inside of a year and that is what powered Doubleday to be a big backlist publisher.
Also at Doubleday, he created the Dolphin Books paperback imprint.
He left Doubleday for Crowell-Collier in 1961 to start Collier Books, based on the same principles as Dolphin. When overextended expansion forced the company to cut back on investments. Collier Books was shaved and soon after Len left. He went back to production at McGraw-Hill.
In the 1970s, Len organized two publishing services business: Planned Production to be a rent-a-production-department and Two Continents, the first independent national distributor for trade books. He sold those businesses and went into a long and productive retirement in 1979. During the last two decades-plus of his life, he consulted to publishers all over the world.
Dad was a scientist. He would have had no problems grasping the implications of the web and of ebooks if they had occurred in his mental prime.
T: Tell us about what your father did for diversity. I know you’re very proud of that.
MS: The one story I know is that he hired two black men at Doubleday. After he hired the second one, he was told to stop. As it happens, he had already offered a job to a third at that point and refused to rescind the offer. His job was possibly saved by the fact that the person he’d offered the position to declined it.
Being married to my mother, the first woman to graduate with a degree in physics from Carnegie Tech and later a management consultant, Len was a feminist man before anybody thought of those terms. I don’t know whether he hired women for key roles before that was popular, but I’d imagine he did.
T: The publishing industry employs just a tiny percentage of minorities in professional jobs, and book lists, too, could better reflect today’s America. How can publishing people change this?
MS: I don’t have an answer to that question. The books published roughly represent the books bought. Since books tend to be the province of both higher-income and higher-educated demographics, it could be that the country has to change in order for the book business to change in this way.
T: If anyone is still deciding on whether they want to go to DBW, what is the best reason that they should go?
MS: DBW features a program that examines the most important digital change issues of the moment. This year the three big themes are 1) company transformation, 2) marketing using digital techniques and tools, and 3) understanding the big companies (most importantly: Amazon, Apple, Facebook, Google) that define the environment in which publishing takes place.
T: It seems like every time DBW rolls around, we’re on cusp of some interesting news or trend. This time it’s about subscription services and how Oyster had to shut down and Scribd must back off. Where does this leave Amazon and Kindle Unlimited in this field?
MS: It leaves Amazon in a very dominant position when it comes to general ebook subscriptions. I’m not making any predictions, but there might be another big piece of publishing M&A news before the show.
T: Where do you land on the topic of physical Amazon bookstores? Do you really think they’re gunning for 400 brick-and-mortar locations? What are the possible anti-trust ramification of that? And other things. You’ve heard a rumor that B&N may kill the Nook in the UK–could it next fade away in the U.S. And what would that mean, in possible antitrust terms?
MS: I am not an expert in anti-trust, but we’re featuring one named Jonathan Kanter at DBW so we’ll get answers to those questions. I think a rollout of Amazon stores—who knows what number—makes a lot of strategic and logistical sense for Amazon. B&N’s new Chief Digital Officer is speaking at DBW too. I expect he will talk about the future of the Nook. It must always have been hard for them to operate Nook outside the US. Their big competitive advantage was controlling their own stores. And they don’t control any outside the US.
T: One of the big topics at DBW is “transformation.” What are some of the companies that seem to evolving well with the changing marketplace, and what attributes do they share? Have the big publishing companies done enough to transform in this marketplace or is there greater room for them to change? In what areas?
MS: Ingram is the outstanding example of a company that has transformed. They are earning half their margin or more from businesses they didn’t have two decades ago. The other companies we’re featuring are large and small, new and old. They are Rodale, Sourcebooks, Quarto, John Wiley, Houghton Mifflin Harcourt, NetGalley, and Diversion Books. We define transformation as a dramatic change in business model or revenue sources. The Big Five have not really transformed. They are continuing with basically the same business model. Sourcebooks, for example, has built an entire new business of customized children’s books. I can’t think of any initiative from a Big Five house that is comparable transformative.
I still believe the big transformations to come are around “verticals”, topics of interest. There has been real movement on that front from big houses as marketing initiatives. But they haven’t built the verticals into new business models or free-standing profit centers. I think that might be something to look for in the next few years.
T: How keen are you at this point on publishers selling directly to consumers? Who’s doing it best, and what are they successful at it?
MS: I think it is ultimately a necessary capability, but not a transformative one. Publishers will never succeed selling most of their books directly. But the tools to do this are becoming so easy and ubiquitous that it is hard to see how all of them can continue to avoid it. Right now the big publishers are doing a lot to have direct contact with consumers without necessarily owning the transaction. I think all of the Big Five are doing something: vertical communities, email blasts promoting discounted ebooks, and increasingly coaching authors to be helpful marketing partners. But there’s a lot of room for “more” on all these fronts from all the big houses.
T: How do you feel right now about the encryption-based variety of DRM vs. the social kind or maybe none at all? What are the trends?
MS: The more publishers sell directly, the more they’ll see the virtue in simpler DRM. Frankly, I think this is not nearly as important an issue to consumers than it is to digerati. Most consumers just buy their DRMed ebooks from Amazon, Nook, Apple, etc. The ebooks work fine in the owned environment. Most people don’t care much beyond that except those who want to make a point.
T: The FCC voted to decouple content and hardware for cable TV customers, in saying people should be able to buy their own cable boxes. There’ll be more discussion of it at the FCC, but that’s where things seem headed. Do we perhaps need some kind of legal or regulatory measures against Amazon so tightly intertwining hardware, format and content, so consumers and publishers aren’t at such a disadvantage?
MS: I think we will get to the point where it becomes clear that Amazon has a stranglehold on the book market. What we do at that point is not at all clear to me. I think what is most likely to be useful would be rules that prohibit them from discriminating against content they don’t like or suppliers they want to “punish”. They will become, effectively, a public utility—the “pipes” for the ebook marketplace. At that point, the “profit” from book sales will be such a trivial part of Amazon’s economic well-being that it will not hurt them, except psychologically, to live with whatever adjustments are necessary.
T: How do you feel about the future of public libraries? Will there be a place for them 20 year from now, and if so, what will it be?
MS: I really have a hard time understanding how public libraries make commercial sense in a mostly ebook world. If you can go to one website and get the ebook for free and at another you have to pay for it or for access to it, why wouldn’t you always choose “free”? Free public print libraries always had “friction”: you had to go get the book and you had to go take it back. AND ownership had a benefit: a physical object you could lend, write in, or use to decorate your shelves. All of this goes away with ebooks. You can see publishers struggling with this now with high library prices and loan cap rules, for example. As the infrastructure gets built out, I see the conflict becoming more and more difficult to manage.
T: What’s going to become of OverDrive? Can it survive? Or will Amazon get serious in a big way about the library business and roll right over them?
MS: I’m not sure whether the library business would attract a big effort from Amazon. Perhaps they see what I do about the future, and in that case they wouldn’t want to make a big investment. But anybody in any part of the book business would hope that Amazon leaves their patch alone!
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