The Future of Publishing is Digital

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The Future of Publishing is Digital by Tim Sanders

March 01, 2012

Net Minds is a marketplace for book ideas that produces digital products. We are making a big bet on the rise of  digital books (eBook or Print On Demand) in our reading life. For this first post I'd like to tell you about my journey to the digital publishing revolution.

In his 1996 classic Being Digital MIT professor Nicholas Negroponte predicted that in the near future information will move from the disc (or the page) to a series of zeros and ones surmising, "that which can be digitized will eventually be digitized." He further stated that we would prefer this move to digital over its analogue counterpart in the long run. We first saw this Law of Digitization in the music business with Napster. In just a few years, the users looked at music as simply downloadable files, making CDs irrelevant, and thoroughly transforming the music industry. Many, including myself, insisted that books would be different. We liked carrying them around, loved their feel, and couldn't live without the ability to write in the margins. But in 2007, with the introduction of the Kindle, the first sign that digitization had invaded the publishing industry emerged. The sea change from paper to paperless had begun.

My first sense that the tipping point to digital had been passed came in December of 2010, when million-seller advice book author Timothy Ferriss told me that his latest blockbuster The Four Hour Body was selling as many eBooks as physical books. That's a far cry from industry projections that proclaimed eBooks would be a 'rounding error' for major authors for years to come. By the Spring of 2011, Amazon reported that digital sales had eclipsed physical book sales. Game on.

Around that time, Ferriss broke up with Random House/Crown and cast his lot with Amazon Publishing. He realized that the future of publishing is digital, and in that domain the value proposition of traditional publishers wasn't good enough anymore. If the future of publishing is digital, it's important to view eBooks as a disruptive innovation. Currently eBooks are enabled by apps like Kindle and iBooks that run on tablets and smart phones. In a few years this will become the industry standard. A recent study by the Joan Ganz Cooney Center at Sesame Workshop found that the new generation of readers, children, favor eBooks over their physical counterparts. It stands to reasons that in the future physical books will be increasingly rare. This is something publishers won't like to hear, because this digital revolution won't be pretty for them. Everything they do will be disrupted. So they will either have to pivot or perish, just like record companies over the last decade.

According to Harvard Business School professor Clayton Christenson, author of The Innovator's Dilemma, disruptive innovations thrive when the customer has been over served over a protracted period of time. When innovators offer them faster and cheaper, not necessarily better, they flock to them and the legacy companies perish. We've seen this over and over again recently, from the music industry to the recent fall of Kodak.

Book publishers have over served us for decades. Think about how big books are, both in footprint and word count. Do you know why business books are probably 100 or so pages too long? Because the publisher needs it to feel like twenty-five books in one when you hold it in the store. I'm not kidding. They even like heavier pages to achieve the same effect. Much like the music industry did with LPs and CDs, they charge us twenty to thirty bucks for a book that cost them a dollar or two to produce (not counting royalties and setup).

So along comes eBooks and Amazon's aggressive $9.99 pricing and BOOM the balance tips quickly. We don't care how many pages a book is as eReaders, because we care about whether it provides us entertainment or advice value. The Steve Jobs biography is actually a better reading experience on an iPad than the bloated print copy that weighs more than a chicken.

And then there is the issue of retail, and the seven letter dirty word that ruins the publishing business model: R-E-T-U-R-N-S. Starting in 1929, in an effort to prop up booksellers, publishers agreed to accept returns and paid shipping both ways. At the time, it likely made sense, as few bookstores could take a gamble on buying books that might not sell. But today, this policy is an albatross that makes it almost impossible to generate profits unless you have mega-hits that sell millions to cover your losses.

According to a recent NPR interview with industry execs, many bookstores end up stocking the same titles several times. This means that publishers ship them to stores, pay to have them sent back to a warehouse, then pay storage on them until they are either summoned back for a second run on the shelves … or burned and written off. Nasty business. That might explains why Barnes and Noble, announced on January 6th that they are exploring a spinoff of the rapidly growing (and profitable) Nook business from its ball-and-chain retail operations.

Let's flip it around, and consider the plight of today's self-published author. He must pay thousands of dollars to a vanity press to have a garage full of books mass-produced. Then he must troll around to booksellers asking them to give up precious Stephen King shelf space to consign their unsigned works. While a few authors eek out a profit, 99% take a bath at the end – with only the vanity press providers making any money. In the traditional world of publishing it's a lose, lose situation.

As the publishing world goes digital and eBooks take hold the paradigm will shift in the self-publishing author's favor. No wasted months spent waiting for the finished books to arrive from China, no six-month retail stocking window, no inventory, no returns, no round trips, and best of all – no shipping! As an author, I've found that shipping is usually my number two book launch expense behind travel. In his landmark book Information Rules Carl Shapiro states that, "when information becomes easier, quicker and cheaper to transmit, it grows in value." And now you see why.

Many of you may already have a Kindle, Nook, iPad, etc. Think about your own personal habits. Are you buying as many physical books as you used to? How about those of you that have an iPod, smart phone, or other digital music gadget - are you still buying as many CDs today as you did three or five years ago?

Sure, there will still be physical books just like there will still be Albums, CDs and DVDs. They'll just become more rare in the overall mix. With the rise of digitization, authors and freelancers will be able to produce meaningful income with eBook only releases. When they work with partners, like Net Minds, it will be because it leads to better books that are more widely discovered online. Not because the publisher is the bank, broker, and gatekeeper to the industry. And that's an exciting world to me.

Tim Sanders

About Tim Sanders

Tim is a bestselling author and former Yahoo! executive with a mission to disrupt the traditional publishing and self-publishing industries and share knowledge with authors looking to publish and market high-quality books.

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