E-Publishing Is Doing Well. Publishers? Not So Much

Last Updated Jul 30, 2010 4:26 PM EDT

U.K. publisher Pearson, owner of both Penguin and the Financial Times, announced interim results of 9 percent growth. From a tech perspective, the interesting aspect is ebooks. Penguin alone saw a 300 percent sales increase over the previous year, with 15,700 ebook titles available. And according to the Association of American Publishers, so far this year, ebook sales are 8.5 percent of the total trade book market.

Good news for authors and such powerhouses of ebook sales as Amazon (AMZN) and Apple (AAPL). But for publishers, things aren't necessarily so cheery, Penguin's growth notwithstanding. That's because they are losing control of the publishing industry, as authors and agents work directly with retailers, who extend their control over the relationship with customers. In other words, publishers are beginning to get frozen out -- perhaps because they largely added little to the process for a long time.

I know plenty of people at book publishers who refine, edit, and design wonderful titles. (Disclosure -- I've written multiple times for Penguin, as well as other book publishers.) But increasingly there's been less time and money for editing, promotion, and sales. The publisher wants writers to work for cheap and to pursue marketing and sales. Many authors I know feel that the publisher no longer contributes to the extent that justifies taking the lion's share of revenue.

This is why the Wylie Agency, which represents such clients as John Updike, Philip Roth, and Vladimir Nabokov, has begun to work directly with Amazon to create ebooks available exclusively through the retailer. Random House, which had tried to claim rights to these same books, announced that it wouldn't do business with the agency. How can it hold out? No, not the agency -- the publisher and its traditional competitors.

Look at the following chart from the Association of American Publishers and the International Digital Publishing Forum (click chart to expand):


That is turning into an exponential growth curve. In addition, it's deceiving. When ebooks sell for less than paper, then 8.5 percent of total revenue actually means a good site larger percentage of title units. If ebooks go for half the price, then they become 17 percent of volume. Get 85 percent of half the price after agency royalty and authors find themselves effectively making 42.5 percent of the full price, far more than most traditional royalty rates. No wonder those who can look to jump ship. As the shift continues to ebooks, eventually print book publishers lose their economic leverage, as well as their livelihood.

Things are no better on the magazine front. Currently, Time Inc. is fighting with Apple over subscriptions. So far, Steve Jobs has said that Time can only sell single issues, not full subscriptions.
Since then, Time Inc. executives "have been going nuts," trying to figure out how to get Apple (AAPL) to approve a subscription plan. One of the more desperate suggestions, which apparently didn't get traction: Pulling the publisher's apps out of the iTunes store altogether.

Subscriptions, whether they're for ink-and-paper magazines or their digital editions, are a big deal for Time Inc. and every other magazine publisher. They value them in part because they provide recurring revenue, but primarily because they provide a treasure trove of data.
But Apple doesn't want to give up the data, or give up its continuing cut of what Time and other publishers make. It means that the magazine companies are screwed. They can't figure out who might be willing to purchase additional titles. Combine the lack of direct information with digital rights management, and they can't even claim their dubious "pass through" readership to advertisers and set rates on all the supposed readers, not just the subscribers.

The magazine publishers currently have a better position than the book companies because people buy their brands, not an author's name. But how long before some of the writers, editors, designers, and business types set adrift by publishers begin to create their own electronic periodicals and also sell direct.

The term sea change may be a cliché, but that is exactly what is happening. I don't know how most publishers, particularly on the book front, will survive the next 10 or 15 years.

Image: Flickr user stibbons, CC 2.0.
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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.

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