iPad's Coming, Ready or Not: Publishers and Retailers Still Have Their Pants Down

Apple's (AAPL) iPad debut is less than a day away and in these final hours, publishers large and small -- not to mention wholesalers, retailers, and Amazon (AMZN) -- are still scrambling around like a teenage girl before a date. When the doorbell rings though, they're all in danger of being caught with their pants down.

Few have come to agreements over pricing and availability of e-books, much less author advances and royalties. And if they can't see through the haze of hype and start nailing down new ways to do business in a hurry, their bare asses will all be chafed, if not burned, by the winds of change.

Third Degree Burns

The first, most obvious, loser is Amazon (AMZN). As the e-bookselling giant fusses over digital book agreements with publishers in effort to stem the tide of looming competition, it's resorted to the same tactic it used against publisher Macmillan in January. Amazon pulled the buy buttons off the Hachette Book Groups' e-books yesterday. Yes, even those of bestselling authors such as Nicholas Sparks and Stephenie Meyer. (HBG's print books remain available through Amazon).

On its Kindle discussion board, Amazon first said: "We recently signed an 'agency' agreement with Hachette and we are working with them to offer their books under these terms in the coming days. This means we will not be selling Hachette e-books in the interim." But the wording in an update suggested this was all Hachette's fault because it accepted Apple's agency terms (Apple gets a 30 percent cut, publishers get to set the retail prices). Amazon said, "We cannot be operationally ready to sell their e-books on agency terms until two days from now -- April 3 -- when we will also cut over for the other publishers that are switching to agency."

How does this make Amazon look? One customer said it best in the thread, "As for the book I was trying to purchase this a.m. -- I might not get back to trying to purchase it right away. I'll be off on another reading tangent before then. So all of us attempting or who attempted to buy books during this time might translate into even greater lost sales."

Second Degree Burns

Publisher Penguin USA took the bull (books) by the horns and went ahead and told agents that only its newest e-books would be unavailable on Amazon until terms of sale were resolved. Penguin CEO David Shanks wrote about talks with various retail partners: "At the moment, we have reached an agreement with many of them, but unfortunately not Amazon -- of course, we hope to in the future." (Subscription required for link.) The result? Just take a look at comments from the many disgruntled customers on the Amazon forum titled, "Boycott Agency Books."

Meanwhile Random House, the only large publisher who has not yet come to an agreement with Apple, continues to hang back and watch the scene unfold. I've posted about the possibility that the publishing giant, under the Bertlesmann media umbrella, is waiting for better terms while taking the time to shore up a more comprehensive digital strategy. My BNET colleague Damon Brown followed up with a list of hurts brought about by Random House's stall tactics.

In the end, it all comes down to lost sales. And RH's blockbusters -- Dan Brown's The Lost Symbol sold 100,000 e-books its first week out, or about 5 percent of total sales for the book -- represent a small, but rapidly growing, segment of the market.

Industry consultant Don Linn told me that publishers would do well to shift their focus from controlling pricing of their books to their business models. He recommends starting with what they've historically done well: acquiring intelligently, editing and designing properly and marketing appropriately. "Too many titles now are bought (often at way too high a price), produced sloppily, and just tossed into the market without adequate marketing support. This benefits no one."

First Degree Burn

Not using sunscreen (or even thinking about the effect of the sun's glare on the iPad screen) will have Apple running for a milk bath. The NYT's David Pogue wrote, not one, but three reviews of the device and confirmed that iPad as an e-reader leaves much to be desired. "There's an e-book reader app, but it's not going to rescue the newspaper and book industries (sorry, media pundits). The selection is puny (60,000 titles for now). You can't read well in direct sunlight. At 1.5 pounds, the iPad gets heavy in your hand after awhile (the Kindle is 10 ounces). And you can't read books from the Apple bookstore on any other machine -- not even a Mac or iPhone."

Right now, I suspect consumers are more enchanted with the device than the content it carries. But it won't always be that way. A study by Verso Advertising indicates that only 25 percent of readers plan to purchase an e-book in the next 12 months but estimated e-reader penetration could reach as high as 15 percent in the next couple of years. It's the kind of steady growth that brings the potential for solid sales. Which means Apple needs to get on the stick and complete negotiations, or face playing second fiddle to Kindle.

Apple also needs to pay attention to metadata. This data is embedded in the e-book digital files and helps to sort them by title, author, and subject so they can be browsed and searched easily. Publishing blogger Mike Cane notes that this very important detail was largely overlooked by Apple in the rush to get iPad to market and cautions publishers to sit up and take notice.

A book's metadata is as important as the book itself now. Because none of us are going to be strolling through physical bookstores browsing shelves. We won't browse: we'll search. We'll want to find what we want, buy it, and start reading it. But without the metadata to help us along, buying is not going to be a smooth process. Apple will lose money -- and more importantly, writers will lose money.

The Salve

To maximize revenue, publishers need to be able to use it in every possible market and every available format. With the tools and platforms that are available now, you can afford to experiment with lots of things around the margins pretty inexpensively where failure is not a lose-the-company mistake.