The Espresso 2.0 machine recently introduced by On Demand books is another step in the direction of a new publishing ecosystem. A self publisher with access to an Espresso 2.0 machine and a properly formatted book on a USB memory stick can walk away with a printed and bound book five minutes later. An Espresso 2.0 machine running full out may not reach the annual turnover of a small independent bookshop, but Espresso 2.0 machines located in hundreds of independent bookshops or chain stores would have a tremendous affect on the traditional publishing model. The application I'd love to try myself is to put an Espresso 2.0 in a small storefront with pedestrian traffic in a foreign city with strong demand for English and other non-native titles. In a city like Jerusalem or Tel Aviv, selling titles printed on demand from the Lightning Source library, along with printing books on the spot for self publishers and helping them gain access to international distribution, would make for an interesting business.
But is the bell tolling for libraries as well as the offset press? The picture above is from a 100 year old library tower pendulum clock, and believe it or not, I was there today with a friend to fix the trip hammer that tolls the hour on the bell (you can see the hammer over my shoulder in the video below). Many libraries in America are in a serious bind, as funding cuts combine with increased demand for non-book related services to reduce the budget for collection building. But integrating the Google Books library (I'm looking ahead here) and Espresso 2.0 machines would help libraries serve patrons who aren't interested in the latest bestsellers, and to serve them more efficiently than purchasing those books out of distribution. Maybe a Bookmobile featuring an Espresso 2.0 and shared between several towns will become a standard feature of 21st libraries.
In a brave new business model, the library might offer the patron the opportunity to purchase the book for a "donation" that covers the immediate costs associated with downloading and printing it. Otherwise, the book would end up in the library collection when returned, and the librarian could inform that patron that rationing is now in effect:-) As a long toothed library hound who is constantly checking out books from the stacks that have yet to be cataloged (and sometimes have never been read), I'm the last person who would suggest that libraries should exit the business of providing low demand books. But it would be more efficient and cost effective to provide these books only when the demand materializes in the form of a patron walking in and asking.
So how many Espresso 2.0 (and later generation) machines would it take to change the world of publishing? A hundred wouldn't be enough, but I think offset printing would reel under the impact of a thousand. It's not that any POD machine can, or ever will, print books cheaper than an offset press in quantity. It's that all non-offset book sales will eat into the offset business model. I frequently point out that Amazon presents a direct threat to the offset printing model, simply by their exploration of alternative book production and delivery systems, such as POD and Kindle, along with the leverage the Amazon platform gives them with publishers. It isn't necessary that Amazon, Lightning Source or the Espresso machines produce and sell hundreds of millions of books outside of the offset based system to deal it a death blow, they only have to change the economics enough on the margin so that publishers abandon offset for all but the surest bestsellers and most reliable mass market romances.
After our library clock surgery, it's been tolling the hour properly, but a half an hour late. Even though I rushed the video in today's post, I'm not likely to try another take, but maybe I'll get some good footage of the clock chiming if I go out there again.
13 comments:
Yes, this makes sense. Every time I put in a new order for 4,000 copies of my best selling book, "The Top 10 Lyme Disease Treatments" (I order about 4,000 copies / year) I wonder if my sales associate at my offset printer will still be there...or instead a "wrong number" automated message indicating the company went out of business.
Or perhaps more subtle, as long as the company stays in business, I wonder if the squeeze on their economic model and the foreseeable inevitable exit from profitability might put a damper on quality whereby I end up with a storage shed full of crappy books.
On my bestselling books I continue to use offset. On some of my other titles I use POD / LSI. I haven't quite decided which seems better. Obviously the POD / LSI can be more profitable with less work. But it also seems more volatile to somehow submit my business model to the process rather than having the hard copy books in my possession so I can ship them as needed. I suspect I am just being old fashioned and need to act like I am 10 years younger and just adopt the new model. Funny thing is I'm only 30 years old, but that just goes to show how fast technology moves.
I worry about what will happen to us publishers as this unfolds. I suspect that the author platform website will become more than just a business asset - but as we move to "free content + advertising" (which is inevitable) then our websites may become our only remaining business asset.
Enough of this ramble......
Bryan
Bryan,
You're a horrible example:-)
What I mean is that you've successfully applied part of the large trade model to a small operation - very few small publishers would have constructed their own temperature controlled warehouse. Also, your main retailers aren't bookstores, they are specialty stores, health food shops, etc. The economic break-even point on offset publishing for you is very different than it would be for a publisher who didn't own a warehouse outright, was dealing with bookstores through distribution, renting space, etc.
The quantities I had in mind for "bestsellers" that would continue to work with offset economics are those that sell in the tens of thousands of copies a year, maybe 50,000 copies for the life of the book would be a reasonable number.
You've also stayed away from alternative delivery methods for the book in questions, so the whole thesis of the argument wouldn't really apply. But let's take a hypothetical publisher, say, Hartford Disease Books, whose top title sold a steady 4,000 copies a year. Let's say that publisher decided to sell use Lightning Source POD to reach some distribution channels they were currently missing, and also started selling eBooks direct as PDF's and signed up with Amazon's Kindle. Hartford Disease would see some increase in overall unit sales and earnings, but also some decrease in offset printed book sales as those customers drew books from these other sources. It's not zero sum, but it is cutting up a somewhat bigger pie in many smaller pieces.
So now Hartford Disease only required 3,000 copies a year of their lead title. They'd have to look at the printing cost, which would go up a little, the shipping and handling costs with smaller orders going out to some customers, the warehousing costs, and all of the overhead of being involved in the returnable book business.
Would it necessitate raising the cover price on the offset books? Would it lead them to push more customers into the Lightning Source or other POD channel? How about if there were a thousand Espresso 2.0 machines located around the country, and people got to like using them? Maybe a string a cafes where you order an Espresso to drink and by the time you've tossed it back, your book is ready?
I don't expect it to happen overnight, but the shift away from offset as the heart of publishing already has a heck of a head start.
Morris
What if traditional publishers decided to embrace the Espresso by offering immediately downloadable files to the consumer, who could a) read it on the device of their choice, and b) go to a local Espresso machine at their leisure and print a single copy? Would involve some DRM, but publisher, author, and bookstore (or whichever outlet has the Espresso) would get their cut... Save the bookstore shelves for hardbacks.
Chad,
If the publishers wanted to use DRM, there are enough existing systems out there that I'm sure one could be adopted. And the idea of selling the "content" once for all readng forms has been kicked around a bit, especially by the folks at O'Reilly.
From a business model persepctive, the main drawback is that most publishers sell very few books direct, and take every opportunity to lower that number further. They chase every new eBook outlet in hopes that it will me the magical marketing platform, instead of building their own site traffic.
So I think it would have to be done via the retailer, rather than the publisher, which may make it a little trickier. And while publishers are finally getting to the point where they can release an eBook and still sleep at night, they may be uncomfortable releasing printer ready files, because once hacked (and everything is hackable) the popular books might be sold on the pushcarts from NY to Tokyo.
Morris
I work in a medical library and it is in the process of eating itself. The VPN (virtual private network) system which allows access to journals on line from home has emptied the place and made most of the staff redundant. Hard copy journals are vanishing faster than Catholic nuns. Hours of operation are being cut. I'm not a doctor, dammit, but online info has saved me a few trips to the doctor. The laptop generation will be replaced by the iphone/kindle generation so I wonder if that viewscreen reading seen in so many sci-fi films/tv shows back in the 50's/60's is but a few years away. Of course, with no jobs, we'll all have to pirate our content if we want to read it but illegal downloading is easier than shoplifting.
Tyrone,
Wow, is that depressing. Reminds me of something I wrote for a newsletter I co-published back in the early 90's. Let me see if I can find it online somewhere...
Way, Way Outsourcing
The outsourcing avalanche of the Eighties has taken on the momentum of a religious movement in the Nineties. The ultimate result of this terribly flawed model for industry gives rise to a new paradigm, which I call Way Outsourcing. As you might guess, Way Outsourcing refers to sending manufacturing overseas. How did outsourcing win so many converts in industry? Simple. Through an unholy marriage with downsizing, outsourcing has transitioned from being a strategic choice to a grim necessity.
Originally, outsourcing won adherents through the process of business re-engineering, Focus on your strengths, management was advised, and improve efficiency by outsourcing your non-core activities. This approach never went over well with middle managers who saw this process as a threat to their career expectancy. They were proven correct, and downsized as a reward for their acuity. At the same time, a funny thing was happening on the technical side in many American corporations. The hiring and "bringing along" of fresh graduates in engineering disciplines, the time honored approach to securing technical expertise for the future, was also discontinued. This clever move reduced staffing requirements for both trainees and trainers. As long as nobody retired, expired, or otherwise abandoned their post, great savings could be achieved.
Well, a few years went by, and a new problem crept up. Upper management retired too, and nobody was left who knew the names and phone numbers of all the ex-middle managers and retired engineers who had been coming in as contractors to maintain plant infrastructure. Top management was left with one choice. Outsource upper management to consulting houses, which had proven their worth by remaining focused on their own core business, billing a many hours as possible. Now there was no way to transition back to the old business model, and no real motivation for anyone involved to try.
The next step I call Way, Way Outsourcing. This is where top management and stock ownership are outsourced overseas as well. This business model has the added attraction that nobody left in the United States has to pay any income tax. If you see any holes in this model, please post a comment. I've outsourced my secretarial support and I want to see if the new blog guys are worth the beating I'm taking on exchange rates.
Originally from my old newspaper article blog
Morris Rosenthal
I don't understand why publishers wouldn't want to sell direct. Yes, it means customer service, warehouses, and employees to take orders. But it isn't really a question of whether or not you like doing that or if it is expensive. It is a question of profitability. I make more $ / hour by selling direct.
Yes, I am forfeiting that time. The opportunity cost: I can't use that time to do other stuff.
But what is the "other stuff"? For a publisher it is publishing new books.
If you have an endless stream of bestselling content to publish, by all means, spend your time doing that insead of taking direct orders!
Reality check: we don't have endless content. In fact publishers rarely come up with evergreen book ideas. So, at least for me, a lot of the time, I sit around bored, wishing for the next "great book idea." While I'm waiting, I would rather be packaging books, dealing with customers, and making more money, instead of sitting on my butt and watching TV waiting for the next LSI check to come in.
... Bryan
Bryan,
I remember being quite puzzled when I first encountered the resistance to direct sales most trade publishers have, best expressed by their (and now my) setting direct prices higher than Amazon prices. I think most of them would argue that direct sales are a needles distraction when their business model is built around bookstores and distribution. My own reason for cutting way down on direct paper book sales is that I simply don't like that kind of customer support. Also, as a non-TV watcher, I find constructive things to do (other than publishing), and if I was fully employed, I'd never get to anything new.
One publisher I know to whom the opportunity cost argument might apply to is YOU. If I understood your recent blurb in the old PMA newsletter they keep sending me free copies of, you've done well with expanding your product line to books written and published by others. Why only a dozen, why not a thousand? You could be the biggest alternative health marketer out there if you spent your time doing that rather than stuffing envelopes and answering "Why isn't my book here?" e-mails.
Morris
You are right. The opportunity cost argument definitely leaves me at a major crossroads. The two directions are vastly different.
Problem is right now my business model is highly tied to me doing the shipping. I have a printed, 20 page, color catalog I send with my orders. Often, someone who bought one book will call back and buy 5 more from the catalog. This accounts for a huge portion of my revenue. I also have flyer inserts that advertisers pay me to put in outgoing orders. I'd lose that too if I switched to the LSI / POD distribution model. Plus I'm not so sure LSI / POD gives you access to much important, anyway. Ingram, yes, but I already have ingram through a different distributor - BCH Company. (Although they don't pay me as much as Ingram via LSI would).
So in a sense I am not partnering with Amazon when it comes to my offset books - I am their competitor. And not just for my own titles, but for the others in my catalog. Problem is, many of my highest profit items are not ones that I publish. So if people buy them off Amazon I make zero. I am in a sense a retailer in that regard. If I send people off my site to go to Amazon to buy stuff, they come back and want more stuff - but they come back not to me but to Amazon.
It does some somewhat insane to compete with Amazon - can I win? Well, I'm sure I lose some, but I think I win enough to make it worth it. One of the books in my catalog (I sell it but do not publish it) has a $50 profit margin for me. As long as a few people call me to order that from getting my catalog, it makes the shipping and catalog printing bit worth it all the more. Plus doing a google search for that book title puts me in the top 3. What am I supposed to do when I get a search engine purchase of that book - refer them to Amazon where I make a 2% commission, or sell them the book myself and make $50?
For now, given my catalog / mail order business model, the shipping and packaging role is just collateral damage that I must endure. If I really was going to free up my time to do as you say, publish 1000 books (which would be fun - I've already published 10 by different authors including one doctor and one dentist) what I'd probably do instead of give up the shipping stuff is hire an employee to handle it for me. But...that is for another discussion...too much headache managing - I really like being a one man shop.
Anyway, this is a long winded post, but it is good for me to be able to process my thoughts here because this is a very important cross roads and I need to work it out in my head what is best for me.
Giving up my mail order / catalog / flyer insert business model just to save myself the 8 hours a week or so that it takes me to ship (granted I am lazy and only go to the post office once a week and have some unhappy late book receiving customers) just doesn't quite make sense for me. Although I admit that part of my problem is simply that I am so entrenched in this business model. Had I STARTED with the other model, maybe I'd be better off by now - I don't know. But changing my stripes at this point might kill this zebra.
Bryan
Bryan,
I think you have a terrific business model, and should be expanding it, not changing it. I'm pointing out that if you have X hours a week to put in the business, and that leaves you without enough time to expand your catalog, you should hire somebody to do the shipping, etc.
Aside from giving somebody the greatest gift non-romanticaly involved humans can give one another, a job, you'll get a wonderful tax write-off. And if you are serious about expanding in a non-virtual mode, employees are inevitable, so better to start with a part-timer at 10 hours or 20hours a week and maybe you'll find your plant manager of the future.
Morris
I am reluctant to get an employee and grow because it creates a situation of less flexibility, more overhead, and, after reading your blog a lot, it looks like most of these types of operations are shriveling up now anyway and downsizing and cutting staff.
So here I am a one man shop. I like it. I have tremendous flexibility, very low overhead, and am agile enough to change things overnight.
A friend of mine who owns a few restaurants and has owned over 20 restaurants during his life said it is great to own a very small business, and great to own a very large one, but the medium ones are awful - lots of overhead but not enough revenue to comfortably cover all the mid range costs - e.g., not much economies of scale.
In any event, I think that when it comes to businesses the people good at raising puppies aren't necessarily the same people who are good at taking care of adult dogs (if you'll forgive the metaphor).
I am good at the puppy phase but now that my business is an adult, I'm not quite sure what to do. My dad had the same limitations. He built a great business but once it hit 20 employees he didn't know what to do or how to grow and delegate so instead he went crazy for a while then finally sold the business to someone who knew how to tend to the proper care and feeding of adult dogs (or businesses).
Bryan
I worry about what will happen to us publishers as this unfolds. I suspect that the author platform website will become more than just a business asset - but as we move to "free content + advertising" (which is inevitable) then our websites may become our only remaining business asset.
Free content + advertising will not work for fiction sites. Non-fiction publishers may have limited success with ads, but fiction sites can forget about it.
In order to sell advertising (or get visitors to click on ads) on your website, you've got to have targeted traffic. That means in order to sell weight loss products, for example, your site topic must be weight loss, or something closely related.
If self-publishers / small publishers have to make their income from advertising, I believe they will soon go out of business.
Why do we think we have to do this anyway? Because we fear that eBooks will lead to piracy which will lead to us going broke. We think that nobody will buy our eBooks if there are free illegal ones available.
Then how is iTunes selling so much music? Pretty much every title the offer can be obtained illegally.
I think it's because most people want to be fair and honest. And as long as you offer your product at a reasonable price, a large percentage of folks will do the right thing.
However, if you price your mystery novel at $24.95, expect to be ripped off big-time.
Robert,
I agree that most fiction would be hard to monetize with advertising. There are exceptions, but they tend to be dirty. I also agree that most book and internet publishers couldn't make it as internet publishers alone. Of course, most of them can't make it as book publishers alone either, so you have to be careful drawing comparisons.
But I don't agree with your iTunes comparison, and the idea that anybody is "asking for it" is crazy. Mercedes Benz asks way too much for their cars, but people don't steal them because it's hard to get away with and not socially acceptable. People do steal music and eBooks because it's easy to get away with and socially acceptible in many circles. The "success" of iTunes has been a disaster for the music industry, a business model forced upon them.
Fair and honest people don't steal if they don't like the price of something, they buy something else or do without. We aren't talking about air or water here. But that's pretty far off subject for this post.
Morris
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