"You're not afraid of heights, are you?" John Sargent, the CEO of Macmillan publishing, asks as he steps onto the balcony.
This perch on the 19th-floor prow of New York's Flatiron Building is a striking place—in late spring 2010—for a conversation with the head of the nation's sixth largest publisher. Looking out from Sargent's office in this 1902 architectural marvel, it is hard not to notice that the vistas from this Fifth Avenue landmark were overshadowed only three decades later by an Art Deco triumph of its day: the Empire State Building. And if the new skyscraper recently approved by the New York City Council for 15 Penn Plaza actually gets built, the mighty Empire State Building will see its views usurped.
Sooner or later, every innovation or enterprise is upstaged by the next, whether it be empire, architecture or—the topic at hand—the distribution method of the written word.
In a year in which an estimated 10.3 million e-reading devices will be purchased, virtually everyone agrees that the book industry is experiencing a tectonic shift. There's far less consensus about what the shift will mean. If the traditionally high barriers to publication fall, will that produce a world of unimagined richness or one mired in dross? If the cost of reading plummets, will that mean that everybody reads more widely or that nobody bothers to? Is the printed book a technology whose time has flown or one too valuable to lose? With questions like these in mind, STANFORD talked with three alumni influential in publishing—Sargent, '79, Grove/Atlantic Press publisher Morgan Entrekin, '77, and Counterpoint publisher Charlie Winton, '74.
THE WAYS WE READ NOW
Publishing has, for decades, lamented its lost Golden Age. The insiders' classic joke says that the second book off Gutenberg's press predicted the demise of publishing. "We seem to have the ability to be bleak in our outlook," Sargent says.
But by a great many measures, 2010 represents a turning point. With apologies to Charles Dickens, it appears that readers are experiencing the best of times, the worst of times.
The evidence for the best of times? People have unprecedented access to books in all formats—from printed to pixeled, from tree to e. Books are for sale everywhere: independent bookstores, chain stores, big-box discounters, online, at places that traditionally sold only groceries or gas. Books can be downloaded and consumed on devices that go everywhere—except perhaps the bathtub. Readers of such electronic editions may be further liberated from type too tiny or volumes too heavy—and they also may experience enhancements such as video and electronic note-taking, although whether consumers will pay for additional features is unclear.
Google, which estimates there are 130 million unique books worldwide, hopes to make millions of them available in digital form in a virtual library that beggars the imagination. Bookstores that acquire print-on-demand (POD) technology can print and bind a copy of a book within minutes of a customer's request.
Would-be authors, meanwhile, can readily self-publish books—with subsidy publishing firms such as iUniverse or PublishAmerica, or in even-more-DIY arrangements using such online services as Smashwords or Scribd. And it's not only wannabes who can bypass agents, publishers and retailers. Bestselling marketing guru Seth Godin, MBA '84, created a stir in August when he announced that he would no longer bother to publish with traditional publishers, given the success of his direct-marketing savvy.
And the case for the worst of times? Price pressure from electronic editions disturbs many people in the book industry: If downloads are too cheap, the generally modest payoff for publishing books could disappear. Authors and publishers are ever mindful of what has happened with musicians and recording companies: the uprooting of a creative class.
In a world with few editorial gatekeepers, the quantity of available books threatens to smother the quality. When professional reviews give way to the musings of generally uncredentialed bloggers or to dubious "customer" rankings, readers may have a harder time finding the worthwhile.
Bricks-and-mortar bookstores face marginalization—or even extinction—if the digital realm consistently trumps the book-buying experience. Independent bookstores now account for only an estimated 9 to 11 percent of all book sales—which dismays those who recognize that this segment of the market traditionally "discovers" midlist books and is vital to word-of-mouth promotion. Even the once-dominant Barnes & Noble went on the selling block in 2010.
The upshot: There is going to be a lot of sorting out. If opinions vary as to whether the book world is entering a spring of hope or a winter of despair, there's not much doubt that a revolution is under way.
BUYING THE BUSINESS SOME TIME
The most interesting standing ovation in the book business this year was given not to an author, but to a publisher: Macmillan, as led by John Sargent.
In January, Sargent made news when he challenged Amazon's policy of charging $9.99 for any e-book—even brand-new releases for which the hardcover price might be $29.95. At the heart of this discussion is the question of what is a fair price. Everyone agrees that e-books, which don't incur such costs as paper and shipping, should be less expensive than printed volumes. But other publishing costs—including royalties for authors, the costs of editing and marketing, overhead, and the new costs of IT—must be covered. Publishers and booksellers considered Amazon's insistence on $9.99 a predatory practice aimed at cornering the e-book market for its Kindle device—and a stance destined to shortchange authors and make good publishing unaffordable.
Macmillan moved to institute a different pricing model—one that reflected, as Sargent wrote in his blog, a belief that "the first release of an e-book is worth more and people will pay more for it." In general, Macmillan insisted that Amazon was an agent for its titles and the publisher had the right to withhold the release of e-book editions unless Amazon agreed to sell them at a price the publisher deemed fair. Under this plan, the e-book price of a new release generally would start at about $15—with the expectation that the price would fall to about $10 as demand waned.
Amazon responded immediately by stealthily removing "buy" capability from its listings of all Macmillan titles. Furor among authors and customers followed. (Bemusement, too. Macmillan, highlighting what was often perceived as Amazon's pettiness, took out a full-page ad in the New York Times to boost an important title likely to suffer from an Amazon "blackout" at the moment of its publicity push. The ad, for The Checklist Manifesto by surgeon Atul Gawande, '87, drolly noted, "Available at booksellers everywhere except Amazon.")
Within days, Amazon backed down. The result was the ascension of an "agency" pricing model friendlier to publishers and one that kept the playing field somewhat more level for booksellers. It was an audience of about 500 national booksellers, at a February meeting in San Jose, who rose to applaud Macmillan.
Fellow publishers praised Sargent's action, too. Morgan Entrekin says, "He had very strong opinions about how the business should be structured and he basically took the lead there." Charlie Winton says, "John told Amazon to slow down while we figure this out."
BOOKSELLING AS CULTURAL TREASURE
Gallows humor surfaced quickly when Winton recently sat down at a neighborhood café in Berkeley to discuss the state of publishing. Neil Young was coming over the sound system: It's better to burn out than to fade away. "Well, you know—," Winton says, "there are some days when it feels like it couldn't be more difficult in the trenches."
The year after he graduated from Stanford, Winton founded Publishers Group West, a distribution company that marshaled its independent press clients into a company on par in size and power with the New York houses. PGW was sold in 2002, and Winton remains an independent publisher: the CEO of Counterpoint Press.
Winton, like many book-loving and tech-savvy readers, uses an iPad and appreciates digital editions. But he is very concerned about the migration of book buying to the digital world. "No one wants to pick on anybody here," he says, acknowledging Amazon's incredible success at selling backlist books—the lifeblood of all publishers. (Backlist books are the hundreds of perennial sellers as opposed to the handful of new releases in a season's frontlist.) With limited shelf space, physical bookstores cannot keep more than a fraction of backlist in stock. Amazon doesn't have that problem—and the result has been a boon for publishers with backlist riches.
But as e-book sales climb in percentage of overall sales and the digital shopping experience surpasses physical bookstore sales, Winton wonders, "What does that mean for literary culture?"
It is not a scenario that threatens the James Pattersons or Stephenie Meyerses of the world. "It's first novels and works of literary nonfiction I am talking about," Winton adds. A huge part of the success of these books hinges on what happens when people go into a bookstore looking for one thing and are influenced by knowledgeable bookstore staff or their own serendipitous browsing to try something new. "This allows things that are less obvious to percolate on a consumer level," Winton says.
As an example, Winton cites Matterhorn, a debut by Karl Marlantes, published by his colleague Entrekin's Grove/Atlantic Monthly Press this spring. Because of bookseller buzz, Matterhorn hit the New York Times bestseller list within three weeks and stayed there for 16—quite a success for a 592-page novel about Marines in Vietnam.
Entrekin, while quick to credit booksellers with making Matterhorn a hit, also says the book illustrates the value of publishing expertise. Grove published Matterhorn in conjunction with the small literary Berkeley publisher El León, which had planned a 1,200-copy first printing. When Grove stepped in, it committed $100,000 for marketing and produced 3,000 advanced reading copies to send to booksellers and reviewers. Matterhorn has sold more than 200,000 copies to date.
Most publishers would agree that an investment such as Grove's in a first novel like Matterhorn cannot be recouped unless e-book pricing is fine-tuned as seriously as hardcover pricing has been.
SHOULD LARGE BE IN CHARGE?
While he understands the issues publishers face in this changing e-climate, Scott Turow, MA '74, the bestselling author and lawyer, who this year became president of the Authors Guild, says he is concerned that traditional publishers are not handling the digital challenges well. "It is frustrating to watch publishers do so little to recognize the perils that face them as well as authors," he says.
The Constitution established copyright law, Turow notes, and over the years authors, publishers and retailers have created a system in which they exploit and profit from copyrighted work. In this shifting digital world, Turow worries about protecting traditional rights for authors and the effects on consumers in a market ruled by the makers of e-book readers (Amazon, Sony) and e-book aggregators (Google).
"Woe unto everybody in publishing if the e-book becomes dominant, and Amazon, Apple and Google join forces on issues," Turow warns. "We're talking about companies that are so well-to-do, in an environment where the political influence of the corporation is being enhanced, that they are in a position to shape the copyright and patent laws in their favor."
The year provided moments—or were they tipping points?—when Amazon and Apple seemed to take charge. In July, Amazon CEO Jeff Bezos reported that after dropping the price of its Kindle from $259 to $189 sales of the e-reader tripled. (Since then, Amazon has added a WiFi-only version at $139 and expanded its sales into retailers such as Target and Best Buy.) At that same time, Bezos announced that sales of downloaded editions of Kindle e-books surpassed its sales of hardcovers for the first time. And Apple's iPad—whose e-book capabilities are an important, if not killer, app—enjoyed the most rapidly successful launch of an Apple product ever. As more people can afford e-readers, downloads will further cement their place in the book product mix.
"It's a hybrid business right now," offers Entrekin, "and I believe that that status is going to be around for a few years." Unlike music, where the experience of listening on an iPod or a car radio or similar format, is largely the same, Entrekin—who reads on all platforms—says the reading experience is not yet the same on a computer or iPad as it is in the printed book.
"I think there's a business model that will work that is not radically different than the one we have," Entrekin says. Unlike the music industry that had to completely reinvent itself as digital technology took over, publishers "will have a chance to evolve," he predicts.
Sargent says publishers are figuring out how to manage that evolution wisely. "The way I see it," he says, "our job is to do two things: make sure we make that transition well, and we also must protect the value of the intellectual property as we go through the transition." Once that's done, he adds, publishing must "make sure, in the end, that the consumer pays a price that is fair and isn't artificially made cheaper."
Entrekin notes that books—or what he likes to call "100,000-word narratives"—remain the repository of the serious discourse that is vital to a healthy, informed society. "Whether the books are printed on paper or if they're delivered electronically, that's not going to go away," says Entrekin. "At least not in my lifetime."
Sargent thinks the printed book "in fact will go away" but he emphasizes that he does not know how long that would take and that it remains a valid technology with advantages over e-books. People still love the artifact value of a book, he says—and not just in a nostalgic way. "That's the question, taking the weight of that value—and what is still a superior technology, ink on paper—and asking: How does the technology have to get better for people to give up the artifact value of a book?"
As that question looms, it's worth noting that when Matt Stewart became the first person to publish a novel via Twitter—The French Revolution, set in 1989 San Francisco, about a pastry chef with twin sons named Robespierre and Marat—he did not reject Winton's offer of a traditional book deal. Even with a project at the leading edge, the story that fits on a shelf has cachet.
Consumers will determine what the publishing industry will look like in the future by voting with their dollars. Every time a person downloads an e-book, or seeks out a heavily discounted copy online, or buys at a local bookstore that contributes to the tax base in their community, they are telling publishers how much they value the printed word and a particular buying experience.
Winton, Entrekin and Sargent agree that in their role of helping consumers sort through what has become a vast and daunting selection, the imprimatur of a publishing company and its marketing savvy becomes even more necessary. "That's the argument for the value of the publisher in the future," says Sargent.
BRIDGET KINSELLA has covered the book business for almost 20 years for Publishers Weekly and other media. She is the author of a memoir, Visiting Life.
