Bullet Train

I began my discussions about the coming transformation of the book industry with Jack Romanos, who runs Simon & Schuster, the presumptive publisher of the Stephen King e-novella Riding the Bullet (presumptive because S&S didn’t actually print or distribute the book). Simon & Schuster is also my publisher.

As such, I was sitting on Romanos’s couch with the normal author emotions of helplessness and fury toward publishers starting to surface, and it was not long before I began to feel like a rebellious high-school-newspaper editor interviewing the remote and patronizing principal (Romanos is in fact an affable, down-to-earth guy – although famous in the book business for never making eye contact).

“Well, what do you think is going to happen?” Romanos asked, after I indicated that I thought his version of the future – i.e., everything pretty much goes on as before, except some books are published electronically – was a pipe dream.

“You’re done for,” I said, feeling the power. “You don’t have technology skills; you bring no particular distribution advantages to the electronic marketplace; and from a capital standpoint you won’t be able to compete with pure-play Internet companies with big market caps. It’s possible you can still truck books to bookstores, but that’s going to be just a small part of the new book market.”

Now this could have been for him just another dreaded interaction with a difficult author. But it was also likely that he was reading the same writing on the wall that I was. “I hope you’re wrong,” he said – but weakly.

“Here’s what I think will happen: Twenty-four months from now, the stock market willing, there will be a new kind of publisher. With no production costs, no sales staff or sales commission, no warehouse.”

Indeed, this whole Stephen King thing was having a strange effect on everyone. “Who knew?” is the way bookish people are reacting to the more than half a million people willing and able to download a book. Even Romanos, who has some reason to be pleased – he can credibly argue he’s leading the charge into this new world, not to mention making money from something that costs nothing to make – has more reason to be rattled. If people are truly ready to read books that are not books, the future function of Simon & Schuster and the other book publishers (all six, at last count) becomes extraordinarily uncertain. What’s more, because the King book has now proved the market, Wall Street will surely be eager to finance upstart companies that can aggressively exploit it.

“I do think we bring added value in the form of traditional publishing skills.” He sighed. “We edit books …”

It is possible, I suppose, that Romanos, coming from the business side, might actually believe that the people he pays who are called editors actually edit.

“… and we market them. What did we do for Michael’s book?” He turned to one of the marketing people sitting with us. “Didn’t we put up a Website?”

They did. Although they did not seem to know that part of putting up a Website is getting people to come to the Website, which they did not do (S&S, even more adamantly than other publishers, no longer believes in advertising). But I was not going to renew the please-please-promote-my-book anguish. The book-industry business model is very clear: A publisher acquits its promotional responsibility as cheaply as possible (thereby protecting its downside) and hopes an author has an appetite for self-promotion, his or her own network to leverage, and media favors to call in.

As it happens, this is a less-than-perfect model for selling printed books (where, no matter how little you promote, or because of how little you promote, you’re stuck with the cost of printing the books you don’t sell). But it’s a perfect model for electronic books. With no cost of goods, if a book doesn’t sell it costs you nothing, and if it does sell it’s almost pure profit.

The book business in New York is a very small business. In many ways, its insularity defines it. Everybody knows everybody; everybody has worked with everybody.

Its other defining trait is that it is almost economically impossible to succeed in the book business. Book companies offer a smaller return on investment than other media enterprises; book professionals are paid much less than their counterparts in other media businesses; book talent, in all but a special few cases, has to work a day job. And most ruinously, there is almost no real growth in the industry itself.

Still, we do it. In part we do it – and, no doubt, in part the industry suffers for it – because we have self-selected ourselves on the basis of our lack of business acumen, even our distaste for business skills, which explains not only the industry’s penury and inefficiencies but its snobbishness.

So I suggested to Richard Tam, the founder of iUniverse.com, one of several technology-focused publishing start-ups, that we meet for lunch at Michael’s on West 55th Street, a major book-industry hangout. I thought that was a good joke. (At the table next to us, Alice Mayhew, Simon & Schuster’s legendary editor, acknowledging the various other bookish notables at Michael’s, was blind to Tam.)

It is hard to get as far from the book business as Tam and still be in books. He grew up in Hong Kong, won a scholarship to Brigham Young University, went to Stanford, became an engineer, and in short order was starting technology companies, where he made a pile. A few years ago, looking around for his next business opportunity – and obviously mindful of the relative ease with which Amazon grabbed the advantage in the book trade – Tam focused on the technology of book production. With new technologies and properly applied production systems, he found he could produce a few books at the same unit economics as S&S, for instance, produced thousands of books – i.e., Simon & Schuster would spend $10,000 to produce 10,000 books and, equally, $10,000 if it only wanted to produce one book. Whereas Tam’s one book costs one dollar. (“But what do they look like?” sniff New York book people. Actually, they look just like regular books.)

Tam called New York publishers.

They didn’t return his calls. (Book people have never regarded returning calls as a necessary part of the business equation.)

Since then, iUniverse.com’s three employees have grown to more than 300, Barnes & Noble has made a significant investment in the company, and it is getting ready for a public offering. Tam’s plan is to be doing a million or so titles a year, from self-published books to academic works, business plans, business research, screenplays, and the vast reserve of out-of-print titles. (B&N now circulates bookmarks saying submit your manuscript to www.iuniverse.com.) Whereas iUniverse had been snobbishly dismissed as vanity publishing (which is a fifties literary notion, and, in the age of the Web, a truly out-of-it conceit), Tam’s method merely makes many, many more books commercially viable. He has, in other words, discovered a more economically efficient way to distribute intellectual property. And that is a profound discovery.

Tam, of course, is still largely talking about book books. Whereas a good part of the discussion about the future of the book business makes the book – the “unit” – an iffy proposition. My friend Peter Rutten was in town, coincident with Stephen King Week, to talk to New York publishers (of note, virtually no one in the new book world is in New York) about his new company, a kind of intellectual-property superstore. Called Vox.com, and backed by Cybergold, the company that pays you to look at online ads, the idea is to sell almost anything that can be downloaded: images, music, words, video. In other words, Vox is looking at books, or words, as part and parcel of the larger content-media business. I invited him to Michael’s, too.

We gossiped about his meetings with New York publishers.

Intransigence in the book business is balanced by a profound sense of insecurity and trendiness – and a frantic determination to do what everyone else is doing. Instead of the normal difficulties in discussing technology, pricing, format, business models (pardon me, but you have no idea how stubbornly ignorant book people can be), Peter reported a post-King desperation to be a part of this, to be out there, to be, well, digital.

Indeed, by the end of Stephen King Week, Random House was announcing the formation of a venture group and making its first investment – in Xlibris, an iUniverse.com competitor.

Everybody, of course, says there’s room for everybody else.

But a subplot to Stephen King Week was Simon & Schuster’s tiff with Fatbrain.com, an online bookseller now peddling electronic books through its MightyWords.com site and commissioning original content to sell electronically (the premise is that there is a length between magazine article and full book that is ideal for electronic distribution). In one of the childish outbursts the book business is noted for, S&S declared that it wasn’t going to do business with Fatbrain if Fatbrain approached S&S authors (actually, S&S has no authors per se, just the right to distribute specific books by specific authors). And MightyWords.com, to its chagrin, was precluded from selling the King book (S&S now says this is because it is unhappy with MightyWords.com’s copy-protection security system).

Indeed, publishers believe that rights, rather than publishing skills, or market acumen, or technological capabilities, are their real ticket to the book future. (As I interview Romanos, he broaches the subject of the electronic rights to my own book. The deal S&S is offering treats electronic publishing as though it is the same as paper publishing – so I keep turning the deal down.)

In the early nineties, book publishers comically committed themselves to an electronic revolution based on CD-roms, and demanded all manner of rights that had almost nothing to do with what they need today. “We fought and fought for these electronic rights, only to find out they are worthless,” harrumphed Random House’s former chief Alberto Vitale.

It’s a not-getting-it deal. It’s picking the wrong fights, being scared of the wrong things, obsessing over totally irrelevant details.

There is just no reason to believe that these people, many of whom are my dear friends, will be able to deal with the technological issues and marketing complexities that are shortly going to arise. My friends are going to be marginalized (they already have been, really).

They’re in a fox-henhouse, cat-canary world.

Here’s what I think will happen: twenty-four months from now, the stock market willing, there will be a new kind of publisher. With no production costs, no sales staff or sales commission, no warehouse, his or her job becomes wholly to select and then artfully to promote the book (perhaps we need a new word) across multiple platforms and through various outlets – Web, handheld, laptop, mass-market retail, custom edition, digital slice-and-dice, audio files, streaming author video. The pervasive book. This new kind of publisher becomes sort of an old-time publisher. Very impresario-ish. Publisher-agent-manager in one. Liveright-Weidenfeld-Cerf (and I’m thinking a bit of Malcolm McLaren). You have to have a certain appetite for disruption – and take a certain mean-spirited joy in sticking it to a certain set of people.

Just tell me where to sign.

E-mail: michael@burnrate.com

Bullet Train