The Disintermediation Moment

With the advent of the Barnes and Noble Nook e-reader and the growing acceptance of e-books among readers and writers, it’s safe to say that we’ve reached what I’d call the Disintermediation Moment. This is the time when industries collapse, driven by changes in consumer behavior and expectations. Technology offers new solutions, eagerly adopted by ordinary people, but resisted by middlemen and gatekeepers who want to retain their status, control and income.

The music industry had its Disintermediation Moment with the advent of Napster. Once consumers discovered the power of acquiring individual songs, rather than whole albums, the days of the $16.99 album CD were doomed. Lawyers shut down Napster but could never put the genie back in the bottle. The music business, where “thieves and pimps run free,” according to Hunter S. Thompson, was forced to cut a deal with another rebel, Steve Jobs. An industry that once condemned the idea of “ripping” songs from CDs to computers has turned to iTunes to save their sliding profits.

Newspapers were early adopters of the web, launching some of the first web sites and online services, such as the Washington Post’s Digital Ink in 1994. Early efforts made the mistaken assumption that people would pay for content – despite being surrounded by a sea of free information. For more than a decade, newspapers have tried to use the web to support a business model (money from classified ads goes for reporters, buildings, paper, trucks) that’s been undercut by Craigslist and others. It would be better if they adapted to the medium like the Huffington Post or Politico.

Back in the 1980s, movie studios tried to stop the development of the VCR, arguing that the devices enable copyright infringement. Though they lost, they continued their efforts, athwart the flow of history, as they sued DVR makers, as if they had learned nothing. Meanwhile, consumers have moved on, and watch clips and whole movies online.

And now it’s the turn of the book industry.

I’ve been reading a lot about e-books and the Nook, both as an avid reader and an author. I wrote a book, Murder in Ocean Hall, have an agent and am looking for publisher.

However, I also work on web sites for a living so the slow print publishing world seems really outdated to me. Why does it take a year for a book to go from an author to a bookstore? I could publish my book on Lulu and start selling it immediately.

Why are there so many gatekeepers involved? Why do writers get such a small (10%) royalty on their titles? Why do so many writers have to do their own marketing, despite the fact that publishers claim that’s what they’re for?

The argument seems to be that this is the way we’ve always done it. The book publishing world seems little changed, a Mad Men environment of stacks of manuscripts, Manhattan offices and boozy lunches. I would love a noontime martini but like the manual typewriters and flirtatious secretaries of Sterling Cooper, that world is long gone.

The price of e-books today is subsidized by Amazon and others. Publishers would like to charge much, much more than the standard $9.99 for e-books, arguing that they have high costs. This makes no sense – when you have perfect, unlimited digital copies of something, the price has to come down, as anyone who’s bought an album or song on iTunes knows. Consumers are saying that e-books should be comparable in price to paperbacks. That’s what its worth to them and book publishers need to adapt if they’re going to survive.

The fact that the publishing industry takes such a big chunk of the price of a book really seems like an argument against it. If so much of the cost of a title pays for execs and marketing campaigns, then why have a publishing industry at all? How is this model any different from the music, film and newspaper industries – all middlemen and gatekeepers have been rendered irrelevant by the Internet.

Without such high costs, books would be cheaper for readers and writers would make more money. My thoughts were really crystallized by this wonderful blog post by Joe Konrath. In it, he breaks down the amount of money he makes off e-books he sells through his publisher and those he sells on his own. He gets more money from titles he sells himself. And readers get more works to chose from and at a cheaper price. Konrath is meeting the demand of the market and making a better living than he would if he used a book publisher.

What value do book publishers add then? Are they not just standing in the way of more books at lower prices for more readers?

Author: Joe Flood

Joe Flood is the author of The Swamp, a funny new novel that mocks the city America has come to hate.

5 thoughts on “The Disintermediation Moment”

  1. Joe, Very good post and right on. I’m working with a group that is helping musicians and writers to get their work to their public or the public with little to no obstacles. We let the artist create, set their own price and get their work on line almost immediately. The artist gets 70% of all sales and is under no obligation. If a publisher wants an exclusive they are free to pull their work. The only cost to the artist is a one time fee of $25.00 for each book or cd.

  2. Why does it take a year to get a manuscript out the door? It doesn’t — if you don’t care about sales volume. The time isn’t just for editing (which doesn’t take all that long if you’re only getting a light copyedit, which is all most authors are lucky enough to get these days). It’s not just for design of the text or the cover art. And it’s certainly not for printing. All of that could be done in a month or two.

    It’s for the behind-the-scenes marketing. Blurbs take time. The long-lead review journals require 4 and like 6 months before pub date. (No these aren’t the reviews aimed at the general public, but instead the more important ones aimed at the library and bookstore inventory buyers.)

    Oh, and why do you need those folks? Have you looked at the stats on how many books are published? More than 400,000 different titles each year in the US alone! That’s many times what the largest bookstore could begin to hold.

    Readers won’t want to wade through that many books, let alone the 2 MILLION manuscripts in circulation at any one point.

    And where do you think the money goes? Marketing? 2.5% of the retail price. Executives? Nope. (You don’t need to take a vow of chastity to go into this business, but you sure are taking a vow of poverty!)

    Here’s a breakdown of sales and costs on my blog. It’s waay too long for a comment, I’m afraid.

  3. Thanks for all the interesting comments. The economics of book publishing, particularly for book stores and publishers seem pretty brutal. It seems that there has to be a better system, one that puts more money in the hands of the people adding value and less in the hands of warehouses and distributors. Maybe e-books is the answer to this problem.

  4. Aggregators (middlemen) are necessary in systems where millions of readers are buying from tens of thousands of publishers. The number of relationships that need to be recorded and addresses maintained, becomes VERY expensive, and the individual sales get really small.

    The only way to make it work is to have a very small number of very large middlemen who invest heavily in the systems to make those microtransactions, and all that record-keeping, viable.

    That’s dangerous, as we’ve seen with the way Amazon and Google have strong-armed publishers (and through them, authors). Their tactics aren’t a symptom of evil, but they are a symptom of an extreme imbalance in power.

    Of course, publishers are used to being between a rock and a hard place, and to large trading partners that use their economic power to extract expensive concessions (Barnes and Noble’s standard shortage deductions, anyone?), but caution is in order in the consolidation of intermediaries and search/recommendation engines (Google and Amazon, being prime examples) as ebooks become more popular.

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