A little while ago I wrote about how on-demand printing was changing the calculations of producing books and managing inventory. That discussion ignored a more dramatic solution: Why print anything? Why not just distribute electronic copies? That leads to the question recently asked on NPR: What is the value of an e-book? (Mar 12):
Mr. JASON EPSTEIN (Editor, Publisher, Author): It is the most exciting event, as far as books are concerned, in 500 years. … There will be no inventory. There will simply be digital files, and they’ll be available worldwide at the click of a mouse. This makes much of what publishers now do irrelevant: creating inventory, putting it in the warehouse, keeping track of it, selling it, shipping it. All that’s going to go.
But Epstein goes on to note that publishing houses provide other services like editing and promotion that won’t go away with electronic distribution. The New York Times had a related article that attempted to break down the costs of traditional and electronic books (Math of Publishing Meets the E-Book, Mar 1):
The Times also observes that the overhead here matters because publishers have an infrastructure that assumes a certain volume of books moving through the system. That would also go for what they have listed for printing and storage as well. Those are likely average costs, not marginal costs. If demand shifts from hardcovers to e-books, these costs are going to spread over a smaller and smaller volume of “real” books unless publishers find a way to shed those assets. That is likely to be hard to do in the near-term.
There is an operational view on this as well. I think that one could argue that the current system of publishing is not set up well for what it is in fact doing. The current model is set up for blockbuster books — whether that is a Dan Brown novel or a political memoir. Those might be the majority of sales, but they are the minority of titles. Currently, publishing houses piggyback smaller volume books on this distribution because they can be accommodated by existing processes. Maybe some turn into sleeper hits, but most are just there because they absorb some of that overhead. To back that view of things up, we have the following from the Times article:
In fact, the industry is based on the understanding that as much as 70 percent of the books published will make little or no money at all for the publisher once costs are paid.
Electronic books are the solution for these low volume titles. Without the physical distribution costs, these titles might stand on their own in terms of profitability. The difficulty is that once the genie is out of the bottle, customers want electronic copies of everything. It is not price sensitive customers who are springing for Kindles. If you can afford a Kindle, you can afford a hard cover. It is just that once you have the Kindle, that is how you want all of your books. Maybe the solution is to run two separate processes. One for the blockbusters and a separate one for the more “marginal” titles. Having the marginal titles stand on their own could provide a cushion as the industry figures out how to deal with the blockbusters.