Steve Jobs recently walked on to a stage in San Francisco and answered a question that authors and publishers have been asking for years: How would he adjust Apple’s iPhone technology and iTunes platform to the horizons of the reader? His answer was the iPad, a typically alluring device, featuring a screen big enough for comfortable reading of books, and a new iBookstore, bringing the text of Harry Potter within reach of the US’ millions of iTunes users for the first time.
The proposition was seductive and intelligent. Maybe Apple’s younger customers will baulk at paying up to $800 for a new device, and maybe existing iTunes customers will struggle to read books on the smaller screen of the iPhone. Maybe. But it wouldn’t be smart to bet against a company with an extraordinary talent for connecting creative content with new audiences.
Amazon has already shown the way. The success of its Kindle e-book reader has demonstrated the size of the public appetite for books on screens. We can argue about speed and direction, but there’s not much doubt that the world of books is undergoing its most profound structural shift since Gutenberg.
How will we book publishers respond to this opportunity? With anxious enthusiasm is the honest answer. New channels of supply have always created new markets for the work that we publish.
Pirates are one obvious source of anxiety. None of us needs to be reminded of how fast the music industry was dismantled by a deadly combination of illegal file-sharing and aggressive consumer pricing. Books, we like to argue, are different from music and in some respects they are. The playlist was born when iTunes exposed the consumer’s preference for buying tracks rather than albums. Yet, we still buy our Stephenie Meyer whole and unabridged. And I don’t think it’s sentimental to argue that the digital file will always face stiff competition from a physical product that is a pleasure to buy, share with friends, and put on the shelf.
But we are vulnerable to the digital tides that are washing away prices and copyright protection elsewhere in media. The challenge is to anticipate and act on the dramatic changes in consumer preference, while maintaining enough of a surplus in the industry to keep developing new authors and taking risks. To do that we’ll need to keep a tight control of rights and a measure of authority over pricing.
Today’s e-book is a direct descendant of the 1930s paperback. Like its predecessor, it should be less expensive than a hardcover book as it costs almost nothing to produce, and the rights can be acquired separately from other formats.
The cost of acquiring, editing, selling and marketing a book doesn’t change when one format, a paperback or an e-book for example, gains ground at the expense of another. Publishers should respond to consumer preferences for different kinds of books and be agnostic about the channels and platforms through which books are sold. But they can only do that if they have the right to access all those channels and platforms.
The same logic applies to pricing. The small cost of producing e-books is viewed by authors as an opportunity for higher royalties and by consumers as an opportunity for lower prices. Yet, the physical cost of a book—manufacturing, transportation and warehousing—is just under 10% of its retail price. Around 10% is also roughly the average margin of the consumer book publishing industry and what’s needed to keep investing in new writing and new ideas. So there’s some room for discussion but not that much.
Publishers will flourish in this new economy so long as they keep these issues in perspective and understand that it’s fruitless to stand between the reader and his choice. We have to keep one eye on the bottom line, but the other trained on a brave new world of publishing from which authors, consumers and retailers of all kinds should benefit and prosper.
THE WALL STREET JOURNAL
Edited excerpts. John Makinson is chairman and chief executive officer of the Penguin Group. Comment at email@example.com