Tag: Daniel Raff

Bad News for Borders — and for Publishing

Posted on July 19, 2011

On Monday, 40-year-old book retailer Borders Group announced that it will close its 399 remaining stores after failing to attract enough bids prior to a bankruptcy auction scheduled to take place this week. “We were all working hard towards a different outcome, but the headwinds we have been facing for quite some time — including the rapidly changing book industry, e-reader revolution and turbulent economy — have brought us to where we are now,” Borders president Mike Edwards said in a statement.

Borders is the second-largest bookstore chain in the U.S., behind Barnes & Noble. The company filed for bankruptcy in February, and most recently was in talks with Najafi Cos., a private equity firm, in hopes of staying alive. That bid fell through last week. According to The Wall Street Journal, the company may begin liquidating stores as early as Friday, and will likely be out of business permanently by the end of September.

No doubt, urban and suburban book lovers who frequented the company’s bookstores for reading material, coffee and social time will be at a loss. But the company’s liquidation has significant implications for publishing, too, according to Wharton management professor Daniel Raff, who studies the book industry. Raff answered a few questions today about how Borders’ closing will affect its competitors, the publishing industry and the future of the book “superstore”:

What does Borders’ closing mean for Barnes & Noble and other book sellers?

Borders sold a wide variety of books. Best sellers were said to be a small fraction of the company’s sales in its early years — and, in particular, when it went public. But this appears to have changed somewhat in recent years. The closing will certainly benefit Barnes & Noble, particularly for those sorts of titles. But what was special about Borders was the variety, the more specialist taste, and [the ability to find] on the shelves exactly what you were looking for. Independent stores with lots of knowledge of their customers and their customers’ tastes will be well-situated to pick up on this business. Anecdotal reporting over the past few months suggests that this is happening in some places to a significant extent.

It won’t be bad for Amazon, either, of course. But some people really do like the experience of going to a store and looking around. If there is a convenient independent [bookstore], these potential customers may well end up there rather than online. 

What impact will it have on the publishing industry?

The publishing industry places great value on being able to put its offerings in front of actual customers who are potentially open to making purchases. The disappearance of all, or even most, of the Borders shelf and display space is not a good development for publishers. Neither, to the extent that it happens, is the loss of contact with the Borders clientele. Borders’ leaving the business is the loss of a major channel of distribution [for the publishing industry]. I would anticipate scaled-back print runs and staff cutbacks in the short run.

Is this the beginning of the end for large bookstore chains?

At its peak, the book superstore companies put very broadly merchandised retail bookstores into areas of the United States which had never had such service. This was a good thing for the customers.

But it seems that with the rise of Internet booksellers and now e-books, there may no longer be the level of business in many of those stores to cover the necessary costs. It is not clear that the concept of book superstores — bookstores along category-killer lines — is no longer viable. But chains of the scale we saw, and with the [locations] they had, do not seem likely to survive.

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Is Quality Control Lacking in Business Books?

Posted on July 18, 2011

In Sunday’s New York Times, Bryan Burrough — an author, former Wall Street Journal reporter and now a correspondent for Vanity Fair, takes business writers to task for producing books that are of generally low quality. He gives many reasons for this: Some of the books are too technical, some too complicated, some authors don’t have access to the business people they write about and some simply can’t tell a story. He also suggests that because businesses are notoriously secret, it can be hard to get access to information that would make a compelling narrative.

He also notes that many of the business book authors are not good writers; they are “chief executives, professors and experts in their field” who often lack “professional craftsmanship.” A lot are written “by consultants and others who I suspect seek to use the books as giant business cards, a way of garnering attention … or speaking engagements.” Of course there are exceptions, he says, including Greed and Glory on Wall Street, Liar’s Poker and Den of Thieves.

According to Wharton management professor Stephen Kobrin, publisher and executive director of Wharton Digital Press, the term “business books” encompasses a wide range of genres. “These include narratives — such as the spate of books dealing with the Great Recession — biographies of business leaders, histories of firms and the like. Recent books, such as Too Big to Fail, The Wizard of Lies and The First Tycoon, are works of serious non-fiction. More typically, ‘business books’ include investment advice, biographies of CEOs or firm histories aimed primarily at a business audience, and a wide variety of books that deal with specific issues such as leadership, strategy, marketing, human resource management, technology and so forth.”

What differentiates “business books” from narratives, he adds, “is that they are written to provide managers and others working in business and other organizations with information that will be useful in improving their performance and that of their companies. The best business books help the reader adapt to rapid change, view his or her situation from a truly fresh perspective, develop skills or capabilities, gain deeper knowledge of processes and disciplines or provide an understanding of new technologies and their applicability.”  

Kobrin, like Burrough, finds some reasons to be critical. “The worst business books are both jargon laden and trite, capitalizing on the fad of the moment. They tend to be vapid exercises that are the moral equivalent of a too-clever Powerpoint presentation…. That said, it is far from clear that there are more ‘bad’ business books than can be found in any other genre. I suspect the difference is that it might be easier for business books to see the light of day than other categories of non-fiction. More business authors come with ‘platforms,’ the ability to move books through their speaking engagements, consulting practices and the like.” While Kobrin does not have hard evidence to support the assertion, he “suspects that it may be easier for publishers to see their way to a positive P&L with a business book than for other works of non-fiction.”

Burrough and John Helyar co-authored one of the most recognized business books of the last few decades — Barbarians at the Gate: The Fall of RJR Nabisco, published in 1990. Wharton management professor Daniel Raff describes the book as “a brilliant success at the time and durable enough to support a second edition 20 years after the first.” One can find books in the business section of airport bookstores “which are comparably dense, insightful and carefully written,” Raff adds. Some, like Barbarians at the Gate, “also have subjects with plot and character and develop these superbly. But books like that are not typical of the genre.”

Viewed from Burrough’s “personal perspective, or from an academic one, there seems to be something to his criticisms,” Raff adds. ”But I also wonder whether they beg an important question. Business books, for the most part, provide a certain sort of consumption experience, and they appear to be purchased primarily by people who are looking for this experience.” In that sense, Raff says, many business books have something in common with the articles in some magazines also for sale in airport bookstores: “They stimulate readers to think harder than they might have otherwise about why certain decisions are made or how particular things might get done. I do have the impression that a lot of the books are read in the course of an airplane flight and are never subsequently consulted. But that doesn’t mean that they don’t satisfy a need or desire, or that they don’t serve a constructive purpose.”

 

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More Wizardry in the Book World

Posted on June 24, 2011

As if Harry Potter hadn’t shaken up the muggle world enough already. Now comes word that J.K. Rowling, author of the Harry Potter series, is launching a website called Pottermore, which will sell ebook versions of the wildly popular books directly to the public. Pottermore will offer more than ebooks, however; it will create a whole Harry Potter universe, with an additional 18,000 words of content about the books’ characters, plots and settings along with interactive games, vivid new illustrations and more — all designed to cement the love affair between Rowling and her legions of devoted fans.

Pottermore, which will go live on July 31 — just for some; see the website for explanation — will be the only place consumers can buy the ebooks beginning in October. They will not be available from Amazon’s Kindle store, Barnes & Noble’s Nook store, Apple’s iBookstore or other online stores, according to press reports.

Although traditional publishers and online stores can still sell print copies of the Harry Potter series, Rowling’s move is sure to upset the industry, and give new impetus to the discussion about digital rights ownership. Rowling, unlike many authors, never signed away the digital rights to her books.

Changes in technology “are threatening publishers’ historic role in the reading value chain and their ability to get paid for carrying out that role,” says Wharton management professor Daniel Raff. “What we are seeing is the potential for digital delivery of texts to effect a kind of disintermediation. This might play out in any of a variety of ways, but imaginable scenarios involve radically changed roles for traditional retailers, wholesalers, publishers and, of course, printers.”

Rowling can pose a threat to the traditional publishing model “because she is not an anonymous author of genre literature, but rather a brand in herself,” Raff says. “This is why she succeeded in retaining digital rights for herself when authors with less market power were simply offered contracts reserving digital rights to the publishers on a take-it-or-leave-it basis.”

Big publishers, he adds, “are undoubtedly very nervous” about the impact that this initiative — and its possible success — might have “on the willingness of future potential Rowlings to cut the old-style deal rather than reserved-rights deals.” Of course with the typical first-time writer, a publisher does not have any guarantee of huge sales, he notes. “I would expect the main consequence of this to be different royalty rates for digital sales, not wholesale changes in boilerplate terms.” He predicts that the success of sites like Pottermore will depend on how much distinctive content they can offer.

As for the question of “the degree of digital rights protection involved, this is not yet clear and will be interesting,” Raff notes. “Some arrangement making onsite-distinctive material accessible only to people who have paid to download copies will probably be one means of combating piracy.”

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A Better Way to Buy Books?

Posted on May 9, 2011

Simon & Schuster, Penguin Group USA and Hachette Book Group announced plans on Friday to launch a new book site this summer called Bookish.com. The site will offer consumers a smorgasbord of options, including the ability not only to buy books, but also to recommend books to friends, read book reviews and excerpts, download books to certain mobile devices and find information about individual authors, according to articles in The New York Times and The Wall Street Journal.

 In the Journal article, Carolyn Reidy, CEO of Simon & Schuster, described the site as “a one-stop shop for consumers because today they feel they have to go all over the place to find what they want to know,” adding that other publishers are expected to join the venture.

David Shanks, CEO of Penguin, told the Times that the site will “embrace all the amazing marketing materials that publishers have been doing on their own sites and put them together on one site,” thereby helping to provide an answer to a consumer who wants to know, “Which book should I read next?”

Wharton faculty who follow the publishing industry have mixed reactions to the venture. Stephen Kobrin, publisher and executive director of Wharton Digital Press, says that while the disintermediation of retailers — cutting out the middlemen (wholesalers or retailers) and selling directly to consumers — “has gotten a lot of attention, the most interesting thing about Bookish.com is the attempt to create a community of readers online.”

As fewer and fewer readers shop in bricks-and-mortar bookstores, generating awareness of new titles becomes more and more of a problem, he adds. “In the past, readers often selected a book through browsing a section of a bookstore – current events, fiction, biography, etc. – and in-store merchandising played a large role in any publisher’s marketing program. With the segment of readers served by physical stores shrinking, online sites provide the potential for interested readers to find out about new books and authors that might be of interest, to look at reviews and even discuss what they like and do not like with others. Bookish.com may provide a way to drive readers to books in the absence of a physical pre-purchase experience.”

But Kobrin cites “one big caveat…. If the site is seen as just one more attempt by publishers to push their books — if it is seen as primarily advertising and sales driven — the odds of developing a real community of readers drops. If Bookish.com is going to be successful, it may have to allow reviews and discussions of competitors, other than the three founders, to be posted.”

Wharton marketing professor Peter Fader describes the venture as “an example of history repeating itself. You look at the music industry now, and it’s an abysmal failure, despite efforts to do similar things along these lines. People forget the history of services like Pressplay [and MusicNet] – music downloading services that supported the labels but didn’t serve up content quite the way people wanted it. These services said, ‘We are going to embrace the digital age but we’re going to do it on our terms.’”

He acknowledges that Bookish.com is a somewhat different proposition. The music services “were more about downloading” as opposed to Bookish.com’s goal of creating a community. However, “people won’t have a really big compelling reason for going there unless there is more commercial activity or at least the ability to get content.” Fader sees the publishers as “taking their old ways of doing things and transporting them into the digital space as opposed to coming up with a stunning new model. It is basically the same people running it. There is no reason to believe they will shake things up.”

Publishers, Fader adds, are “very good at defining who the next hot author will be, and they are good at editing, but they are not good at selling and never have been. For most of their existence, they disdained it…. The only way publishers will learn is by letting outsiders in.” Unlike the music world, which had Napster, the publishing world has “no single place where everyone wants to come together and where the industry can [offer] its stamp of approval. Just having the publishers hang out a shingle isn’t going to create demand.” The good news, he adds, is that there are no such “places” now in existence, so the industry is not in competition with anyone in that space.

Fader also points to the difficulties that Amazon has had “trying to create its own imprints or pushing new content through the Kindle. It hasn’t worked.” Conceptually, on paper, he adds, Bookish.com could be successful. “But it won’t be, because publishers won’t be able to really truly embrace and leverage the technology,” relying instead on “an online equivalent of traditional tactics.” In addition, the initiative will require “a massive top-down marketing push. There is no existing groundswell of interest. It would be better if the publishers had a competition and told entrepreneurs to build an online one-stop shopping book world, because right now [the publishers] are not capable of creating the right kind of buzz themselves.”

Wharton management professor Daniel Raff considers Bookish.com “a step in the publishers’ attempt to reach out to a clientele which looks for books online, or might look for books online…. I have the impression that the major publishers already invested in these capabilities haven’t yet seen very satisfying returns from them.” He also characterizes the new site as “an attempt to mimic various attractive features of the main Amazon book site but without the central attraction of that site — its scope. In itself, this seems likely to leave the publishers better off than they were, but not that much better.”

The interesting detail, he says, concerns “the file formats. If I read correctly, the publishers are not committing to that yet. I think that the big question in these matters now is, ‘Who can download?’ We have seen distributors and device manufacturers trying to become monopoly suppliers to some large group of potential customers, using the size of the locked-in group to sign up more titles but also using the locked-in relationship to throw their weight around — such as by imposing pricing schemes on the publishers, who in this perspective feature as manufacturers. That is, in a sense, backward integration without bothering to buy up the upstream firms. This is the upstream firms gesturing at fighting back.”

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