Rocket Bomber - business

So,

[*sigh*]

OK, so everyone in publishing and book retail and certain investors & investor groups and of course, Barnes & Noble employees (& I’m sure, other booksellers) have been looking at and looking into the current skerfluffle happening with Barnes & Noble stock.

I’ll note here: this is only about the stock. While ownership of stock does at least theoretically correspond to ownership of the company, ownership of the stock doesn’t run the stores, doesn’t affect the appetite or enthusiasm of the shopping public for books, and doesn’t reflect, affect, or deflect the much larger trends in both publishing and street-level retail sales of physical goods —

…and any goober with a pile of cash can buy stock; If you have enough cash, you can buy a lot of stock:

while possession of money is seen as a virtue in our current [western, capitalist, greedy, consumerist, commoditized&packaged-for-sale] society, usually big money only derives from one of three sources:

you’re lucky, you’re ruthless, or you’re really, really smart.

(Not all smart people are rich, mind you. Some luck/greed/ruthlessness also usually is a factor)

& While some smart people are rich, possession of cash is not a guarantor of either general intelligence or business acumen. The ability to buy a thing does not correspond to the knowledge of the proper use of the thing. The ability to buy a company’s stock on the open market only has one meaning:

You have money.

##

Meanwhile, the knowledge needed to run a single bookstore, or a city-wide chain of a dozen bookstores, or a regional player with multiple dozens of bookstores — or a nation-wide chain of bookstores with hundreds of stores, millions of books, billions of dollars in sales, and a website and ancillary sales [* see below] – seriously, Dude: just because one can buy a stock doesn’t mean one knows jack about how that business is run.

Bookselling, these days, isn’t about selling books. I hate it, you don’t understand it, and it makes no sense. And now, I have to explain it to you.

[here’s the important bit]

With the transition of bookstores from the local independent retailers of the 60s to the major retail chains of the 90s and today, there was also a shift in mindset, from the sale of books as books – to the sale of books as just another retail commodity

[/important bit]

If one’s mission statement is to operate the “best specialty retail business in America” (& that has been and is still B&N’s mission statement) then you open yourself up for all kinds of distractions

* (CDs, DVDs, audio books, stationary, calendars, stuffed animals, bookmarks, journals, board games, book lights, magnifying glasses, reading glasses, tchotchkes, coffee mugs, coffee, and a whole lot of crap non-book merchandise that I have to deal with, on a daily basis, as a corporately-owned bookseller) —

Retail is broad, open, messy, and undefined. The exchange of goods for money includes things like prostitution, the grey market, the black market, street-corner drug dealers, human trafficking; the sales of pelts, horns, organs, meat, glands, other derivatives & messy bits of endangered species; or of the mere rights to buy and sell something, whether one actually owns said somethings before the rights to buy and sell them are extended to the open market.

“Retail” ideally means I actually have the item, here, in a store on a shelf, and I can sell it to you. It hasn’t actually meant this for decades, perhaps enough decades to constitute centuries.

“Oh, sure, I’ll have that in next week; if you pay for it today, I’ll hold it for you as soon as it comes in.”

This statement is not only a supporting pillar of retail bookstores, it is the bald lie that all online retail is built upon. — key quote: “Oh, sure, I can get that to you next week.”

Promises, Promises.

##

I’ll take a step back from retail theory [while once again noting that investors, particularly investors of the scale that take “ownership stakes” should endeavour to educate themselves about the companies they buy and sell like Monopoly™ gameboard spaces] to get back to what I originally wanted to comment on:

See, there’s this guy with a lot of money, who is trying to buy up quite a bit of the company I work for [whatever beef I have with current management, it is still the company I work for] and he’s filing lawsuits, haranguing stock-holders, whining, complaining, and generally distracting major stake holders, the board, the management, and the shopping public (at least those who read financial mags and newspapers) from the business of the company: the exchange of dollars for words.

And, as stated, while I have my own beef with current ownership and management, this dude Burkle isn’t helping.

The latest newsworthy bit is that Burkle is bitching that current management is using “Company resources and the company’s internal communications systems on multiple occasions to solicit votes for Leonard Riggio and his hand-picked nominees to the Board of Directors”

Here, let me state something Burkle doesn’t know and is piling much grief upon: All official press releases of my employer, Barnes & Noble, are also distributed to all employees (stockholders or not) via an intranet known as “Barnes & Noble Inside” — the letters of Len Riggio and William Lynch were also official B&N press releases, & official company statements, in as much as they are addressed to everyone and propagated to Businesswire.com (the same host for Burkle’s press releases) & also barnesandnobleinc.com [the official corporate site] before they were made available to employees of Barnes & Noble, whether they are shareholders, management, or just the folks I have working part time on a register to help me through the weekends. If any statement from Corporate has been made public through other channels, we like to be sure our employees can read it as well.

Thus, Burkle is complaining that B&N makes official B&N press releases easily available to all B&N employees. Pray tell, what should they do otherwise, if this is wrong?

Burkle – as a shareholder – can bitch that he doesn’t has access to internal B&N communications, but since he holds no executive position in B&N, he has no basis to complain:

If he would care to submit a resume and application to Barnes & Noble, for a specific job in our organization (“owner” isn’t available; & “owner” means nothing, contributes nothing, and doesn’t sell books) then I’m sure we can re-evaluate his standing and address some of his complaints.

##

Instead I’m going to call him out on his research.

[Here I’ll insert a link to the wikipedia entry on McDonalds — not that micky-d’s is immediately germane to the discussion of book retail, but I want to plant that seed in your head, before I get to my conclusion.]

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In his letter to B&N employees Burkle shows his ignorance at least a dozen times, but I’ll pull just a few:

“Leonard Riggio isn’t a Barnes or a Noble, but he considers himself THE founder because he writes the history. The Barnes & Noble company’s roots go back over a century and its history is full of innovation. Many of Leonard Riggio’s businesses can trace their history to these families.”

“Leonard Riggio doesn’t want anyone else in his story. Not the Barnes family, the Noble family or even the shareholders. Over the years, he charged the Company over $32 million dollars just to use the Barnes & Noble name, but he doesn’t invite members of the Barnes family or the Noble family to cut the ribbons at store openings. He believes this is his company…except he doesn’t own it…not even half of it…but he acts like he does. Until just a couple of years ago he owned about as much as Yucaipa does.”

“Barnes & Noble has been around over 100 years. If it’s allowed to operate with good governance and without conflicts of interest that have siphoned off billions of dollars into transactions that have benefited Leonard Riggio and his family, I believe it can be around for another 100 years.”

Here’s your history, and I can quote Wikipedia — and while that doesn’t mean it’s true, it certainly means anyone with scant minutes could “verify” these facts:

“Barnes” was Charles Barnes who began a book printing (not book retail) business in 1873. He was based out of Wheaton, Illinois — not New York, a publisher not a retailer, and soon to fade to black if it weren’t for…

His son, William Barnes: who entered into a partnership with G. Clifford Noble in 1917 to open up a physical bookstore in New York — not more than 100 years ago, Mr. Burkle, but merely 93 years past.

For someone as detail oriented as you, Mr. Burkle, who specifically called out the members of “the Barnes family or the Noble family” in your letter, I’m surprised you missed this point. Even at it’s inception, no matter the name, the bookstore that became the Barnes & Noble chain was more than the sum of it’s parts, more than a mere congregation of names, and 40 years removed (in 1917) from “Barnes” the publisher —

What is now known as the “flagship” Barnes & Noble bookstore only opened on 18th & Fifth in 1932.

The bookstore, the business, the brand name; Barnes & Noble was purchased by Leonard Riggio in 1971. While Ronald Burkle would love to characterise this as a late development in the long, storied B&N history, in fact, this is just when B&N as a national brand was started.

##

In Burkle’s version [and likely also the general public perception] “Mr. Barnes” & “Mr. Noble” worked for 80 years to build a company that by the 1970s was an established New York bookseller that was then bought out by Riggio, but everything you know or think you know about B&N leading up to that point is likely wrong.

Mr. Noble exits the picture in 1929, before the “flagship” bookstore [the proto-big-box that later was a model for the whole chain] even opened, & the last Barnes who ran B&N died in 1969 and at that point the company was sold to Amtel, which as a conglomerate had all kinds of product lines, but didn’t know books. The book division quickly declined, and Amtel was looking to sell.

In 1971, Len Riggio already owned 10 bookstores — having started his own bookstore business 6 years prior at the age of 24 — and the research I’ve done points toward Barnes & Noble only having 4 branches at that point, though the 5th Avenue store was certainly a landmark and among the largest bookstores anywhere. After Riggio bought the name (& the company that went along with it) he immediately rebranded his 10 college bookstores with the B&N moniker. Len Riggio came to B&N with bookselling experience and more locations than the stores he purchased in 1971. Sure, “Barnes & Noble” began—in one way—in 1873, and the original bookstore opened in 1917, but the company that is now a massive corporation began in 1965 when a 24-year-old bookseller started his own chain of independent college bookstores. The name you and I now know that company by came later, and was purchased on the cheap (just $750,000) and bought second hand — since Noble had left 42 years prior and John Barnes [grandson of William, the founder] was 2 years dead.

Given Riggio’s background — and also, the past retail and distribution activities of the pre-1971-B&N — Barnes & Noble was primarily a college bookseller throughout the 70s and early 80s. Starting in the late 70s, though, B&N began acquiring other book store chains leading up to the 1986 acquisition of B. Dalton, a nation-wide chain with close to 800 stores.

For more detail, I’d heartily recommend the well-researched article at fundinguniverse.com — which took me all of 5 seconds to find via a Google search, and I don’t even own 20% of the company.

And for more information on how bookstores changed from local retailers to big box superstores, I’ll point you to my first Rethinking the Box Column.

##

The Brothers MacDonald opened a restaurant in 1940 in San Bernardino, California. Their name is all over the burger franchise that now dominates the planet. But heirs and descendants of that particular “McDonalds” clan have nothing to do with the fast-food empire that serves us hot apple pies and meat nuggets of dubious origin

Ray Kroc is the businessman who took a single idea (burgers and fries, in this case) to a billions-of-dollars market-leading business.

“Barnes” and “Noble” both deserve their place in the history of bookselling, and on wikipedia, and both on the store-front signs and in the minds (& hearts?) of book lovers everywhere.

But Barnes & Noble as a company was built from scratch by Len Riggio, and he was well on his way toward his goals even before he bought the B&N name.

##

And booksellers are smart cookies; we know how to use the internet, and quite a few of us are skilled at research as well. On top of that, those of us who are stockholders-of-record have received — [*sigh*] do not doubt we’ve received — multiple communications from both sides and honestly, we’re all a little sick of the whole thing.

Mr. Burkle, your side of the story got out. You didn’t need to throw out a last-minute smear against current B&N management about censorship or insider boosterism.

I’ll note, as a Barnes & Noble employee, I did see some some internal communications noting that the deadline for proxy votes for the shareholder’s meeting was approaching — but these were presented to me as informational statements, that I needed to submit either the gold or white proxy card by a certain date, and not as exhortations to vote the company line.

Any propaganda from the company to support the company were first sent out as official press releases, and merely repeated via internal channels, so it’s likely you saw all of these statements before I did.

##

At this late date I believe the point is moot. All deadlines are past, all shareholders have cast their vote. We’re waiting for the shareholder’s meeting on Tuesday (28 September) and I’m not sure if we’ll know immediately what the results are — my vague recollection of SEC filing rules may give the company four business days before they have to report the results of the voting — but given the stakes and the public scrutiny I expect there will be PR from both sides coming out after the markets close on Tuesday.

It doesn’t matter anyway. 3 board members out of 9 won’t change any votes, and doesn’t change any of the company executives who run the company day-to-day, and who have already made plans for the rest of this year and likely most of the next.

Barnes & Noble’s Holiday and Digital strategy for 2009 is already cast — not set in stone but formed in fairly durable plastic (wrapped around the electronic guts of an e-book reader). The battle for ownership of the shares, and all this grumbling and rumbling, is a distraction that *I* certainly didn’t need, as much of my energy and both mental and physical effort should have been poured into the bookstore as we prepare for December (and it’s tougher this year than any I’ve worked yet) — and also constitutes an expense for the company – as we have to publicly conduct this exercise; what is essentially a bigger-dick contest between Riggio & Burkle with some bearing on what B&N looks like in 5 years, but doesn’t do anything to explain, ameliorate, or resolve Problems in Publishing and Book Retail which affect my business but which is due to much larger culture and technological shifts.

It’s like the passengers voting on which lifeboat to take, as we all prepare to debark from the Titanic — yeah, sure, we can make this a point of debate and if one insists and yells with sufficient volume, it certainly seems like it matters, but there are larger issues.

And while a couple of first-class passengers shout at each other about whether the port or starboard side is better, us working proles are making our way to whichever lifeboat is closest – and it’s women, children and booksellers first.

##

This post is not a defence of Len Riggio: I personally think that Len is a dick, and suffers from a napoleon complex. The whole B&N College vs Barnes & Noble [retail] split prior to the 1993 B&N stock IPO was a classic dick-move, and I’ve commented at length about it.

The continued and continuing quarterly dividend payment is one point that really sticks in my craw [in a depression! and while the company loses money!] on top of the fact that B&N had to pay a half billion to re-acquire the B&N name from Riggio’s pocket College Bookstore Company (though the purchase also included 700 or so college bookstores — and full ownership of the brand and reunification of the two Barnes & Noble companies is a big plus… but) shows that Riggio is shrewd, if nothing else, and protective of what he sees as his.

But if one were to ask me who I’d trust a bookstore to:

I’m backing Len, and Burkle can skip and go eff himself.

Alternate Title: Before you destroy a thing you should know just what it is you mean to destroy.

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A lot of forecasts & assertions & spin & PR & words have been dropped all around this new thing, e-books, but to me it all smacks of pipe dreams and snake oil.

I’m a numbers guy, just give me the numbers.

…

…and it’s a whole lotta numbers: 60 months of data from Publishers.org, the website of the Association of American Publishers. — I’d list a link to each month of data but thankfully there’s already an index at the AAP site

Of course, it took a while to pull everything together into a spreadsheet, but hey, somebody had to do it.

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So, let’s set a baseline first. Total book sales, by month, for the last 60 months. [July 2005 to June 2010.] For this calculation I’ve included college text-books but excluded the el-hi (elementary to high school) text book market.

Here it is kids: this is bookselling.

• bookselling is seasonal. Everyone knows this, I guess, as all retail is seasonal. Some books are bought as gifts, in fact, though I think a lot of the December bump is folks buying gifts for themselves after mall trawls and selective skirmishes into discount retailers: a hot cup of cocoa and a little something to curl up with on a cold winter night. (maybe that’s just me)
• textbooks are bookselling – and a big ol’ chunk of bookselling at that. Some observers (myself included) raised an eybrow at the B&N/B&N College merger – but just look at that graph: every August & September is like Christmas all over again, except for two months, and while not nearly as many units are sold, the ones that do sell are selling at text book prices. The college business is that big (just look at the graph) and maybe buying B&N College for a half billion was cheap at the price.
• even at it’s worst — Feb, Mar, Apr each year — books sell in the hundreds of millions monthly. And sales of close to 1.5 billion each December doesn’t hurt either.

Obviously textbooks are a destabilising factor; let’s run the same chart without them:

Here we see something much more interesting. Returns of textbooks to publishers each March and October actual drag down total sales. That, and the peak for books isn’t December (that’s just kids gearing up for second semester) — the real season for book sales is Autumn, peaking each Sept-Oct, months before holiday retail.

Bet you didn’t count on that! Heck, I work retail (& I’m a bookseller) and we do gobs of business each December but it never occured to me (until I made that chart) how much of that isn’t books: calendars, greeting cards, gift wrap, board games; everything and anything but the books (though we sell books, too.)

I haven’t even hit my main points yet and I’m already learning something. Research is it’s own reward.

If you hadn’t already guessed, I’ll be slowly adding more and more lines to this graph just to illustrate what the book business is and where it’s going — slowly, to give your brain time to assimilate the info. Next line is e-books, and given where e-books currently stand, it’d be easy to use this as a punchline:

Even with double- and triple-digit growth year-to-year, ebooks are, well, just a footnote. So Far. I’ll get back to e- before the end of this post, and we’ll adjust the scale so we can more clearly see just how the e biz is doing for books. But given the scope of the rest of publishing, even without the text book market? just a blip.

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Amazon recently reported that they sell more Kindle books than hardcovers. Woot. Yay. I find it interesting, however, that this news only comes out after the spring (which as we can see in graphs above is a seasonal low-point in book sales) and only compared to hardcover books sales… well, since I have those numbers, let’s analyze it. I’ll even give Amazon the benefit of the doubt, and combine adult and childrens hardcover into a single number

Amazon has at least 80% of the ebook business but only 13% of overall book sales [per my most recent analysis] so growth in the former combined with a seasonal- and recession-related drop in the latter makes for a good headline.

But what does it actually look like?

The “explosion” in Kindle sales didn’t seem to affect hardcover much. Indeed, Amazon sells a lot of books (2 billion dollars worth in 2009, by my count) but that still isn’t enough to move the needle: Publishing and bookselling seem to be doing fine, and doing their own thing, even after 15 years of Amazon (and 5 years as charted in detail above)

I think you can see the overall trends, so let me add the last two threads:

The “Trade” paperbacks [the purple line in the graph above] don’t follow the same trends as hardcover, and the “mass market” paperbacks [teal] seem immune, even to seasonal trends. Even at this scale, I think we can see e-books eating more into mass-market paperbacks (the closest format to e-books in price) than any other publishing trend.

Of course, we’re in a recession, so it’s hard to say just what’s going on, or what will happen.

Let me adjust the scale, so we can see better:

With a bit of focus, we can see e-book sales steadily growing throughout 2009, with a definite spike after the 2009 holiday season: ebook sales suddenly doubled, and seem to have reached a new plateau just shy of $30 Million monthly. Great for e-books.

Ah, yes, but what changed from January of 2009 to January of 2010? Was it something that Amazon did, or was it the entry of Barnes & Noble into the e-book market, and the introduction of Apple’s iPad?

I invite you to draw your own conclusions, but I’d put forward that no matter what Amazon’s strength in the e-book market, they are still just a marginal retail player, and folks hadn’t even heard about e-books until Steve Jobs did an iPad demonstration and all of a sudden it was on every local-tv-broadcast-news telecast (you know, 1950s technology) coast to coast.

Amazon certainly benefits from the buzz currently surrounding e-books, but they didn’t generate it.

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In my last post I tried to figure out just what share Amazon had of the book business; I estimated they currently hold $2 billion (plus or minus $200 million) — that’s about 15% of the trade book business [somewhere between 12 and 18% – you can quote 20% if you really feel like but it it’s much likely to be less] but less than 10% of the total book business when textbooks are included.

If we hold to the best guess, $2 billion (& 15% of trade) then a safer estimate of Amazon’s actual total book share is 8%

That’s… actually pretty darn good. One of the throwaway statistics I generated in that last post is that Game Stop, acknowledged market leader in it’s segment, only sells 7% of all new games (of course, they make gobs of cash off of systems and a billion plus annually on used games, but that wasn’t the calculation I ran).

For comparison: for the fiscal year ending May 1, 2010 [pdf] Barnes & Noble reported retail sales (Stores + BN.com) of $4.974 billion, with an added kicker of $800 million in sales through their college stores.

B&N sells more than books. There are CDs, DVDs, magazines, board games, stationary, gifts, greeting cards… but if all of that adds up to more than a billion dollars I’d be surprised. Even if 40% of B&N’s business were non-book, they’d still be selling close to 3 billion dollars worth of books each year.

Just like I had to make a guess at Amazon’s share of the book business ($2 billion out of $5.964 billion in “media” sales) I’ll take a stab at B&N: I’m going to say $4 billion of that $4.974 billion of “retail” is books and I’m going to leave their college segment out of it.

In fact my best guess is 3.5-3.75 billion dollars, but once again, that’s without the text books: $4 billion is a nice round number and is as “accurate” as my Amazon estimate.

If you like my math and (informed) assumptions, then you might be excused for thinking B&N handles 25% of the trade book business and 16-17% of all book retail. This seems to match other estimates which should make me a smug bastard but all the guess work and really big numbers and potential errors of, I don’t know, a billion dollars either way make me less confident.

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Let’s go back to e-books. Here’s the e-book numbers on their own, without the massive rest of the industry pressing down on top of it:

Here the growth trend is much more pronounced.

Growth is the key word. Yes, the book business is huge, billions, but it’s also largely static. I posted charts showing five years of sales and there’s a nice, repeating seasonal pattern. Reliable. While no one knows which books are going to sell, the industry as a whole is going to sell some books.

But none of the other book categories is growing.

I need at least another 6 months of data to see where e-book sales are trending; my guess is it’ll hover around $30 million a month for the rest of the year, and then after Holidays 2010 (and a whole new batch of e-readers given as gifts) we’ll see e-books climb to the next plateau. E-books will do $360 million this year, fairly easy. Will it be $500 million in 2011? Will e-books continue to cannibalize sales of mass-market paperbacks? Will it affect other paperbacks and hardcovers as well?

Is the growth of e-books also growth for books? Or are we just shifting beans around to different columns without changing the book & publishing total?

In a separate post, I’ll go into my opinions on why e-books are hitting the mass market paperbacks first.

Amazon is so damn annoying.

Oh, it’s not that they’re a competitor and want to put both me and book publishers out of business so they can sell crappy books cheaply as some sort of book monopoly (though that sucks, too) — no, it’s the half-assed reporting of their financials.

Here, go to their annual report [pdf] and skip all that introductory crap that makes them sound good, go down to page 25: there they list a summary

Net Sales – North America: $12,828 – International: $11,681
Consolidated: $24,509
(in millions)

…and that’s it. Oh, but there are more tables and numbers to go, obviously we just need to read down a bit… ah, here it is on page 28, “Supplimental information about our net sales is as follows:”

Net Sales – North America
Media: $5,964
Electronics and other general merchandise: $6,314
Other (1): $550

Total North America: $12,828

Numbers still in millions, and that footnote (1) reads “Includes non-retail activities, such as marketing and promotional activities, Amazon Web Services, other seller sites, and our co-branded credit card agreements.” That’s worth noting, in fact, as it would seem amazon makes a half billion off of ‘non-retail’ — I wonder how much of that is from ad revenue off of the ads that cover each and every Amazon page — sheesh, I know they’re in it for the money but it went way past tacky two years ago…

Anyway, their whole retail operation, close to 12.3 Billion Dollars, is summed up by those two categories: Media, and not-Media.

Real helpful, guys.

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All I’m interested in is Books, so I’m going to have to independently re-create a media number and then work backwards to figure out just what Amazon is selling.

Sounds easy, right?

My go-to source for numbers on publishing is The Association of American Publishers, a trade group that among other things, puts out monthly sales numbers broken into a dozen different categories and posts the figures to their web site.

That’s what I’m talking about. For 2009, they reported sales of $23.9 billion.

That’s an awfully big number, and it includes things like college textbooks, $4.3 billion all by itself. El-hi (a book publishing category that encompases the other big text book market, grades k-12 — elementary to high school, hence the abbreviation) is even bigger, $5.2 billion. For a back-of-the-envelope calculation, I’m going to take those out. Call it an adjusted trade book total: $14.4 billion.

So what else is “media”? Well, there are CDs and Music, DVDs, and video games.

For music, I found this release [pdf] with the year end 2009 Neilsen MusicScan statistics in it — though it lists units sold for 2009, not dollars. That’s OK. I figure 99¢ a track on downloads and $10 an album and with the barest gloss of extra math: that’s music media sales in 2009 of roughly $4.9 billion.

Not bad for an industry that’s going out of business, and that doesn’t include concert ticket sales, music licensing, prestige vinyl, or international sales. Just a ballpark number.

For DVDs, I found the Digital Entertainment Group, another trade association. Their members include just about every manufacturer and distributor of both DVDs and Blu-ray, and while they have an annoying flash site that doesn’t allow me to link direct to their numbers, they also have some pretty good numbers on the industry (including some yummy historical data going back 11 years, so you can watch VHS die all over again!)

The DEG figure for DVD, Blu-ray, and Digital Downloads is $20 billion. Down a bit, actually, from 2008 — it’s a lot closer to the 2003 total — but hey, we all knew sales were down. Unfortunately, this also includes money made off of rentals, so we’re going to have to back down a bit from the ‘headline’ number. DEG’s report cites Rentrak Corporation’s estimate for rentals in 2009: $6.5 billion. That puts DVD & Blu-ray retail sales at a still healthy $13.5 billion.

The final chunk of media is video games. Here’s an msnbc.com link posting the Associated Press article that quotes numbers from research firm NPD Group for 2008 — not as handy, as I need 2009 numbers, but it gave me the breadcrumbs I needed to find this press release from NPD Group itself, which not only has the total number (including hardware), it breaks it down a bit further into just what I need: Game software sales for PCs, portables, and consoles at $10.5 billion.

So “media” as Amazon reports it had total sales in 2009 of, well, let’s all do the math together:

(numbers in billions)
Books: $14.4
Music: $4.9
DVD/Blu-ray: $13.5
Games: $10.5

Total: $43.4

That’s U.S. only, but is made up of industry-wide estimates for each category. $43.4 billion.

Amazon, out of their big $25 billion gross sales number, only does $5.964 billion in US Media sales. About 13% of the total. Nothing to sneeze at, but not much to crow about either (else Amazon would have already done so: they’re secretive about some things —but not shy)

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So, what else can I do with this shiny new “retail media sales” estimate?

Well, books may be old fashioned but they are still a third of the retail media market. Music is 11% (about a ninth), DVD/Blu-ray at 31% (close enough to also call a third), and Video Games are 24% of the total.

We could also have some fun doing different types of analysis (Game Stop, for example, sold $795 million in new games in 2009, so even a solid “market leader” in a category only manages 7% or so of the total business) but my focus today is on Amazon, and books.

Let’s assume that sales on Amazon are proportional to overall sales: that is to say, of the $5.964 billion in “media”, a third is books, a third is DVD/Blu-ray, a ninth is music (CDs and downloads) and the rest is video game software.

Look at your own purchasing history — from Amazon in fact, if you’ve bought anything from them this past year — and also remember the figures above are all dollars, not units:

• a handful of books, at $12 or less?
• a TV series box set (or two), at $20 or more?
• two or three albums, when they advertise those $5 downloads?
• any games? maybe so, if it was discounted enough, and you didn’t just go to Wal-Mart when they had it on sale.

It’s nearly impossible to say — which is kind of why I wish Amazon broke it out in their own reporting of financials — but in the absence of real data, I’m going with my best guess and this assumption:

Amazon is so big, I’d be more surprised if their sales didn’t mirror the overall retail market as a whole, particularly in sales of books and discs: easily shippable but occasionally hard to find physical media. It’s what they built their core business on, a decade ago.

As a number of industries turn digital, well, so is Amazon. I’m not sure if it’s enough to move the needle one way or another. So what if I end up being off by half-a-billion dollars or so? It’s not like anyone else is posting numbers.

##

Taking a leap in the dark, I think we divide up Amazon’s media sales proportional to the overall retail media market:

(in millions)
Books: $1,978
Music: $673
DVD/Blu-ray: $1,855
Video Games: $1,442

…but that video game number just looks wrong. Maybe with hardware added in, maybe, but the media calculations above specifically excluded hardware.

Gah! I hate Amazon!

Let’s say Amazon sells just as many games as they sell music? I’m on my third assumption, now:

(in millions)
Books: $2370
Music: $670
DVD/Blu-ray: $2240
Video Games: $670

I think the best we could manage is a range: Out of close to 6 billion in “media” sales Amazon earns between 1.8 and 2.5 billion dollars from sales of books, and about the same amount off of DVD & Blu-ray.

To make the math easier for my next post, I’m going with an even $2 billion.

• Amazon is just 4% of the market and grossly overhyped
• Retail is at $4 Trillion even in a recession – yes, $4 Trillion even in a recession
• and the actual valuations of some companies need to be examined even if [especially if] they ‘seem’ to be ‘unprofitable’

and I can back that up with Math.

##

So, the Census Bureau (love those guys) post monthly retail numbers, and you all know how I ♥ #s.

The total retail picture includes two massive chunks that tend to distort the whole, however: Cars, and food.

Gotta eat. So food (restaurants and supermarkets) can be considered something akin to a fixed cost, and discarded. And cars (new & used sales, repairs, and sales of parts & gasoline) are Big Ticket Items. I currently do not have a car because the Cost of Repair (to say nothing of a NEW car) is beyond my current means. (Sucks. But at least I can use transit).

There are some other categories that could be considered capital expenditures (building materials) or necessities (prescription drugs, beer, liquor) and so also follow their own [occasionally contrarian] cycles, and fall outside of what I consider ‘retail’ —

If only some smart person could pull just the discretionary retail spending, discounting all these other special-and/or-fixed categories…

say, have I mentioned recently that the Census Bureau (love those guys) is full of smart people?

Let me introduce you to the GAFO number.

GAFO is “General Merchandise, Apparel and Accessories, Furniture and Other Sales” and encompases the following categories tracked by the US Census Bureau in this drool-worthy spreadsheet *

442 Furniture and home furnishings stores
4421 Furniture stores
4422 Home furnishings stores
44221 Floor covering stores
442299 All other home furnishings stores
443 Electronics and appliance stores
44311 Appl.,TV, and other elect. stores
443111 Household appliance stores
443112 Radio, T.V., and other elect. stores
44312 Computer and software stores
448 Clothing and clothing access. stores
4481 Clothing stores
44811 Men’s clothing stores
44812 Women’s clothing stores
44814 Family clothing stores
44819 Other clothing stores
4482 Shoe stores
44831 Jewelry stores
451 Sporting goods, hobby, book, and music stores
45111 Sporting goods stores
45112 Hobby, toy, and game stores
451211 Book stores
452 General merchandise stores
4521 Department stores (excl. Leased Departments)
452112 Discount dept. stores
452111 Department stores(excl. discount department stores)
4521 Department stores (incl. Leased Departments)
452112 Discount dept. stores
4529 Other general merchandise stores
45291 Warehouse clubs and superstores
45299 All other gen. merchandise stores
4532 Office supplies, stationery, and gift stores
45321 Office supplies and stationery stores
45322 Gift, novelty, and souvenir stores

The GAFO number includes my all-important bookstore retail (category code 451221) along with everything else in the mall [excl. the food court] and every damn big box besides, including Sam’s Club and Costco (45291); Staples and Office Depot (45321); Sears, Macy’s, K-Mart, & Target (4521); Wal-Mart (452 or 452112, one or the other); Best Buy, Game Stop (44311 & 44312) — and quite a bit of everything else, from new carpet to Ikea to the local game & hobby shop.

(* I have referenced these census numbers before and most assuredly will reference them again)

Here, let me put that in a chart for you:

The scale on the x-axis is millions; that red vertical line is the 50 Billion mark, the green one is 100 Billion. Dollars. Retail. Each Month — and retail excluding all food sales, gas, and cars.

Big Honkin’ Numbers.

I have one more census chart in reserve, but let’s fall back and first consider Amazon.com:

##

Amazon built itself from the ground up, starting in 1994 and advancing inexorably year after year, exploiting new technology to ream retail a new one and take its place as AMAZON, Retail Giant, destroyer of publishers, devourer of worlds.

Amazon is big, sure: for FY 2009 they reported North American sales of $12.8 Billion and overall sales (all product classes, internationally) of $24.5 Billion. [internets] Oh My God Amazon is Eating My Lunch & Just Stole My Girlfriend… Panic… [/internets]

Scale, folks. Scale:

Amazon managed $12.8 Billion in [US] annual net retail in a year when December retail sales were $136 Billion — just for December! — and just for that GAFO classification, which is comparable (if not an exact analogue) to Amazon’s market segments. If we expand that to all retail for 2009 [as tracked by the census] then Amazon manages just $12.8 Billion of $4.13 Trillion in overall economic activity, or about 3% of retail.

Even the $25 Billion Amazon does in the US & Internationally — is only 6% of the $400 Billion Wal-Mart does annually.

Amazon started as a bookseller, sure, in as much as they sold books online at a discount. And Amazon deserves credit for losing money for close to a decade before showing a profit (talking a line of shit about “the future” to whomever would listen to secure their funding, apparently) and now they are a multi-billion dollar business & showing a profit & bully for them.

[there is something in investing circles known as a P-to-E ratio: this ain’t it; just some simple math]

So, Amazon did $24.5 Big Bills in 2009. Best Year Yet.

AMZN has 448 Million outstanding shares, and [at today’s closing price, $127.57] a market cap of $57 Billion — at time of posting.

So that’s annual sales [not profits] of around $55 a share, and sales-to-“value” [value in quotes since market capitalization is based on stock prices and as such is completely arbitrary and subject to whims of the market] of 1:2.3 — that is to say, Amazon may be ‘worth’ $57 Billion but they do less than half that in sales each year.

Since I dragged Wal-mart into this:

Wal-mart had net sales of $405 Billion, outstanding shares numbering 3.7 Billion, and a market cap of 185.7 Billion [trading at $50.06 at time of posting]

That’s sales per share of $109, roughly, and sales-to-“value” of 2.1:1 — Walmart is ‘worth’ $185 billion and they do more than twice that in net sales each year.

Barnes & Noble is small fry in this fight: only 58 million shares at $15.20 [at time of posting] for a market cap of $895 million.

Not even worth a billion dollars. B&N sales must suck too, right?

per the most recent annual report: B&N 2009 sales of $5.8 Billion.

So, sales per share of $100 and (since B&N is trading at a fraction of Wal-Mart share price) sales-to-“value” of 6.5:1.

That is to say, B&N is valued at $895 Million (you could buy all outstanding shares for that amount) but in 2009 (a bad year for retail) and in bookselling (a niche market, apparently, with as quickly as the media has been to pronounce us dead each year for the past three years) still managed $5.8 Billion in gross sales and $1.6 Billion in gross profits.

Now, all kinds of things slowly whittle away that gross profit number, until we end up with only $36 Million in earnings. But:

For just .9 Billion Dollars one could theoretically buy a company that grosses six times that each year – and do I have to remind you we’re in a recession and with certain per-share statistics that seem to match Wal-Mart and at a bargain basement price of $15 a share. — And 58 Million Shares seems like a lot but Amazon has seven times that number and Wal-Mart 63 Times as many. You could buy B&N, actually; Walmart & Amazon, not so much.

Which is where at least one investor found himself: considering buying B&N at a bargain basement price. What Burkle didn’t consider is that there was at least one guy who was pretty sure he already owned B&N, and didn’t feel like selling.

##

As noted, Amazon is eating my lunch and my future and just stole my girlfriend; all my friends are saying they saw her hanging off of Amazon down at the local malt shop in a way that was much more than just friendly. Amazon has the black leather jacket, the motorcycle that’s “in the shop this week, but I’ll show you later” and the attitude.

Bookselling is old-and-busted, e-books are the new hotness.

And yeah, technology can change overnight.

Let me pull that other census chart:

E-Commerce is growing, and has been growing for a decade. Q4 (December, holiday sales) each year are spiking quite a bit actually, though the overall trend is a bit flatter.

Note that trend, though. look at it:

Not an explosion. Steady growth of a half percent each year, plus a smidge. Sure, some players [Amazon, one supposes] can demonstrate or manipulate numbers that make the e-volution seem like a much bigger thing, but actual, independently sourced numbers point to a process that is much more gradual. 2001 is post- dot-com-bubble, in fact, and is a decent starting point to track online sales: Yes, this is a growing and promising part of the business, but e-sales are, um, still just a fraction.

4 percent of the total. 4% of 4.3 Trillion. — yeah, that’s a lot [a whole lot] but still just 4% — And Amazon’s $25 Billion doesn’t seem quite so hot when considered as a mere fraction of $107 billion in total e-commerce

Amazon may be #1 but isn’t even a fourth of total online trade. There are (apparently) a lot of e-commerce transactions [porn] that have nothing to do with books, e-books, or kindles.

It’s all a matter of scale.

And selling things at a discount doesn’t help your bottom line as much. Sure, bookstores charge a bit more, but we also have to provide a more comfortable experience, and (provided we can sell something) enjoy a more comfortable profit margin.

And I’ve been so busy proving that Amazon is not only a [really, really minor] fraction of retail but also [and surprisingly] just a fraction of online sales, that I didn’t even have time to point out that e-books are a fraction of a fraction of a fraction of either $4.3 Trillion in retail or $11 Billion in book sales (just 3.3% per the AAP numbers I just linked to — which means that e-books are approaching but haven’t quite reached the same overall ratio of e-commerce to retail as posted by the Census Bureau — that is to say, e-books are new, but haven’t yet proven they are an exceptional category that will outperform ordinary e-goods (including physical goods ordered online)

—sure, Amazon reports that e-books outperfrom one format of physical books, but not that they’ve outperformed all physical formats — and Amazon is not the industry. Hell, Amazon isn’t even the whole internet. And, um, why only e- versus hardcover, Amazon? How does e- do against all books, including the popular paperback formats? eh? Oh, cat got your propaganda?

##

Amazon’s Billions don’t even crack 3% of retail — though they do manage 4% of the general goods GAFO number.

& E-Commerce isn’t quite 5% —

— so Wal-Mart, Sam’s Club, and CostCo are still the primary enemy
— and while digital is not to be discounted or laughed away, no one [no, not even Amazon] has the solution, let alone monopoly, on e-books yet.

Scale, folks, scale: Sure, Amazon has headlines, and would love for you to think all e-books are Amazon, but the reality is far from that, and Amazon is trading on a book ‘supremacy’ that is itself a myth.

Yes, I’m a bookseller, but look at the numbers: Even if all of Amazon’s 5.9 Billion of ‘media’ sales constituted books (and they don’t, as there are CDs, DVDs, digital music downloads, physical books, and yes, e-books in that total) that’s just half of an 11 Billion dollar market — And even if my assumptions are incorrect and we only get the scraps from Amazon, that’s still a 5 Billion dollar plate of scraps.

The truth is that Amazon is just another retailer and one that captures quite a bit of the holiday gift market, but day to day — not so much.

(that’s my interpretation of the census numbers previously posted – feel free to run your own analyses)

Some see e-books as the death of bookstores and traditional publishing. And I’ll chime in a little later in this essay with my thoughts on that, but I’ll be going the long way ‘round, so go ahead and get that second cup of coffee and settle in.

Every transaction in publishing [Author to Agent, Agent to Publisher, Publisher to Distributor, Distributor to Retail, Bookseller to You – and the many business transactions that shortcut one or two or all of those interactions] is about words being slowly converted into dollars, and then the flow of dollars back to the Author, ideally, though much like the Colorado River that stream often dries up long before it reaches its supposed final destination.

Books are not produced by Amazon. While an author might go directly to Amazon (or an agent might do so, on an author’s behalf, as has recently caused a stir) even then, Amazon is just digital-storefront and distributor of the files. In a fundamental way, this is no different from Amazon selling any other sort of books, and Amazon’s interest in the deal is limited to Amazon’s take. While I’ll concede that Amazon is taking on some roles of the publisher—production and distribution in the case of e-books—it’s only going that far because e-books are digital and these costs are negligible. What is missing is editorial & financial support, and any marketing of the book. Some books only get written because of the advance on royalties extended to the author by the publisher before the book is finished, sometimes before it’s even written. Amazon isn’t offering that. Sure, you might make more on the back end but you as the author are forced to bear all financial risk. You as the author have to pay someone to proofread and edit your book (assuming you value the polish a good editor can add to even the best manusripts) and you as the author are going to have to arrange your own book signings and tours, and submitting the book to awards committees, and getting listed in catalogues (wait, will there be any catalogues if the major publishers don’t exist any more?) so physical copies of your book can be ordered into bookstores, and placed in libraries.

Amazon just wants the e-book, and their cut of its sale. Of Course Amazon is willing to pay the author more in royalties, maybe even as much as 90% of the purchase price, as they did nothing and the book costs them next to nothing. Your agent is going to work a lot harder for her 10%, let me tell you. Amazon is a parasite, taking the finished product away from folks who worked hard to produce it, and offering money back if and only if it manages to sell.

And the same might be said of all retail (and publishing, if your publisher doesn’t get behind the book) — but editors, publishers’ field reps & marketing departments, and yes, booksellers can all do a lot more than Amazon in selling books. Your take is less, because costs are higher. Those costs are higher because people are actually working on selling the book. A link and a listing on an online sales site are not the same as “being published”

##

90 years ago, publishing worked differently. I’m not usually nostalgic, but it’s the death of the business model of the 1920s & 30s that we’re seeing, and mourning, now.

The book you need to buy (& read) is Jason Epstein’s Book Business: Publishing Past, Present, and Future, isbn 9780393322347.

From the publisher:

“Jason Epstein has led arguably the most creative career in book publishing during the past half-century. He founded Anchor Books and launched the quality paperback revolution, cofounded the New York Review of Books, and created of the Library of America, the prestigious publisher of American classics, and The Reader’s Catalog, the precursor of online bookselling. In this short book he discusses the severe crisis facing the book business today—a crisis that affects writers and readers as well as publishers—and looks ahead to the radically transformed industry that will revolutionize the idea of the book as profoundly as the introduction of movable type did five centuries ago.”

From Wikipedia, Jason Epstein:

A 1949 graduate of Columbia College of Columbia University, Epstein was hired by Bennett Cerf at Random House, where he was the editorial director for forty years. He was responsible for the Vintage paperbacks, which published such authors as Norman Mailer, David Rudomin, Vladimir Nabokov, E. L. Doctorow, Gore Vidal, Itai Guttman, and Philip Roth. In 1952, while an editor at Doubleday, he created the Anchor Books imprint. This was the first of the trade paperback formats, a format which has consistently remained profitable and popular since that time.

In 1963, during the New York City newspaper strike, he co-founded The New York Review of Books, with his then-wife, Barbara Epstein, Elizabeth Hardwick and Robert Lowell.
He wrote a book entitled Book Business: Publishing Past, Present, and Future. In 1979, he and his brother, Zach Epstein were the co-founders of the Library of America which was intended to market archival quality editions of American classic literature. The first volumes were published in 1982, and the company now prints about 250,000 volumes per year.

He has been the recipient of the first National Book Award for Distinguished Service to American Letters and the Curtis Benjamin Award of the Association of American Publishers for “inventing new kinds of publishing and editing and The Lifetime Achievement Award of the National Book Critic’s Circle.”

His most recent endeavour is On Demand Books, the company that markets the Espresso Book Machine, which he co-founded in 2004.

A [possibly ironic, if only in that it exists?] preview of Book Business is available online from Google Books — though currently there are no e-book editions.

You can argue against Epstein’s conclusions in the book [though he backs them with his own money and actions, see ‘Espresso Book Machine’ above] but to say anything about publishing, retail, and digital books without having read his excellent history (& personal take) on the industry you mean to replace is almost criminally negligent. Pitch it as either ‘know yourself’ or ‘know your enemy’ but educate yourself on traditional, 20th-century-style publishing before stepping into this new era.

[and this is just my introduction…]

##

Words Exchanged for Dollars: 5 questions.

What is a book? What is bookselling? Who is best able to sell books? In an era when some to most to all “books” are files, what does “bookselling” even mean?

that’s 4. And:

Are current players (Amazon, major chains, independents, bloggers) going to be future players? Where is bookselling heading?

5 questions to cover and I might not have the answers. There’s nothing to do but start writing.

##

1. What is a Book?

Yeah, I know, you wanted business analysis and advice on which stock to buy now, or even just a summary of book retail with a 3-5 year forecast of the industry, retail prospects, and a sideline on digital media as relates to traditional retail.

The last thing you were looking for was a philosophical discourse on the definition and very nature of the term/idea/form “Book”. But that’s how I roll.

Let’s start with what a book is Not: A book is not a collection of paper leaves bound on one vertical edge, and stained on their surface by heiroglyphic marks meant to represent words and ideas. A book is not a digital file of 1s and 0s, which when properly decoded correspond to those same heiroglyphic marks, a translation into digital of that bound collection of leaves. A book is not a collection of ideas, or a physical document. A book is not a history or story, or an argument or allegory, or a manifesto or call to action, or a summation of past arguments, or a presentation of scientific data, or a historigraphic survey of previously unknown culture, or a speculative excursion into the realms of what might be, or a devout and discrete distillation of mystic experience into a concise statement of the divine.

A book can be all of these things, and several of them simultaneously, but at its very base: a Book is nothing but a mess of words. — permanently recorded words, & ideally meant for posterity, but more often collected and presented for economic gain: Words to be exchanged for Dollars.

(Or pounds, yen, shillings, francs, euros, yuan, shillings, cedi, pesos, manats, pesetas, dinar, marks, kronig, lats, shekles, rials, lira, credits, gil, double-dollars, or geekcred – eventually someone may commoditize and monetize our attention, such that revenue from online ads aren’t ‘priced’ at all but are instead treated separately and traded at their own rates on currency exchanges)

A book is a collection of words presented to the public by the author for gain — whether that’s monetary gain [most common], enhanced reputation & recognition, to support other economic activity, or an increased awareness (and eventual sale) of additonal books or other merchandise. Not every use of a ‘book’ requires money to change hands, but if some economic value is not derived from publication (“the act of making something public”) then that mess of words might as well [most likely will] remain a personal journal or private correspondence.

Even if the only economic benefit is “being read by others”, and the author who gives books away for free is willing to take all other production and distribution costs upon themselves in order to obtain that benefit, there is an economic component to sharing: a perceived benefit for a given expenditure.

“Free” books are hardly that: Religious organizations gain converts, political movements gain members, webcomickers gain fans who buy t-shirts. “Free” is great as a marketing strategy, but nothing is ever free, even if it’s only your attention that is being sold (via online ads, or the visibilty/recognition/popularity/notoriety/loyalty gained and banked for later economic benefit — please reference The Attention Economy)

So. By my definition, every collection of words (including this blog) is a “Book”, and all books have costs, and all books are for “sale”

— we can argue that not all “books” are fully equal [which is obvious, as no matter what class of goods we’d care to consider, even substitutable, ‘equivalent’ goods are not equal]
— and while digital costs are amazingly low, for ‘free’ books those costs are still borne by the ‘publisher’ even if that publisher is a blogger and the cost of ‘publication’ is just the annual web hosting fee.

E-books and ‘new’ formats and ‘new’ publication models are in fact nothing new, and can be shown to have easy historical analogs & also fall into my definitions of ‘book’ and ‘publication’ – to me, the argument is not a matter of Publishing Books but instead Publishing Books for Profit.

##

2. What is Bookselling?

Paper print & publication, and associated retail via book stores and newsstands, have proved more-or-less profitable (occasionally massively so, though losses are just as common) ever since industrial methods were applied to the means of producing books. Costs have fallen, more books are available to more people in more places than ever before, and more people can read even if they don’t bother to. It doesn’t make a whole lot of money as a percentage of costs, but it’s enough to keep the whole thing going, and the whole is a $15 Billion dollar a year business

And profits are a fine side-effect from the need to publish (or perhaps, publishing is a side-effect of the profit motive, though I’d argue there are many, many easier ways to make a buck than writing novels – theft springs immediately to mind, as does digging ditches) and there are so many books and players in the market that we’re tempted to refer to the whole mess as an industry, and institution.

Which is fine.

It’s a great thing, actually, when the sheer volume of books makes one think that books will always be there and that the mass of books published are somehow ‘culture’ or [hang on a sec, let me find my own past wording…] the canon and corpus of all human knowledge.

But there are no guarantees. Even after publication, books only remain in the market if there is money to be made in the sales of new copies, or so long as someone (a library or other academic resource) subsidizes them.

• and let me note here: that could be money made by the author and original rights holders, or money made by pirates. Both activities—publication & piracy—promulgate additional copies [in the digital age, copies ARE the continued existance of a work, though more often than not the means to produce/procure them are morally wrong]
• and ‘sales’ refers to the direct paper-for-money transactions, ad revenue to be gleaned from web hits, circulation within a library system that prompts the purchase of replacement copies, or additional copies, or copies for new library branches, old-fashioned bookstore sales and even the new-fangled ‘ebooks’.
• While this month’s paycheck [and being able to eat] are the primary focus of authors and all other actors in the publication industry, today’s profits are no guarantor of future income, or even a good indication that a popular book will remain in print 10 years from now.
• Allow me to repeat that: most, if not all books, only get 10 years. After that, editions remain in libraries, used book stores, and warehouses, but new books are not being printed. 20 years out, dedicated readers can find a copy but it is no longer in general circulation or for sale at the original retail price. 30 years on and the last used paperbacks are either stuck in collections or discarded as they deteriorate – 40 years on the hardcover editions are either firmly held by collectors [first-editions, mostly] [if your book is worth anything] while the majority have been forgotten, sold by the library in a book fair, lost in basements and attics, slowly falling apart if still in circulation, and rarely if ever read. After 50 years, you’re either known as a genius and your works classic, assigned to students and subject to reprint in new editions every 8 years, or you’ve been forgotten.
• We all like to give lip service to the permanence of print, but paper (particularly the cheap pulp paper used through most of the last century) is not a proper medium for archives and even worse: there is only the scarcest minority that even cares: Collectors, historians, archivists, sociologists, and fans — and there are few enough of any of these classes — but past the core [maybe 500 people, total] that actively lobby to preserve the history of print, everyone else discounts ‘old’ stuff and only cares about what’s new — and I’m not just talking about genre fiction, the ‘pulps’ [sci-fi, mystery, noir, adventure stories with lurid covers] but also ‘serious’, ‘literary’ fiction. Literary fiction actually has very few fans. And if it’s more than 20 years old either it’s famous – or it is lost at this point. Print seems permanent, but in practice has proven to be even more ephemeral than radio and early film and television: I can buy a CD box set of the Lone Ranger radio dramas [c. 1933-54], but not only can I not buy any of the top 10 New York Times Bestsellers from 1933, I’d be hard pressed to even know what those books were. The vast, ever expanding internet only takes us back to the 50s [link] and only because some brave volunteer took the time to type those in from historical sources.

What is bookselling? Well, at its most basic it’s the exchange of words for dollars. But bookselling is also the mechanism that keeps books in print. Dickens would be just another magazine serialist, Shakespeare an actor who wrote sonnets to an unknown mistress, Homer a blind poet with an astounding memory, Dante a little known minor Italian politician, Twain a newspaper reporter with an adventurous streak, and the Brontës just three sisters who liked to tell each other stories. We know these authors, and their books, because the books have been sold more-or-less-continuously through the decades, centuries, and millenia since their deaths.

If books were not sold, it would be up to librarians to keep the flame alive. And I love libraries. I love librarians. I like ‘em so much I’d marry one.

But nothing gets books published and distributed quite like the corrupting influence of dollars. Dirty, filthy commerce with profit motives and scamming the marks for two bits. Exploiting authors, skirting the law, ignoring foreign copyrights, out and out piracy on occasion. It’s an occasionally vile business but it puts books on shelves and into the hands of readers.

So long as a buck can be made on the sale of a new or used book, there’s going to be a person [or multi-billion dollar corporation] there to accept your money and keep the books in print.

This is bookselling: exchanging words for dollars. The profit motive is the only motive. Ah, yes, but no matter how base the activity, the main side effect is that new books get written, and printed, and sold. Old books get new editions and the backlist grows deeper every year.

Bookstores may be grossly inefficient compared to e-books and web sites and all that crap, but sex is also grossly inefficient if the only goal you consider is insemination. Sometimes inefficiencies are a good thing. Sometimes they have a value, even an economic value, well beyond what is most expedient or cost-effective. Just because there is something new, doesn’t mean we forget the old; it takes minutes to microwave but hours to cook; seconds to txtmsg but days to really catch up with old friends; A week to read the Bible, or Koran, or Upanishads, or the Tibetan Book of the Dead, but a lifetime to put principles into practice and to truly lead a moral life. [allow me to note, smugly, that religion starts with books] [and atheism, even moreso]

You can use Amazon if you like: it’s quick, and sterile, and over in just minutes.

Books can be sold in many ways, but to me Bookselling means Bookstores, and I like bookstores for the same reasons I enjoy sex.

##

3. Who is best able to sell books?

Publish or Perish isn’t just an axiom in academia, it’s true for all authors. The best way to sell your backlist is to keep writing new books, minting new fans, and keeping yourself in the public eye. Some authors can get away with only one book [Mitchell’s Gone with the Wind, Lee’s To Kill a Mocking Bird, Sewell’s Black Beauty, Toole’s A Confederacy of Dunces] but most will publish at least two, or will also write poetry and plays and essays — a life in print, not a single masterpiece. And for fans of Nora Roberts or James Patterson, the constant output is comforting and affirming: there will [seemingly] always be another book.

And it’ll be a bestseller. There are many ways to consider best-sellers and “bestselling” authors: there is an elite cadre of 80 or so authors, living and dead who have sold more than 100 Million books apiece. This is the height to which we all aspire. More than 1,400,000 different titles are made available for sale each year (at least since 2007) of which three-quarters will sell less than 100 copies. Of the 300,000 or so remaining titles, only 1-2% could be considered ‘bestsellers’, a number that is a scant 3-hundreths of one percent of the total books in print. [2007 numbers: 1.45 Million Books, of which only 483 sold more than 100,000 copies – source: Harpers index].

The odds are slightly better than the lottery, though the cost of ‘tickets’ are higher (you have to write a book first) (and no data on how many of those ‘bestselling authors’ are in fact debut authors, who manage a bestseller right out of the gate; of the 500 bestselling books each year almost all will be from ‘name’ authors working on their 5th or 10th or 20th book. Maybe the lottery is easier.)

My point is that the one actor best able to sell books is the Author, and she can do that best by writing more books. Nothing moves the backlist like a new release.

If Agatha Christie had written only 4 books [pick your favorite 4] she might still be known today but she is recognized as a master of the genre because she wrote so much. Poe, actually, invented the mystery in three short stories [featuring proto-Sherlock Dupin] but few remember Poe as a mystery writer since he wrote so little. [so little mystery; obviously we remember him for other reasons].

While I turn it back on the author, saying, “Well, you are best able to sell your books” it’s not because I have given up my duties as a bookseller, but because it’s true: the best way to sell books is to write more books. You don’t obsess over your debut, and think, ‘I’ll write the sequel once this one is a bestseller’ — you write the sequel and the third book and a fifth and a ninth, especially if they all feature the same main characters, because this is what avid readers love most. Not a book, but a series; not an experience of hours but of days, and waiting patiently over years for the latest book from a favorite author.

Other than the author, friends telling friends about books is the best way to sell books. I can loan you the book, in fact, if I see you often enough and I like (& trust) you that much, but more often I just tell you about a title and leave you to your own devices in finding it. Bookclubs also operate in this friends-telling-friends mode, as does Oprah—in as much as some people love Oprah and take her recommendations with the same weight as they would the word of a friend.

So, dear Author, you can ‘sell’ the books yourself by writing compelling books and compelling sequels, lots of ‘em. Personal recommendations are next-best and most valued, & after that comes book reviews (when favorable) whether found on blogs or in print. Reviews can be hit or miss, though, as it depends not only on the opinion of the reviewer, but of the level of trust the reader has in the source (and on the review running in a publication which is itself widely read).

All other bookselling is in the hands of strangers.

Bookstores can shelve your books, which is a bare minimum. Your title can be faced-out (with cover fully visible) or merely spined, your book could end up on feature shelves, display tables, endcaps, front-of-store displays, or even the “Staff Recommends” display — sometimes with nothing more than a shelf-talker with a quick blurb from an enthusiastic bookseller, maybe moved to the most prominent display next to the bestsellers, maybe in a small stack next to the register or infomation desk.

Obviously, Booksellers can do a lot to sell your books for you. Bookstores specialize in books, and all kinds of books, not just the top 10 available at 50% off the cover price at CostCo., not the 40 books in a rack at the grocery store or the 200 titles at Target or Wal-Mart.

Yeah, sure we charge more. Unlike Wal-Mart, we’re not in the discount goods business: we sell books, dammit.

100,000 titles, Five Hundered times the books at Wal-Mart, Ten Thousand times the number of books at CostCo. Yeah, so maybe they sell more books that I do; which is fine and great. But unless your last name is “Patterson” you likely don’t see any of that and shouldn’t care. How do books become besellers? Through word of mouth, friends telling friends, and booksellers putting books into the hands of customers daily.

##

4. In an era when some to most to all “books” are files, what does “bookselling” even mean?

I’ve already covered this one once: Rethinking the Box: Selling Books in the Post-Book Era

let me summarize: even without a bookstore, I’ll be a bookseller. I will engage people, talk about books, recommend my favorites, and make readers enthusiastic about authors and titles. I can do that from a blog, if I have to, but I prefer to do it from a physical storefront. And there is a lot to be said for handing a book to a customer: here is the physical object, you can take it home today.

E-books are fine if readers already know they want the book, but there is a much higher curb to overcome if no one has heard of you as an author and is entirely unfamiliar with the book. There is no way to ‘browse’ an e-book. Some samples are available, but how do you encourage people to download them?

Word-of-mouth and friend-to-friend and Reviews & Recommendations become even more important. Expertise and experience becomes even more valuable, not just to sell the books, but to even know what’s out there given the millions and millions of options.

If Amazon kills bookstores, then my role as bookseller (and my experience, as a reader & lover of books) is all the more valuable. I might be out of a job, but with a little hard work I might even end up making more money. Amazon will have relieved me of the hard work of stocking titles, moving inventory, and physically handling books. All that is left is the high-touch, highly personal task of selling books and I can sign up as an Amazon affiliate and take my commission. Instead of selling to one person at a time, I can post to a blog and sell to 50. Nothing is guaranteed, and damn I’ll miss the bookstore, but bookselling isn’t tied to the physical store, and it’s a hell of a lot more than just listing books on a web site. Sales is an interpersonal skill, and so long as there are ways to communicate it will persist in that person-to-person interaction.

##

5. Are current players (Amazon, major chains, independents, bloggers) going to be future players? Where is bookselling heading?

Anyone with a billion dollars in this game will continue to be a player for as long as they want.

They may not have the same market share, and may be forced to abandon what they used to think of as their ‘core’ business, and maybe they can’t support the same staff, but the brand and the ability to at least try in the new market (whatever it is) is still there.

We’ll still have Amazon, and Barnes & Noble. Borders may end up as just a website with a handful of ‘showcase’ stores, or even just a single location, but they have a strong brand and millions of customers and aren’t going anywhere. Random House, Macmillan, Penguin, HarperCollins, Hachette, and Simon & Schuster will still put out books; the major publishers are either part of mass media conglomerates or are massive media companies in their own right. Publishers make books; the actual printing of books was long ago outsourced — in a world without print there will still be reasons for, and a profit made from, the packaging and marketing of books.

Maybe the current top 10 companies will look nothing like some future top 10, but they’ll all still be there (free standing or merged or bought out by upstarts, but present all the same) — an actual failure and exit from the game entirely will be rare. Yes, some few are going to fail to adapt, but I have high hopes for the industry.

I have no idea where bookselling is heading. But I get up each morning, put on my boots, and take each step, each day as it comes. I cannot see the path ahead of me but I’ll walk it to wherever we’re headed. And can I sell you a book?

[You’ll note that even in an essay on the uncertainty and potential failure of the market, I already ‘sold’ you one. Or did you miss my pitch for Epstein’s book at the top of the post?]

Disclaimer: as an employee of Barnes & Noble I’m one of the ‘assets’ that will be considered in any sale — a small part (.02% or thereabouts) of the field management team that actually runs the damn stores.

While B&N may sign my paychecks: My statements are my own, represent my own opinions and analysis, and were neither suggested by, vetted through, nor approved by my employer, and as always I run the [very slight] risk of getting fired over something I had the temerity to say in a public forum.

That, and I’ve been drinking for about 4 hours, and while that has nothing to do with my employment, in a spirit of full disclosure it likely colours the following analysis. ;p

##

The media is going to have fun with some of the possibilities and potential of the official press release, Barnes & Noble to Evaluate Strategic Alternatives, particularly after speculating for so long on the sale of Borders. Here’s an annotated, paragraph by paragraph translation, with highlights for key portions, and a bit of dramatization:

##

New York, NY – August 3, 2010 – Barnes & Noble, Inc. (NYSE: BKS), the world’s largest bookseller, today announced that its Board of Directors intends to evaluate strategic alternatives, including a possible sale of the company, in order to increase stockholder value. The Board came to this decision based on the price of Barnes & Noble shares in the marketplace, which the Board believes are now significantly undervalued.

Key phrases: ‘to increase stockholder value’, and that one at the end of the paragraph, ‘the price of Barnes & Noble shares in the marketplace, which the Board believes are now significantly undervalued’.

Nothing there about the company, or losses (or past profits for that matter), or potential, or performance. No changing publishing models, new hardware, or digital initiatives. Just the stock price. And if I owned 10 or 20 million shares of a stock, I’d likely be worried about the paper-profits-but-more-recently-losses too. Ah, yes, but the stock price is about investor perceptions and expectations and has very little to do with company performance or actual value, especially in a recession.

It’s a recession, we’re talking about retail, of course the stock is down. Duh. But I guess they felt they had to say [and do] something.

The process of evaluating strategic alternatives will be overseen by a Special Committee of four independent directors: George Campbell Jr., William Dillard, II, Margaret Monaco and Patricia Higgins, who will serve as Chair of the Special Committee. The Special Committee will consider all alternatives to increase stockholder value and will recommend a course of action to the company’s full Board. The Special Committee has selected Lazard to serve as its financial advisor and Morris, Nichols, Arsht & Tunnell LLP to serve as its legal advisor.

“See? Even when this special committee comes back with the result I want, I took pains to tell you it was independent, and we hired an accountant and a lawyer and everything“

Also note the use of the terms ‘all alternatives’ and ‘recommend’ — it still has to go to and through the full board of directors, no matter what the conclusions are

The Board stated: “As the world’s largest bookseller, Barnes & Noble has an iconic brand and unique competitive advantages we believe will position the company to succeed over time in a rapidly changing market. The Board is confident in Barnes & Noble’s strategy and fully supportive of the senior management team, which is delivering explosive growth in our fast-developing digital business. The Board has concluded that a review of strategic alternatives is the appropriate next step to take full advantage of our compelling digital opportunities and to create value for shareholders, customers, and employees.”

Here, they insert a direct quote into the press release to give the impression that this is an objective news article [see, it reads just like one, right?] and to also work in at least five nebulous ‘assets’ and ‘advantages’ of the company, along with Big Plans and Strategery and junk, all of of which “create value for shareholders” — oh, yeah, and the customers.

and? “And, um, do we have to bring up the employees? Yes? [*sigh*] OK, we also pay people to sell things. But they’re not as important as the Unique & the Digital & the Explosive! See, Wall Street? We had to mention that we pay people to sell books, but we mentioned it last. Can we a least get half-credit for that?”

Leonard Riggio, the company’s founder and largest stockholder, has informed the Board that, in light of its decision to explore strategic alternatives, he intends to consider the possibility of participating in an investor group to acquire the company.

This is chaff, cover, and whiffs ever so slightly of self-serving bullshit.

The board of directors is setting up an ‘independent’ committee to review ‘strategic’ alternatives, and the Chairman of that Board (who is also the largest shareholder) says, “Well, if you guys are looking at all the alternatives, and no really this just occurred to me, maybe I could just buy the whole mess outright.”

Wait, was this a PR relating relevant steps Barnes & Noble and its Board are taking in a tough market to secure their business and reassure skittish investors, or just a back-door way for Riggio to advertise that he wants to [perhaps fully intends to] take the company private, and you should buy in with him now while the stock price is cheap and the gettin’ is good?

Let’s ask Len – next ‘graph:

Mr. Riggio stated: “I fully support the Board’s decision to evaluate strategic alternatives at this time. Regardless of whether I participate in an investment group that buys the company, I, as well as the entire senior management team, am willing and eager to remain with the company and see it through the challenging years ahead.” Mr. Riggio continued: “Having spent a lifetime in bookselling and building this great company, I am as committed as ever to the future of Barnes & Noble.”

Might I be permitted a translation? “Hey Burkle: You think you know B&N, but you don’t know B&N. You can buy the stock, but you can’t buy the company, I’m the damn company. [*obscene gesture*] …and either me or a dozen people who think like me are going to be running B&N, still running B&N no matter who owns it, unless you plan to fire all of us—might as well cut the femoral artery—in the process of taking over.”

A number of other analysts will no doubt form different conclusions based on this surprise press release. Some Already Have. There is the now hoary 3-year old titter over a Borders/B&N combination — which is like buying two gas-guzzling clunkers instead of one, when what you really need is an electric bike — and 3-decades old ‘greed is good’ models of leveraged buy-outs and Profits For Everyone [except current shareholders, customers, employees, book lovers, and publishers]

Oh, and while market wet dreams and the merest hint of buyout encourage all the hyennas and vultures to salivate and circle ‘round, remember:

There can be no assurance that the review of strategic alternatives will result in a sale of the company or in any other transaction. There is no timetable for the review, and the company does not intend to comment further regarding the evaluation of strategic alternatives, unless a specific transaction is recommended by the Special Committee or the process is concluded.

This press release lands with a big splash, and yet: Nothing has been announced. In the end, maybe nothing will ever be announced.

It did have one effect, though: at time of posting, B&N’s share price was up 28% in after-hours trading. That’s all the Board wanted, after all, and in addition to goosing the stock price, this PR also has the handy side-benefit of pushing Kindle 3 news off the top of the link blogs and well out of the discussion. Barnes & Noble rumour mill = Media Win.

That’s my first impression; more to follow, as I now have to spend all of tomorrow figuring out just what this means.

[if you want a conclusion to the ellipsis in the title, skip down to the end]

I really like the numbers posted by the Association of American Publishers at publishers.org

The Association of American Publishers is the national trade association of the U.S. book publishing industry. AAP’s more than 300 members include most of the major commercial publishers in the United States, as well as smaller and non-profit publishers, university presses and scholarly societies—small and large. AAP members publish hardcover and paperback books in every field, educational materials for the elementary, secondary, postsecondary, and professional markets, scholarly journals, computer software, and electronic products and services. The protection of intellectual property rights in all media, the defense of the freedom to read and the freedom to publish at home and abroad, and the promotion of reading and literacy are among the Association’s highest priorities.

All really good stuff, that. Plus: numbers! I love numbers.

From publishers.org back in February, Year End 2009 net domestic [U.S.] sales by category

Adult Hardcover: $1,600 million, +6.9% [year-to-year]
Adult Paperback: $1,400 million, -5.2%
Adult Mass Market: $775.6 million, -4.0%
Children’s/YA Hardcover: $765.1 million, -5.0%
Children’s/YA Paperback: $577.7 million, +2.2%
Audio Book: $177.2 million, -12.9%
Religious Books: $588.7 million, -9.0%

University Press Hardcover: $58.2 million, -3.0%
University Press Paperback: $61.8 million, -0.1%.
Professional and Scholarly: $766.4 million, -2.9%
Higher Education: $4,200 million, +12.9%.
El-Hi [elementary to high school, K-12]: $3,500 million, -13.8%.

E-books: $169.5 million, +176.6% over 2008

In 2009, ebooks sold less than all other trade categories (even audio books outsold ‘em, dollar wise) and while the university presses didn’t post a stellar showing, text books [for all ages, 5-25] are totally rockin’ the hell out of the print business. Put that in your pipe and smoke it. The trade business (including e-books) is a scant $6.05 billion while text books and the scholarly set are at $8.59 billion.

[puts the acquisition by B&N proper of B&N’s college division into a whole new light]

That’s an oh-my-gods $14.6 billion dollar industry (though the U.S. Census Bureau in parallel reports bookstore sales over the same period at $16.7 billions, so I guess our gross margin is 15% or so) more than half of which are text books [which don’t have e-book versions yet] and to convert that into comparable numbers: 14.6 billions are 14,600 millions, and e-books are all of 1.14% of that.

Most [including Amazon] like to ignore textbooks and so report e-books as a percentage of trade book sales, but still were only at 2.8% — and you can exclude bibles and other religious books, to get to 3.1%, and exclude children’s books as well and inch the percentage of e-books to 4.3% [of a specified class of books, a subset only equal to two-sevenths of the total]

And duh: the segment is growing. But, um, [and it hurts me to point this out] manga was growing by double digits 3 years ago; enough to grab the attention of major retailers and publishers both. How’s that working out these days? Note: present performance is no guarantor of future growth.

numbers go up, numbers go down; for the most part though, there are trends in place and no matter what the markets or consumer demand: A billion is a billion is a billion. E-book sales might hit that mythic, mystical One Billion Sales mark in just 2 years, if current growth can be extrapolated and sales are in fact tripling year-over-year [it’s actually just a tad slower than that, and the market could saturate — with the accompanying flattening of that growth curve — faster than you can blink] but even if e-books hit their billion in December 2012 [that date sounds familiar…] that is still only 6-7% of the total market and I shouldn’t have to remind you: e-books sales are also book sales so the growth of e-books means a larger book market in general: One Billion Dollars of e-books, combined with inflation, growth of retail markets related to increasing U.S. population, e-books as an extension of the book market into populations who don’t buy [physical] books, and a massive increase in backlist sales made possible by e- editions of all kinds of books, from the popular backlist to formerly out-of-print books [nothing is out of print when it’s e-] and suddenly we could see the book market explode

up to $20 billion, or $25 billion in 10 years: and yet, with a core of $15 billion in text books, regular print hardcovers and paperbacks. That is to say, while all the growth in publishing [and it looks to be spectacular growth] is going to be an e-volution as both new books, midlist, backlist, the marginalia and the oldest of the old books all come to the new digital marketplace: there is at least one generation left that likes the feel of actual print books and so I predict not the death of publishing, and the bookstore, but a wealth of knowledge and an embarassment of books on top of the current national chain bookstores and remaining independents.

##

Now let me point out that one shouldn’t conflate my use of historical numbers in the first third of the post with the conclusions presented after.

This is a common trick, where a wave of real (or real-seeming) numbers are then used to hand-wave guesswork and conclusions.

I’m not presenting investment advice, analysis, or prognostication. I’m just pointing out that $15 Billion Dollars in Book Sales is a massive number, and that my impression of e-books so far is that yes, they present the main growth potential in the industry but I don’t personally feel e-books are going to cannibalize other book sales to the degree some gloom-and-doomers [or overenthusiastic internet CEOs] would have us believe. Yes, the bestseller lists are going to get hit, and hit hard. Yes, the popular backlist will either transform or move ‘online’ wholesale. But the long tail, paperbacks from 30 years ago, used books, collectible first editions [which only get more collectible with smaller print runs], people using bookstores like libraries [with our wifi, and laissez faire attitude toward the theft of electricity and the costs of housekeeping & babysitting your ass while you camp out all day] — Amazon can’t do this and never will. The bookstore is a lot more e- and internet-proof than folks give us credit for.

A ‘revolution’ could change the whole game overnight, but so far e-books are just… books… and at the moment only 1-4% of the business anyway.

An awful lot of digital ink has been spilled, and a furious back and forth no doubt still continues, over the latest iteration of Publishers vs Pirates, 2010 Manga Death Match Edition – News recently broke out all over that Seeming #1 Scanlation Site, OneManga.com, is getting out of the content business [currently they hope to continue as an online forum and community; best of luck with that, kids]

If you haven’t read any of the numerous articles & opinion pieces on the move, I’ll refer you to the two links above, which will take you to appropriate Google searches.

Working in a bookstore, I have a privileged position, in that I sit atop a multi-billion dollar distribution chain that includes not just a mammoth corporately-owned warehouse that serves 800+ book superstores but also a network of affiliated distributors—including Baker & Taylor, Bookazine, Partners West, and Ingram—not to mention direct-to-store weekly shipments from Macmillan, Random House, Hachette, Penguin, HarperCollins, and Simon & Schuster — and if I even look crosswise at a title, or sneeze, I can have it actually in the store in 4 business days. Maybe 5 if it has to ship from the opposite coast.

So as a manga fan, I have unprecedented access to books [that I could, you know, order into the store just because I’d like to sample ‘em regardless of whether I plan to buy them or think they might sell] that might make some of the rest of you drool, or perhaps foam at the mouth in a fit of envy.

Damn, but it’s good to be a bookseller.

Despite that, and because I know unsold books cost me twice (once to order, once to return – even though the stock is returnable it incurs additional costs) I don’t actually order all that much unless I plan to buy it. Last time I did the math, fully one-third of all manga sold through my bookstore was in fact just me buying the books for myself.

Major bookstore chain outpost. One manga fan. One Third. — I bring this up to point out that, yeah, well I’m a big ol’ geek fanboy and a collector besides but also: my store just doesn’t sell much manga.

[We’re in more of an art- and coffee-table book market. $80 hardcover full-colour clay-paper heavily-illustrated interior design books? some titles we’re selling in the hundreds]

##

My point, and I do have one, is that as a fan I never felt the need to go to an online scanlation aggregator site because, hell, I can’t even get around to reading all the damn books that are available.

What, 1000 volumes a year released in English isn’t enough for you? Used to be more, and of course the backlist grows each and every year. & I don’t know which year you’d care to pick for the manga “revolution” but we’re not even 10 years in yet.

I’ve an—incomplete—database with [checking…] 8,872 titles in it, as of last Sunday, and I expressly don’t include a lot of older stuff that is out-of-print (technically; but still in warehouses) which just hasn’t sold in quantity in the last 3 years; My personal best guess is that there are 10,000 manga volumes available in licensed, translated English editions [most new, some used] and that at a book a day it’d take you 27 years to read them all.

If you read a book an hour for 16 hours a day, you still wouldn’t exhaust the amount of legal, licensed manga for another 20-21 months or so.

##

Of course, copyrights and actual availability of physical books in a language you can read are a loser’s argument in the scanlation community, where the licensing of a title is mourned rather than celebrated—by those who maintain the fig-leaf-fiction of “promoting” unlicensed manga—and the whole business activity of publishing is actively ignored by the rest.

My favourite argument so far is that “Well, if the Japanese publishers had only embraced digital downloads and the fast translations provided by the scanlation community five years ago, we’d all have cheap translated manga, scanlators would get paid for their noble efforts, and Everyone Would Make Money”

I won’t call out individuals on this, but I’ve seen this argument (and subtle variations on it) quite a bit recently.

Here’s the thing:

Say I own a retail outlet. Shoplifters steal my merchandise, maybe to sell locally, maybe to sell just over the border because my stuff just isn’t available in Quebec.

Still theft.

Then say an accomplished shoplifter says, “Hey, your stuff isn’t available in Montreal; I’ll cut you a deal: me and my crew, we’ve lifted a tonne of stuff off you already, we’re selling it for just a few bucks apiece out the back of a lorry just off Saint Laurent Boulevard – and business is good. Say, I know know you’re mad about the whole ‘theft’ thing but let’s say I cut you in for a share of the profits if you just call off the cops?”

But I’m not selling things in Quebec. I’m not printing books in French, let alone Québécois and had no real desire to do so.

It’s my fault if people steal from me?

Consumer demand is there. Granted.

And demand not met through legitimate channels is fulfilled by ‘black’ and ‘grey’ markets

— doesn’t make it any more legal, and economic demand doesn’t excuse anything (so far as I know) — “free manga” advocates are now in the same realm as those advocating for legal marijuana and prostitution — except of course, advocates of those pastimes are ready and willing to spend money [and at a premium over market costs] if only it were possible to do so legally, and with whatever restrictions the government [or say, international copyright treaties —in a different context] might impose on their use of these products and services.

Just because you want it, doesn’t make it legal. Just because you want it, doesn’t make your acquisition of stolen goods moral. Just because you want it, doesn’t mean you get it.

And don’t rationalize or even glorify illegal means to procure it.

Sure, now you have what you want. Feel some shame. If you’re going to be a pirate, get an eyepatch and a parrot and some rum, and glory in your illegal status, but don’t expect companies to nod-and-wink at your activity, and when the force of law finally makes it to your secluded outpost, be prepared to be hanged [metaphorically]. It was a great run, but there are no Pirates in modern New Orleans, in the Chesapeake, in the Carolinas — and I’m pretty sure the Pirates of the Caribbean were sued by Disney out of existence in the 80s.

##

Points:

1. Right now, Japanese publishers of [unlicensed] manga aren’t making any money on the vasty hoards of cheap-ass american otaku who download scanlations for free.

2. Scanlation sites make “no” money [though, personally, I’d love to have the “no” income from ad revenue on a Top 1000 ranked website] and they’re only supplying a service to fans who [not knowing what a comic shop or bookstore is] have ‘no other way’ to read manga.

3. See, here? I’m willing to cut some folks a break: Scanlators may in fact be trufans who make manga available to others merely because they have a love of the art, and the form, and the works. However, their efforts get wrapped up and subsumed by scanlation aggregators who most decidedly are in it for the money. And that’s the problem. But that’s a point most ignore, willing to conflate charitable scanlators with the [mercenary] sites where they find scanlations…

4. So, the argument goes, if only Aggregators* and Publishers could reach some sort of compact, both would profit and everyone wins. QED.

Here’s the thing: Publishers (Japanese originals or licensees of whatever stripe) own the property.

They don’t have to share.

And, most especially: Free markets go both ways. You can chose to buy or not buy based on whatever criteria you’d care to use: print quality, translation quality, price, online extras, post-purchase support, whim.

And sellers can choose not to sell based on whatever criteria they’d like: profit margins, profit vs cost, cost of localization, perceived problems with local moral standards, legal issues, or merest whim. No one has to sell you anything, or make available for sale of anything through alternate channels. That’s the seller’s choice in a free market. You’re entitled to nothing. They own it and can choose not to sell it. What? You have to have access, or be able to buy whatever you want? What are you, a socialist?

[As an anarcho-socialist myself, I’d love to hear your arguments, but as a person who has to earn a paycheck in a capitalist society, I’m also going to force you to make those arguments yourself — no way I’m doing it for you]

Some have argued: if only publishers would cooperate, I could make money, And they could make money, if only they weren’t so stiff

That is to say: If you and I agree, we both benefit.

That’s the crux of the common situation in game theory described as The Prisoners’ Dilemma

In the case of manga: if publishers would just stand shoulder-to-shoulder with scanlators, both could make a profit.

Yeah. But:

If scanlators [or more typically, their agents] screw over publishers, they retain all ad revenue. Actually, the aggregators screw over both publishers and scanlators so I don’t see why manga ‘fans’ support any of these sites except that they’re both lazy and stupid.

If creators & publishers stand by their legal, centuries-old rights, they miss out on whatever potential profits might be online, but they also guarantee their print profits and royalties – plus whatever additional profits might be gained through justified recourse in the courts.

So aggregation sites have no incentive to cooperate with publishers, and publishers have no logical reason to cooperate with fuckwads who steal content [steal from both publishers and volunteer scanlators] to post to the internet for ad revenue.

While game theory predicts that an ‘optimal’ solution might be reached if only the two parties co-operated, so long as each side has both motivation and economic incentives to ‘defect’ there is no possibility of any collaborative effort unless a major player in the market behaves irrationally.

[Crunchyroll is my best example of an irrational player, to say nothing of the deals they’ve effected in a short time — so I’m not saying it can’t happen, just that it likely won’t]

##

I don’t have the answer. [if I had the answer, I’d also have a startup company] but lamenting what was ‘lost’ while ignoring the embarrassment of riches published each and every month smacks of both laziness and an ingrained contempt for the many professionals who work to translate and localize manga for your benefit.

And: How many fans complain that a translation is ‘wrong’ just because it differs from the first [hasty, occasionally incorrect] translation they read? Is this why scanlators and fan-subbers work so hard to post first? Not to satisfy artificial demand, but to register in the fanbase as the first, “real” translation? If you think ego and recognition have nothing to do with the fan community than I salute your commitment to naïveté but I also fear for the day when your illusions crash down around your ears.

Worrying Point One: Amazon, and Kindles.

Amazon wants to imply they’ve tripled the number of Kindles sold — or, failing that, that they’ve tripled the monthly sales of Kindles. Or something.

But actually: No. The exact wording used in the press release is that “the growth rate of Kindle device unit sales has tripled since we lowered the price”.

They got that ‘triple’ in there, which was the important propaganda bit. —Say the month-on-month sales trends on Kindle was +2%, and now it’s +6% —that’s ‘triple’, as defined. Sales growth is good, and 6% is certainly better than 2%, but we’re only talking about one month of sales, and triple growth in the rate of sales is not triple sales — but the Agitprop arm of Amazon would like you to Get Excited! and not notice that the difference between selling 106 units instead of a predicted 102 units doesn’t amount to anything, really. And any high school student taking AP Microeconomics could run the supply/demand curves that would show that lowering the price increases sales. This “news” is like informing us the Normans invaded southern England in 1066.

The worrysome bit (to a bookseller, and I’m a bookseller) is that Amazon sells Kindles, and they sell some number of Kindles each month, and an even greater number of e-books each month, and week, and day.

Ah, yes. But whom do they sell those books to?

Worrying Point Two: E-Books, vs Books, vs Readers (that is to say, people who read).

There’s a long list of statistics about the book industry at ParaPublishing.com [cross-posted to http://bookstatistics.com/] and yes, it’s a wall-o-text-with-numbers-in-it so of course your eyes are going to glaze over. Fortunately, Robyn Jackson has done at least one pass through the data, to find some interesting trivia, and even a cursory search at the ParaPublishing site pulls up other statistics:

• In 2002: 89.9 million adults in the U.S. did not read a book. (that’s about a third)
• In 2001: 56.5% of households purchased at least one book (the flip side is of course that 43.5% of households—that’s about 130 million Americans—purchased *no* books)
• Customers 55 and older account for more than one-third of all books bought.
• Only 32% of the U.S. population has ever been in a bookstore.
• In 2008: More Books were sold on the internet than any other product, and the number is increasing. “Polling company Nielsen Online surveyed 26,312 people in 48 countries. 41% of internet users had bought books online. 58% of those online in Korea had purchased books online. In the U.S., 57.5-million had purchased books online.” [source]

Here’s my theory:

If the “average” person reads 12 books a year, while about half don’t read any, well: there is a small fraction reading an awful lot of books.

There is a core contingent of readers, like myself and most likely also including you, who don’t just read but read a hell of a lot of books. Not 1, not 10, but dozens and perhaps encroaching on hundreds yearly. We don’t just read books, we love books: and review them, and blog about them, and have homes that are quickly filling with them.

We’re the target market for e-books.

The rest of the beer-swilling, network-TV watching public who read at most one book a year (in 2008, according to one source more than half—55%—of Americans didn’t read any books at all) isn’t buying a Kindle or Nook because hell, they don’t buy books period.

While Jane Six-Pack and her husband skip books in favor of Us and People Magazines and tabloid & reality TV, book lovers are reading — and buying books, to the tune of a billion dollars monthly.

This is the market that Amazon hoped to catch: the 41% of internet users, 45% of the general population, 56.5% of households and as many other statistics you’d care to cite in this instance. Not the general population (who don’t read books) and not even techies & early adopters (who buy gadgets just because) or bargain hunters (who buy books for $3 or less but most certainly balk at even a $100 e-reader that, natch, forces you to spend additional money on the e-books.)

Kindle, and other e-book readers, are not a product for the masses. They’re for readers [as in, readers of books; that is to say people who read books] and when companies like Amazon try to pitch the appliances as a device for everyone they’re doing their customers a disservice. But Amazon desperately wants the Kindle to equate to books in the mind of the reading [and non-reading] public, and has been losing money for years attempting to leverage their online-bookstore-business into an e-bookstore-business — with some success, but also with a large percentage of customers who could give a rat’s ass about e, and nothing close to an air-tight lock on the market segment: in less than a year, B&N has managed to capture 20% of the ebook market.

Surprise, Surprise: hardcore readers, the ones most likely to buy e-books, happen to like booksellers with physical bookstores more. Because they like books. Because they’ve liked books for years [or decades] and while Amazon can compete on price (as can Costco and Sam’s Club, for that matter) there is still something to be said for atmosphere, thousands of books in stock, community goodwill, and a bookstore.

I’m not worried about Amazon.
[I’m actually more concerned about my employer, Big Box Books, neglecting their most important assets: the brick-and-mortar storefronts.]

Point Three: Scale. Millions. [*Pfssh.*] Millions are nothing.

Amazon proudly points out that (as an online retailer) their sales of instant, downloadable books to an online shopping public has exceeded the sales of one type of physical book which must be shipped from a warehouse to the consumer in a process that takes days, and incidentally, also costs more.

So. Um. Wait? Cheaper, instant books online outsell more expensive books with a delivery delay? Well, duh.

I think the news here is that e-books only outsell hardcovers [on Amazon] while paperbacks as a class are obviously still doing quite well, else Amazon would crow about ebooks as their number one format.

That is to say: cheap physical books still outsell cheap e-books when compared to the same book in a premium format. Or, to rephrase: cheap is cheap and e- is less important than price to most consumers.

The most recent numbers I can find [the most recent numbers in which I place faith & trust] are from publishers.org and the headline from a week ago, 14 July: “Publishers’ May Book Sales Increase 9.8%; Year To-Date Sales Increase by 11.6% – Year-To-Date Trade E-Book Sales Comprise 8.48% of Total Trade Market“ [emphasis mine].

So, AAP numbers:

Links to the press releases:
January 2010
February 2010
March 2010
April 2010
May 2010

& here are the percentage gains in ebook sales, year over year [2009 vs 2010]:

Jan 261.2%
Feb 339.3%
Mar 184.8%
Apr 127.4%
May 207.4%

Well, there’s the nail in my job-security-coffin: ebooks are taking over. Might as well retire.

Yeah. the thing is: if you sell one, and next year you sell 3, that’s a 200% increase. It’s not the percentage gain, but the scale with which you measure sales. here are the actual dollar figures from that same source

Jan $31.9 million
Feb $28.9 million
Mar $28.5 million
Apr $27.4 million
May $23.9 million

Millions are millions, and percentage gains year-to-year are fine and all, but let’s not lose sight of the larger market: Here’s the numbers from the Census Bureau, http://www.census.gov/retail/ dating back to 1992, in a handy chart

[the red line on the graph is the One Billion Dollar Sales Mark — since 2000, a mark the bookstores have managed to meet or exceed 90% of the time. One Billion Dollars each month.]

There are five points I’d like to bring to your attention: 1. Since Jan. of 1992 (the earliest date for which the Census Bureau tracked sales) the bookstore market has cleared at least a half billion dollars each and every month. 2. that’s Billion with a capital ‘B’. 3. Since Jan. of 2009 the bookstore market has cleared a billion in sales (more or less; see graph above) each and every month 4. that’s Billion with a capital ‘B’.

5. the much vaunted e-book sales are still only millions (less than 40 millions, and for the last month reported, less than 30 millions each month) and that’s only 3-4% of the total book sales as reported by Amazon itself, The Association of American Publishers, & the US Census Bureau.

We’re wasting ink, bits, and skull-sweat on 4% of the market. Can you [dare to dream] imagine if a major bookseller announced it was going to spend $100 Million Dollars on a graphic novel initiative? (including kids books: comics, picture books, illustrated texts and Graphic Novels are at least 5% of the book market)

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And any number of online pundits are claiming e-books will be fully half the market in a year or two. Um. OK?

From 30 Million to a Half Billion in two years? The book market is a hell of a lot bigger than you think, methinks. [And books are not CDs; books cannot be broken down into ‘tracks’ and the time investment in a book isn’t comparable to the max-70-min time investment in a CD — so your arguments equating digital sales of books to the meltdown in the music industry are incorrect on their face]

Digital books are handy, no doubt. But is their utility that much greater than an actual book?

For works that are already marginal, that wouldn’t have seen a print edition under current publishing regimes, well: the e-book is a gateway, and an excellent opportunity.

But for everything else, for the ‘books’ we’ve seen from major publishers for the past 40 years, is e- really better? Hm. Cheaper, maybe, and more convenient in some applications; but better? That remains to be seen.

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Hey, you know what we do at a bookstore? We sell books.

Right now, I don’t care what the format is — hardcover, paperback; in stock today or ship-to-home from the warehouse: Every day I sell books, and at least half are books we don’t have in the store [yet]. We extend our expertise to help you buy books based on the barest fragments of half-remembered details. We fill in blanks. We help shape searches.

Say the dominant format 5 years from now is e-books.

Everyone who comes into the store today isn’t suddenly going to become smarter or savvier or remember more details in 5 years just because all books are e- — In fact, they’ll likely remember less. And who will be able to help?

Booksellers.

Web sites and searches only take you so far, and to date there is no replacement for expertise. As the world becomes more complex, we’ll rely on experienced guides that much more.

I don’t know if my current employer recognises this fact, but I’m certainly cognizant of it and should be able to make money on it no matter what the future retail environment looks like.

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