if:book's Kate Eltham is currently blogging for if:book from the O'Reilly Tools of Change for Publishing Conference in New York City.
Is There Such a Thing as a Good Business Model for Publishing These Days?
There can be, if you start from scratch—or if you pare down existing models and create a lean machine. Louis Rosenfeld and John Oakes, two veterans of the new publishing universe, discuss the principles that drive their respective publishing houses, Rosenfeld Media and OR Books. Oakes labored in the barren fields of traditional publishing as editor and publisher for two decades. In developing OR Books’ publishing model together with a partner, he trimmed away the pointless, 20th century aspects of publishing. By contrast, Rosenfeld is a publishing outsider, best known as a user experience pioneer and co-author of Information Architecture for the World Wide Web (O’Reilly, 2006); accordingly, Rosenfeld Media’s business model has been created from scratch.
Red Queen Theory of Evolution: "It takes all the running you can do to stay in one place." (Leigh Van Valen)
A million different paths to stability, but one sure way to failure: to stay in one place.
OR Books - throwback. Real editing, marketing and know authors. Don't accept returns, primary business is to sell direct to consumers, platform agnostic, issue e-books alongside print editions, don't do sales conferences, focus on web marketing. Then licence books to traditional publishers.
Simple. Agents and authors fastest to understand the model.
Consumers really don't care whether the publisher's name is Random House or OR Books. So OR was able to quickly assemble a stable of brand-name authors repped by top agents.
Large traditional publishers are the hardest to convince that the OR model is a viable alternative, or even that such an alternative is necessary. Yet to sell a book to one of the major "mid-twon conglomerates" but have had a NYT bestseller in the first year and making income from licensing sub-rights internationally.
OR: 2 planks to the operation. One is acquisition and editing. The other is marketing.
Q: Many publishers daunted by the idea of setting up direct sales channel to readers via the web. How have OR and Rosenfeld achieved this?
A: Hasn't been that challenging. Partnered with a POD supplier who receives orders direct and ships to customer. Louis Rosenfeld says that fulfilment is a bit of a pain in the ass, particularly shipping internationally. However, it's one of those scale/commodity things. It's a pain but once it's properly set up it's not so bad. And now focused on the customer experience of the shopping environment, UX design etc. That's important, as with any e-tailer.
Q: (from Mike Shatzkin): How does Rosenfeld view their "vertical". What are its boundaries?
A: Louis says there are tribes within the community they are serving. So Rosenfeld has been careful not to get dragged away from their core value proposition to cash in on short-term sales. Focused on their community and serving its needs. Don't want to be a commodity practitioner, want to be a leader (brand value). This means they are "leaving assets on the table" (ie passing on certain titles) but feel that in return they are growing a reputation as a leading brand in the field of UX design, focused on quality.
OR Books says that they're experience is that their most successful authors that come to them with an established fan/following, online platform. He wonders if only these authors will be published in future.
Q: (Shatzkin) Can you quantify that? How many twitter followers? How many FB fans?
A: It depends. 1,000 followers doesn't automatically translate into book sales. [Kate's hypothesis: Online platform success is more about influence, connection, voice, authenticity.]
Q: What is the threshold where a successful OR book is better to be licensed to a larger publisher?
A: OR does much better financially selling direct, on a per title basis, but the trade-off is that licensing to a large publisher is that they get cash up front and then a 7-8% royalty which is split with the author. OR doesn't want to take on the infrastructure of a large publisher so this is a good middle path. OR does pay advances. OR says that for the author if your book is only going to sell a modest number of copies, the author will be better of with a trad publisher, but once the book starts to do well, OR's model is better and will return more $ to the author.
OR says what they are doing is really what hardcover publishers used to do. They do one version of the book. Then they licence it to someone else who has the joy of dealing with returns, discounts, warehousing, sales reps etc.
Rosenfeld: Don't pay advances, but can pay higher royalties: 16-20%. They require a lot from their authors, not to just to write it , but to share what they're writing, it's a conversation with the community (which helps develop their audience over time). They also have to sign a joint marketing agreement, a shared understanding that both author and publisher will contribute to the marketing of the book. Ultimately, having a tighter brand within a vertical niche will allow him to monetise other products under the demand curve, such as conferences and events.
Q (from Don Linn): How does this business model scale? (If start publishing more titles)
A: Rosenfeld is a 2-person company with a bunch of freelancers. Thinks it will scale well but not looking to publishing more than 10 a year, but is interested in other packages of the expertise he is publishing.