The “Big Money” Speaks: Publishing’s CEOs More Worried About E-Readers than Readers

By Ron Hogan

It’s never a good idea for industry conference speakers to show up late for their own panels, but when the assigned topic is “Will the iPad Kill Off eReaders and Other Tablets?” — one of the more eagerly anticipated sessions at The Big Money’s “Untethered 2010: Profitable Media in the Tablet Era” — any panelist who can’t make it back from the coffee urn in time risks escalating the situation from an awkward faux pas to an inadvertent metaphor.

None of the participating executives from Barnes & Noble, IREX, Spring Design, and Sony were ready to concede defeat, however, and would even argue that perceived weaknesses in their devices were, in fact, strengths. “Why not move away from your stream-of-conscious life?” IREX senior vice-president David Donovan asked, addressing the complaint that an e-reader is only good for reading books while an iPad can do all sorts of things. “Slow down a little bit and just do one thing.” (Late in the panel, when moderator Farhad Manjoo finally got around to raising the issue of IREX’s bankruptcy, Donovan laughed, “I thought you’d never ask,” then framed it largely as a tactical strategy: “We’re still selling devices in Europe,” he insisted. “We’re still very much alive.”)

Their optimism, however, was confined primarily to their own interests. “I don’t think there’s going to be a proliferation of devices out there,” said Anthony Astarita, Barnes & Noble vice-president of digital products; he predicted that fewer than five devices would wind up commanding a significant piece of the market, underscoring the importance of the relationships that would come about when consumers chose one format for their e-reading and stuck with it over time. After several panelists emphasized the importance of maintaining open platforms, Sarah Wendell, the co-founder of Smart Bitches, Trashy Books, raised a question from the audience: Given that the prices of e-books were significantly higher on the “open” systems than on “closed” systems like Amazon’s Kindle Store, what value could customers find in an open platform?

The short answer: Oh, we weren’t talking about consumer value. “Publishers right now are learning about the fair market value of the product,” explained Sony’s director of business development for digital reading, Bob Nell, and Astarita ran even further with the ball. “Customers have [their own] perceptions of what content will [cost], and we’ll settle on some reasonable number,” he told Wendell. “Enjoy the $9.99 bestseller while you can.”

Wendell was still fuming at that response when I caught up with her during a break between panels. “I outed myself as a Kindle user and was dismissed as a spoiled idiot who doesn’t understand prices,” she told me, and it wasn’t the only aspect of the conference she found frustrating. Even an announced partnership between Quark, knfb Reading (the creators of the Blio eReading app), and Baker & Taylor failed to impress her. “‘The books are safe; they can’t be shared or copied…’ I lost interest right there,” she explained. “What that says to me is that honest consumers need to be punished and the opportunity for word of mouth from enthusiastic readers isn’t important.”

Representatives from knfb and B&T, demonstrating the Blio platform at a table just outside the main auditorium, naturally had a more positive spin on the situation. To their mind, they were offering “the first complete solution for the next generation of digital publishing,” where you could design a book in Quark XPress, then use B&T’s distribution network to sell it to readers using the Blio app on multiple platforms. “I don’t think there’s one publisher we’ve spoken to who isn’t thrilled by this,” said B&T senior vice-president Linda Gagnon. “They love the tool. They love the way they can enhance their own content.” Other attendees, meanwhile, observed that they’d already seen the Blio demo video more than once, and would like to see the final software; knfb’s Mike Angelo noted that the iPhone app was already available, and anticipated a version for the iPad in “about a month.”

Late in the afternoon, the conference allotted 45 minutes to a discussion of “The Future of Book Publishing,” with president/CEOs from three publishing companies (HarperCollins, Simon & Schuster, and Perseus Books Group), one president (McGraw-Hill Education), and Google’s director of strategic partnerships, all led by PublicAffairs founder Peter Osnos, who tried to set the tone early: “Book publishing is not, contrary to what you may hear from time to time, in deep peril,” he declared, adding that when it came to the two industrial concerns of inventory and management, “it’s clear that technology is our friend.” Brian Murray of HarperCollins was quick to agree: “Our business model is not under threat… It’s about doing what we’ve always done — finding the best voices and marrying them to the best possible audience.”

Murray also noted that when it came to “future digital partners” like Google, Amazon, and Apple, every other division of News Corp., the parent company of HarperCollins, was having similar conversations, to Harper’s advantage. It was a sentiment echoed by Simon & Schuster’s Carolyn Reidy. “The digital challenge is part of every part of CBS,” she said, referring to her company’s corporate owners. “Every part of the company is engaged in the same transition and that’s been very beneficial to us.”

At one point, Osnos asked his panelists to predict how much market share e-books would command by 2015. David Steinberger of Perseus said 25 percent, which Murray raised to 40 to 50 percent; Reidy allowed as how she’d raised her estimates in recent months, “but I haven’t hit 40 to 50 yet.” Then Google’s Tom Turvey raised an important distinction. “You talk about this as if there’s only one book business, when really there’s really at least four book businesses,” he said, drawing lines between trade, education, STM and other markets; if the subject was just trade publishing, he saw the e-book share falling between 20 and 25 percent.

“As long as we have a competitive marketplace, ultimately consumers will tell us what they want,” Murray said. “But we need to put that marketplace up quickly.” It was a statement that must have befuddled Sarah Wendell of Smart Bitches, Trashy Books. “How do you not know what the consumers want by now?” she’d asked me during our earlier conversation, in response to another panel where media executives appeared unsure of what readers expected from them. “Consumers are so eager to talk back to companies… I remain eternally dumbfounded by the idea that [publishers] don’t know what consumers want.”

Perhaps part of the problem was that the closest Untethered came to giving voice to user experience was in the opening remarks from Washington Post Company CEO/chairman Donald Graham, who noted that he liked being able to make the print bigger. Other than that, speakers were more than willing to talk about the cool things their devices and apps could do, and how widely we could expect them to spread in the near future, and there was even some talk of being responsive to consumer feedback, but nobody explained what readers were experiencing right now or what they really want from future devices.

Without that input, a stray comment from Smashwords CEO Mark Coker during his afternoon panel may prove prophetic. “I think publishers are in for a world of hurt,” he said. “They may not take advantage of the opportunities they have with digital publishing in time to save their businesses.”

DISCUSS: Is the focus on devices and not readers a big mistake?