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June 27 2012

Direct sales should be a publisher priority

This post is part of the TOC podcast series. You can also subscribe to the free TOC podcast through iTunes.

We're focusing on retailing topics this month at TOC, and when it comes to digital sales, one of a publisher's highest priorities should be building a strong direct channel. The shift from print to digital means publishers can be less reliant on retailers. Retailers are still an important partner, of course, but the direct channel brings many additional benefits. For example, establishing a direct sales channel is the best way to learn what your customers really want, and Logos Bible Software has done a terrific job on that front. I recently spoke with Logos president & CEO Bob Pritchett (@BobPritchett) about his company's strategy of placing so much emphasis on their direct channel.

Key points from the full video interview (below) include:

  • Direct doesn't just mean "online" — In addition to their highly successful e-commerce site Logos direct channel includes in-person sales at conferences as well as via a good old-fashioned phone sales team. [Discussed at 00:50.]
  • Selling the network, not the book — This is an innovative approach Logos has pioneered where they take a more holistic approach to their sales efforts and help customers understand the benefit of the entire Logos library, not just an individual title. [Discussed at 1:55.]
  • Customer engagement is the key — Don't assume that if you simply put up an e-commerce site customers will start buying from you. Logos has made significant investments to establish customer dialog and build community. Direct sales are great but sometimes just getting insightful customer feedback is even more valuable. [Discussed at 4:30.]
  • Logos made the shift from retailers to direct — And so can you! Retail represented about 80% of Logos sales initially but Bob realized the changing landscape meant he needed to focus more on the direct channel. As physical bookstores diversify their product mix with gifts and other goods it's time for publishers to diversify their channel mix as well. [Discussed at 5:50.]
  • Can anyone beat Amazon now? — Bob says "absolutely", and he's an Amazon Prime member. He points out the advantage of the in-person experience and focusing on more specialty merchandising. He also notes the Ancestry example, where their content is offered as an online service rather than a book through a retailer. [Discussed at 6:52.]
  • Downward pricing pressure — In many ways, publishers are their own worst enemy when it comes to the race to zero. One answer is to look at selling in different ways. [Discussed at 9:17.]
  • Subscription models — Monthly access to a broad library of digital content is likely to be a much more attractive for many publishers and consumers going forward. The sampling and discovery options with this approach are enticing. The cable TV model, where you get basic channels and pay more for certain packages, is also one we can learn from. [Discussed at 15:09.]

You can view the entire interview in the following video.

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March 16 2012

Top Stories: March 12-16, 2012

Here's a look at the top stories published across O'Reilly sites this week.

Understanding place and space in a digital Babel
Computational linguist Robert Munro says the subtleties of spatial distinctions are growing in importance as more of the world's digital information takes the form of non-English, unstructured text.

When game development met Kickstarter
Several game developers have decided that game funding and Kickstarter are two great tastes that taste great together.

The state of ebook pricing
Joe Wikert looks at the agency model, efficiencies, fixed pricing and other major trends that will drive ebook pricing in the months ahead.

Foxconn and Ford, Emerson and Jobs
Ralph Waldo Emerson's essay on "Compensation" was a source of inspiration for Henry Ford. It also affirms some of the cosmic truths Steve Jobs held dear.

Three of our best data interviews from Strata CA 12
Featuring: Hadoop creator Doug Cutting on the similarities between Linux and the big data world, Max Gadney from After the Flood explains the benefits of video data graphics, and Kaggle's Jeremy Howard looks at the difference between big data and analytics.

Where Conference 2012 is where the people working on and using location technologies explore emerging trends in software development, tools, business strategies and marketing. Save 20% on registration with the code RADAR20.

March 14 2012

The state of ebook pricing

This post originally appeared on Joe Wikert's Publishing 2020 Blog ("iBooks Author: Appreciating Apple's Intent"). It's republished with permission.

With all the buzz about the agency model, the Justice Department, allegations of collusion, etc., I figure the time is right for a post about ebook pricing. Here are some quick thoughts as both a consumer and a publisher:

Eliminating waste is always a good thing — Walmart has mastered this for years. They squeeze every bit of waste out of the supply chain and generally end up with the lowest prices. I'm a frequent Walmart customer, and I greatly appreciate this. In fact, the only people who don't like this are (a) other retailers who can't match those prices and (b) ecosystem players who are part of the waste that's being eliminated, including suppliers.

Loss leaders are a great retail model — Selling some products at or below cost is a great way to bring customers in the door, regardless of whether that door is physical or virtual. I'm sure I've bought many cartons of milk at a loss for the retailer who made it up by selling me other items at a nice profit. It's a model that works, but have you ever seen a store that sells most of their products at a loss, every day?

Taking loss leadership to a new level — Remember when Amazon first launched the Kindle and pretty much every ebook was $9.99? It's no secret that Amazon was losing money on the majority of those sales. In fact, they still are. Prior to the agency model, Amazon was free to set whatever customer price they wanted for ebooks, even if it meant they were selling every single one of them at a loss. That brings up the razor/blades model, where it's not unusual for the razor to be sold at a loss, but the profit is made on the sale of the blades. So, if ebooks are the razors, what are the blades? The ereader device? According to iSuppli, the Kindle Fire's manufacturing cost is slightly higher than its retail price. How long can a retailer stay in business when they're losing money on both the razors and the blades? Presumably, they're making some money on other products they're selling (e.g., shoes, electronics, etc.). Perhaps. Then again, if they have deep enough pockets they can continue selling all their products at a loss until the cash dries up. In the meantime, competitors will find it difficult, if not impossible, to compete, so they'll disappear. What happens after that? Do prices remain low as products are still sold at a loss? Not if that company wants to stay in business.

The agency model prevents brand erosion — Think of the premium products you've bought or admired. Oftentimes, their prices are higher than most of the competition's. What would happen if those prices were suddenly significantly reduced? Would those products retain the full value of their premium brand? Highly unlikely. And shouldn't the owner of that brand have a say in what price is associated with it? Again, it's OK for a short-term loss-leader model, but I'm talking about selling something at or below cost for years and years, not just for a day or two. Over time, the value of that brand is affected. That's why I think publishers should definitely have the option to go with the agency model so they can manage retail prices and not let their brand lose value. By the way, consumers will ultimately vote with their wallets. If they feel the publisher's prices are too high, they'll stop buying and that publisher will either need to make adjustments or go out of business.

Fixed prices vs. price-fixing — In the U.S., we're so used to competitive retailer discounts that we're surprised to hear of the fixed price models used in other countries. For example, in Germany the price you pay for a book doesn't change from one retailer to the next. They're all required to sell them at the same price. Obviously, there's a huge difference between Germany's fixed price law and the price fixing the Justice Department is alleging. Germany's model doesn't lend itself to squeezing out waste like the U.S. model, but I'll bet it prevents one deep-pocketed retailer from putting its competitors out of business.

I don't work at a big six publisher, but I believe publishers should have the option to choose between the agency and wholesale models. The key issue though is that the Justice Department has suggested that Apple and a number of publishers colluded to keep prices high. I think this article by Gordon Crovitz in The Wall Street Journal sums it up quite nicely, particularly in the closing two paragraphs. Read that piece and ask yourself if the Justice Department's efforts will actually fix or merely add to an existing problem.

What's your opinion of the pricing questions and allegations currently facing the book publishing industry?

TOC Bologna — Being held March 18, TOC Bologna will feature sessions, demos, workshops and keynotes covering the art and business of storytelling in the digital age.

Register to attend TOC Bologna


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