Selling books sans sellers

On publishing’s latent digital revolution

No word needs to be disrupted more than ‘disrupt’. The problem isn’t that it’s now stale, it’s that it was never that apt to begin with. Saying disrupt helps assume an air of rebellion, obfuscating the reality that disrupters are usually profit-driven decision makers and, like the disruptees, strive for market capitalization.

Occasionally, disrupters fulfill a sterling realization of the Internet’s promise, solving an old problem with remarkable digital efficiencies. At other times, we only get the power of the Internet as refracted through a prism of commerce.

Publishing, I’ll argue, is (momentarily) stuck in the latter set.

Before we get there, let’s break down the industry into simple parts: discovery (making the consumer want a book) and fulfillment (getting it to them). Fifty years ago (when tablet-reading still referred to the Bible), the two parts were very closely linked: you walked into a bookstore, discovered a book, and then brought it up to the register. Oftentimes you heard about a book before you went to the store, but didn’t know you could buy it until you went to a specific store, or called beforehand. Some readers even discovered books on the last page of other books, and fulfilled the buy by tearing out an order sheet.

Today, discovery and fulfillment are not quite divorced, but spend a decent amount of time apart. You can find a book through traditional means (reviews, word of mouth, advertisements) but also through businesses that make discovery their primary objective (Goodreads, Riffle, BookBub). A lot of retailers (Amazon, Oyster) even tout discovery as a key feature. And as discovery is becoming more and more horizontal, fulfillment has turned into a beast with many heads.

When a press publishes a book, they print it onto pages and bind them together, and they also turn it into a digital file. For physical books, we have the fulfillment of yesteryear (bookstores) floundering against mail-order services reimagined with steroid-level efficiencies (Amazon et al). Physical fulfillment rightfully takes up a lot of the cost of the book (printing, shipping and retail costs usually constitute a majority of the profit), and it’s a necessary evil for publishers. But what about the digital side of things?

This is where the story gets a bit tricky. There’s a crucial cog at work here: Digital Rights Management (DRM), a ubiquitous yet faulty encryption device. I won’t make the full case against it (I’ve made it before), but I will describe the landscape of digital fulfillment without it. First: a person discovers a book and wants to buy it for his or her ereader. Second: the publisher, having created the ebook version of it, sells it to the customer. And, well, that’s it.

How is this so different from the current model? As an example, in the most recent quarter, Simon & Schuster reported 30% of their revenue was from digital sales. Let’s make the following safe estimates: on each marginal sale, print profit is 40% of the cost of the book (most likely a high estimate) and digital profit is 70% of the cost of the book (also most likely a high estimate). Hypothetically, that means 52.5% of pure profit comes from digital sales. If S&S sold straight to readers, that 70% would become 100%, and would mean an increase in overall profit from sales of at least 15%. That number, 15%, might not mean much to the average reader; a 15% discount on a book isn’t great. But on the corporate level, a 15% increase in profits could mean an industry-wide sea change. “Cut out the middleman” is an adman cliché, but there’s a good reason it’s so well worn.

In my mind, this scenario (and only this scenario) fulfills the potential of the Internet’s effect on publishing. Why should we have settled for anything less than a form of Fermat’s principle, where purchases traverse as little profit-taking middlemen as possible? Digital publishing removes one of the most costly parts of bookselling — why aren’t publishers reaping the benefits? For one, there’s DRM. But the real problem is that retailers got there first and put their stake in the ground — why wouldn’t they take some of the profit?

I can hide it no longer: I’m one of them. I run a digital bookstore called 0s&1s and, up to this point, we took 20 percent of profits from all sales. I admit this number was chosen out of competition: it was simply lower than what other retailers did — I recognized this fact back when we launched, in an interview with Poets & Writers. Since that piece was published, 0s&1s has changed significantly and, in turn, so has my perspective on what 0s&1s can be.

Because 0s&1s sells only DRM-free ebooks, I now consider it a digital middleman, a helpful but unnecessary part of the fulfillment process. Though we’re not going to stop selling books, starting June 1 we’re no longer taking any profit. Publishers get every cent of sale (sans ecommerce costs).

Where does that leave 0s&1s’ sustainability — or that of any ebook retailer that gives publishers full profit? While 0s&1s is moving onto a sponsorship model, I imagine the retail-as-content paradigm would leave ad dollars as the bounty for facilitating transaction. It also could mean, in some surreal way, a true reunion of discovery and digital fulfillment; why can’t that blogger writing about a book sell you the ebook as well (on behalf of the publisher)? It’s even possible to consider a model where publishers sell limited distribution contracts — earning them more per sale than the price. (Why wouldn’t a website looking for traffic pay to be one of the only e-suppliers of an anticipated release?)

The promise of ebooks is the promise of digitizing anything: erasing spatial and temporal restrictions. Without them, buying an ebook can be as easy as trading money for data. And so what is a retailer really doing by scraping profit off such a simple transaction? I’d call that disruption.