A Leanpub Backmatter Podcast Interview with Mike Shatzkin, Founder & CEO of The Idea Logical Company
Mike Shatzkin is the Founder & CEO of The Idea Logical Company. In this interview, Leanpub co-founder Len Epp talks with Mike about his remarkable career, the history of major developments in book publishing spanning 50 years, and his thoughts about the future for an industry that has been experiencing constant upheaval for some time.
This interview was recorded on December 7, 2017.
This interview has been edited for conciseness and clarity.
A Note About the Leanpub Backmatter Podcast
This summer we split the old Leanpub podcast into two distinct podcasts:
Frontmatter, which is a general interest podcast where you can listen to Leanpub authors talk with Leanpub co-founder Len Epp about their books and their areas of expertise, from data science to molecular biology, to the history of labor and management. And for those interested in the nitty-gritty of what it takes to be a successful self-published author, at the end of each episode Len asks the author about how they made their book and how they are spreading the word, and other publishing shop talk.
Backmatter, a new podcast focused specifically on the publishing industry and its latest trends. In each episode Len interviews a professional from the publishing world about their background and their insider’s perspective on what’s happening in the huge and evolving world of book publishing.
Len: Hi, this is Len Epp from Leanpub, and in this episode of the Backmatter publishing industry podcast, I’ll be talking with Mike Shatzkin.
Mike is a veteran book publishing industry expert who is founder and CEO of the Idea Logical Company. With over 50 years in many roles, from bookseller to author to agent and consultant, Mike has been regularly quoted on issues concerning digital change and developments in the book publishing industry by leading media outlets, and has been featured and cited on NPR, The Economist, The Wall Street Journal, and The New York Times, amongst others.
This is a particularly interesting moment to talk to Mike, as he is currently in a professional transition period, remaining involved in the book publishing industry, but shifting his focus to launch an organisation called Climate Change Resources, which is being founded with a mandate to recruit people in the fight for a livable planet.
In this interview, we’re going to talk about Mike’s career in book publishing, his views on a number of important issues the industry has faced over the years, and is facing now, and his climate change work. You can read Mike’s blog on digital change in publishing, The Shatzkin Files, at idealog.com.
I should also note the recent development, that thanks to the dedicated work of Mike’s collaborator, Simon Collinson, you can now read posts from his blog going back to 2011 in ebook format. I’ll put a link in the transcription of this interview, where you can find those books. You can also read Mike’s other blog on climate change in politics on Medium @mikeshatzkin, and you can follow him on Twitter, also @mikeshatzkin.
So with that all said, thank you Mike for being on the Backmatter Podcast.
Mike: Thank you very much, it’s a great summary.
Len: I always like to start these interviews by asking people for what I call their origin story. I was wondering if you could go way back and start by talking a little bit about your first experience with books, and how you got interested in that world?
Mike: Well, I really didn’t have a lot of choice, to be perfectly honest. My dad was in the book business after he was on the Manhattan Project in World War II. After World War II he went to work for Viking Press, and then was at Doubleday, then was at Macmillan. So I grew up with a father who was all-in on the book business, and who was a genius and an innovator. And also a lot of fun, and a really good father.
So I was steeped in it, I knew people in it, and I knew things about it from a very early age. I think that the seminal thing that happened to me in my whole life really, but very much for the book business, is that when I was about seven or eight years old, I was playing with a typewriter, and my father decided that, as he put it, “We have to teach him to type the right way, or he will teach himself to type the wrong way.” And they found a business school in the next town, and asked, “Lady, can you teach an eight-year-old to type?” And she said, “I’m really not sure, but let’s try.”
I went for three months, and I took lessons, and I got up to 42 words a minute — and I quit the lessons, but I’d learnt as my father wanted me to. I had learned to write keyboarding, a keyboard technique, so I typed everything from the age of eight, going forward. That meant covering little league when I was 11 or 12 for the local paper. I was able to meet the deadlines, because I could dash home from the game and type it up very quickly. As a result, as Malcolm Gladwell says, “10,000 hours” — I had my 10,000 of writing a long, long time ago.
And so that facilitated everything in my life. It certainly made being in the book business a lot more comfortable. I think that that’s the single thing that is most responsible for getting me where I am.
Then I went to work for my dad in a family distribution business after the McGovern campaign, which was my detour out of the book business for a couple of years.
There I was a sales and marketing manager. I had to run a sales force and put the books into the stores, and deal with all the accounts — and we were distributors. So we had lots and lots of different publishers that were involved with us. So I learned from a lot of different people.
And then after that, at the age of 31, I went into consulting, because I had enough knowledge and enough contacts, and a small enough budget — not being particularly greedy about money.
So I didn’t have to work 100 hours a week to pay my bills. And I had enough knowledge and reputation to be able to do things. So starting in — I describe myself as having been gainfully unemployed since 1979.
Len: If we could pause there for a moment, ane thing I wanted to ask you about was — I gather you grew up in New York.
Mike: Yes, New York suburbs.
Len: But you decided to go to the west coast for university, and you were at UCLA where you wrote for the paper there, he Daily Bruin, I think? And you were at UCLA as a person studying politics and interested in politics at a very interesting time in the late 60s.
Len: I was wondering if you could just talk a little bit about that experience? I mean I know it’s sort of hard to sort of narrow things down, but what was it like at UCLA at that time?
Mike: It was a lot of fun. Well, UCLA was not Berkeley, right? And my dad really wanted me to go to Berkeley — I was aiming for Berkeley and I missed. I ended up at UCLA. Berkeley was a hotbed of political activism. UCLA, not as much — except everything was, in the late 60s. So I got involved in politics really because of UCLA. I was writing a weekly column for the UCLA Daily Bruin when the 1968 political campaign started.
I was for Robert Kennedy. Robert Kennedy put 12 students on the California delegation. I wasn’t one of them, but my best friend at UCLA, whose unsuccessful campaign for student body president I had run, was one of them. That connected me to the Kennedy campaign.
I left the Ambassador an hour before he was shot. He died on my 21st birthday. It was all very, very significant.
Then at the end of that summer, the remnants of the Kennedy campaign pulled together for George McGovern. And Pierre Salinger, who was Californian, and who had been John F Kennedy’s press secretary and then was briefly a Senator from California, was the key guy organizing that. Because I was a student leader and a columnist for the Bruin, and had signed an ad for Bobby Kennedy, and was connected to some of the people in the delegation, I got to meet Pierre.
I worked for Pierre at the Democratic convention in 1968. So while all my friends were outside in the park demonstrating, I was inside the McGovern headquarters at the Sheraton Blackstone, and meeting other people like Frank Mankiewicz, who became a friend after that.
So I was there for a lot of it — it wasn’t bloody or scary at UCLA, like it was in some places. I mean, it was bloody and scary sometimes at Columbia, was bloody and scary sometimes at Berkeley. It never really was at UCLA. But it was exciting, and it was certainly a great time to be at a university, there is no doubt about that.
And then from there, I went straight to the McGovern campaign, more or less.
Len: I was going to ask, what kind of work did you do for the McGovern campaign? I imagine writing was probably a part of it.
Mike: Well, writing is always a part of everything. It is really, well, a gift. But I would also say a weapon, a tool, to be able to express yourself quickly and comfortably in writing — and being able to type fast. And I always had an electric typewriter until there were computers. I certainly did a lot of writing.
But no, I was in charge of organizing New York state campuses for about a year. I was very proud of the fact that we were sending 500 students a week to work in New Hampshire, when Boston was only sending 800. And our kids had to travel a lot further,- and pay more for the bus, to get there. Well actually, we didn’t pay for the bus. The campaign paid for the bus.
I ran six congressional districts in Upstate New York for the primary, and then I was a delegate to the 1972 Democratic Convention — and announced my political career was over. When that campaign was over, that was the end of it.
Len: And why’s that?
Mike: Well part of the reason why, was I developed a mentor named Richard Wade, who was actually inventor of the field of urban history. He was a historian. And I met him in ’68 when he was in Chicago working for Daley then — building scattered site housing. He was on the McGovern campaign, and then he moved to New York in ’71, where he lived for the rest of his life. He was a professor. He liked smart, young people that were interested in history. And even though he was never my professor, we had plenty of conversations.
In 1972 after the campaign, I was up for the job of the Organizing Director for the ACLU. And Dick said, “Mike, don’t take it.” I didn’t get it. But his explanation was, “If you work in politics for a living, you will face a time when you need a job. And you will do something that’s not necessarily exactly what you believe in, because you have to be employed.” He said, “Much, much better to do your politics as a volunteer. And then you decide what you’re going to — what’s worth it and what’s not.” He had always done that as a professor — involved in a lot of politics, but he was always as a volunteer.
That worked out for me. And getting into publishing worked out for me. Particularly when Dick was alive, I would occasionally do some work as a volunteer. But that’s what moved me away from it as any kind of career choice.
Len: Now in your life now you’re a consultant for the book publishing industry. What what kind of work did that entail? Did you have to go out to find clients? Did they come to find you?
Mike: No, you definitely have to go out and find clients. Itt’s changed over time. I have to say, there’s an opportunistic element to it. Because what I had done when I worked for my dad for five years was sales and marketing for a distribution company that had 125 different little publishers and large publishers that were its clients.
I did the natural thing, which was, I first started getting clients who were companies distributed by other companies. And my consulting job was to help them get the most out of the distribution relationship. Particularly non-US companies — I’d go to Frankfurt, meet them, be their guy in New York to help them get the most out of their distributor. It was kind of a natural thing. I got a few clients at that pretty early, and that sort of got me going.
Then in the mid-80s, what happened was, I managed a rock and roll band with my wife. I learned a little bit about the recording business. That was also a labour of love.
When that broke up, I chanced on a situation at John Wylie & Sons, where they were doing their first audiobooks. There was an unconventional sales manager named Dick McCullough, whom I’ve written about. He was a great guy who liked eccentricity.
And I was eccentric. I didn’t wear a suit, I had long hair, I was a bit of a hippy, and you had to have faith that I actually had great knowledge that you wanted to have around. Otherwise it would seem a little strange, but Dick was perfectly willing to have strange. And because they had this audiobook thing that was an experiment, it was helpful to sell me as a guy who knew something about recording, because I had managed a rock and roll band. And boy, there was no real connection there, but he made it stick.
That got me in Wylie. And when I got into Wylie, they were a scientific and technical company, primarily, who were just beginning to get into trade publishing. Very quickly, a lot of different people at Wylie found that I could help them. So I actually had four different clients inside Wylie, and that gave me some interesting insight into the company, and made me able to help them in other ways. And that lasted for, I don’t know, fve, six, seven years, alongside other things.
That gave me corporate legitimacy, which my prior clients hadn’t, because my prior clients, for the most part, had been small publishers who were distributed by large publishers. And I could work with the large publishers on behalf of the small. But this was really being inside a large publisher and affecting their strategy and operations.
That takes us to the early 90s. And in the early 90’s, we were just beginning to hear about something called electronic publishing. It really existed mostly in the scientific and technical and legal world. This was not something that ordinary people did. But then, starting in the early 90s, you had the Apple Newton and you had the beginning of laptop computers. And you had the beginnings of the notion that people might actually read books on screens.
That idea just was beginning to peak in the early 90s. I got involved with a couple of other consultants doing seminars on conferences on what we then called “electronic publishing.” The first one we did in conjunction with Publishers Weekly and was called, “Electronic Publishing and Rights, “ in around 1992 or 1993. Doing that meant that I had to go talk to all the people, along with my consulting colleagues — talk to all the people who were doing experimental things in the various publishing houses.
So pretty quickly, we became experts. And then later in the 90s, another company called Vista Computer Services suddenly had the same concern about electronic publishing. As the guy who owned the company said, “I sell computer services to keep track of books in warehouses. What if there aren’t any books? What if there aren’t any warehouses?” And he thought, “You know what? But my clients all need to understand this too.”
So he’d formed something called the “Publishing in the 21st Century Program,” of which I was a principal. We would do research and write white papers and give conferences, all discussing what’s going to happen. I mean, is this Amazon.com thing going to be real? Are people going to read on screens? What kind of screens should we have? Should the books have animation in them? Should the books have videos in them? Should the books have audio in them? All kinds of questions that people at the very front of things, were trying to decide.
I met a lot of people, and developed a lot of information and made speeches and wrote papers and developed a reputation as a “thought leader.” That was in the end of the 90s, and that really has been my career for the past quarter century — helping publishers anticipate, understand and adapt to the digital opportunity, or the digital fear, depending on what side of things you’re on at any moment.
Len: And you embraced reading on screens wholeheartedly very early on, as I gather. I believe, on a Palm Pilot?
Mike: Yes, I started on a Palm Pilot in like 1998 or 19999. One of the things my dad had taught me was — because he was very concerned about the efficacy of type design, in terms of ease of reading — was that very wide lines are very hard to read. Narrow lines are much easier to read. And also that ragged right is preferable to justified, because it’s easier for your eye to know where it is and not jump to the wrong line, because all the lines look the same.
And the Palm Pilot was a narrow screen and ragged right. So I was conditioned before I looked at it to think, “This won’t work.” But it did work. I loved reading books on the Palm Pilot, it was no problem at all. The convenience of it was fantastic.
So I got sold on the idea very early by that. And then, making the adjustment later to a Kindle, and then to an iPhone, was really no particular adjustment at all.
Len: One thing I’ve always found peculiar about people who don’t really go for reading on screens is that matter of convenience that you just talked about.
For example,I remember commuting in London, back around that time actually — starting in ’99 on the Underground. You’re crammed in like sardines, and the contortions you would have to go into to fold your book — get a small book that can fit in your coat pocket, because you couldn’t get it out of your pocket down at your waist, otherwise you’d be feeling up the people next to you, so you had to get a small book and fold it out very carefully and hold it right in front of your face.
The utility that comes from being able to put hundreds of books in your pocket, and then read them — just whip out the device when you’re in line or commuting or anything like that — always struck me as totally reasonable and not incompatible with also holding a piece of paper in your hand if you want to, at other times as well.
Mike: You’re absolutely right. I live on the 17th floor of a 19-storey building in Manhattan. A now-deceased neighbour always used to get into the elevator with a book, about the 14th floor, and I think he would read a page between the 14th floor and the lobby. That seemed awkward. I mean with a book, a paper book, that’s not a really easy thing to do. But he wanted to get all his reading time. It would’ve been so much easier for him with an iPhone. But I don’t think he made it to the iPhone era.
Len: Since your career in the book industry has spanned so much dramatic transformation, I wanted to ask you if there was one particular moment where it struck you — let’s say — there’s sort of two separate digital transformations. One is the creation of books, which happened before the other transformation, which was the reading of books.
Let’s sort of focus in on the reading of books. Was there one particular moment where it really struck you, “Wow, this is the way, this is going to be a huge thing going forward?”
Mike: Well first of all, I have to be honest and admit that it has not become as huge a thing as I thought it would. In other words, if you were to ask me 10 years ago about how novels would normally be read today, or straight text would normally be read today, I would not have thought that print would have sustained itself to the extent that it has. I’m just talking about for reading now. Print has lots of other value — illustrated books are another question completely. So I’m not sure that my “ah ha’ moment’s about the degree to which people would adjust to doing all their book reading this way. It hasn’t happened as much as I thought it would.
I think the thing which I figured out earliest, relative to the rest of the world or the industry, was verticality, and the fact that when you had the internet, suddenly it meant — and this is something that occurred to me a long time ago, this is 20, 25 years ago — holy smoke, I could read the story about that Yankee game in every single paper that runs one. But it’s no longer, pick up the three that are at the news stand. In other words, everybody could now stuff themselves with whatever it is they were interested in. Because you could get the pieces from everywhere.
Gradually, as we layered on the fact that the 200,000 books that were available in 1988, became the 2 million books that were available in 2005 — which become the 20 million books which are available today, and the fact that gradually all the newspapers, all the magazines, all the — everything, everywhere is in this digital repository. Even before that was true, it was obvious that you had a surfeit of whatever it is you want.
Want to read about Bob Dylan? You can read original stuff about Bob Dylan from now until you die, and never duplicate, because it’s all there. That was the thing which struck me early on, was that everything was going to verticalize, because people would just naturally become more and more intensely interested, more intensely involved in the things that they were already interested in.
Now I didn’t really anticipate another aspect of that, which is, that everybody’s got their own set of facts, and everybody’s got their own news. Which is another thing that has happened. So if you don’t believe that climate change is real, you can put yourself in a bubble where the conversation won’t disturb your illusion — that’s not a good thing, but it’s a real thing. And it’s another aspect of verticalization.
Len: I’ll be asking you some questions about that a little bit later on. But that is, as you say — connecting that to the concept of verticalisation, having a lot more content on a very particular topic than you had in the past.
Mike: And access to it.
Len: Speaking of things that didn’t necessarily turn out the way people thought they would, I just wanted to approach this as sort of a story that has a beginning and basically has an end now, which is the story of the Nook. I was wondering if you could talk a little bit about why that failed, now that we have the benefit of hindsight?
Mike: I think it failed because it’s in a failed ecosystem. I mean, that’s the short answer. Barnes & Noble had a vision in the world of print and superstore retail, and they built a capability around that vision. But their response to digital change has been very sad. And the failure of the Nook is that the Nook is, has been delivered by a company that is defending the old business model. The print-in-store business model. That’s their primary focus, and that made it hard for them to compete with the Nook.
Because while Amazon was delighted to push ebook prices down to $1.99 or 99 cents or free or whatever it is, they didn’t care how much they were disrupting the print business. They certainly didn’t care how much they were disrupting the print-in-store business. I think that the fact that the print-in-store business was the primary revenue and margin generator for Barnes & Noble affects everything.
I don’t think there was anything particularly wrong with the Nook. My wife actually still reads on a Nook to this day, and reads almost all her books on it, and I think it works fine for her. I think that they will never match Amazon’s selection, because they didn’t go out and get that huge number of independent writers that Amazon got to. And so what happened was that initially, they put Nooks in stores. And there were people who didn’t really shop online, they shopped in stores.
And ebooks were a good idea and those people knew other people who had Kindles. And so they had a great market, and they had it more or less to themselves. They had a device that worked. There’s nothing wrong with the Nook. But the fact is, over time the dedicated device business goes away, because it was just a way of getting things started, basically, before there was WiFi.
I think if Steve Jobs had invented the iPhone two years sooner, and if WiFi had happened two years sooner, of if Kindle hadn’t gotten started until two years later, it all would’ve been a different story. But at the time, Kindle delivered a dedicated device, because that was the only way to do it. They delivered a dedicated device with connectivity. I can’t remember how Nook’s dealt with that problem at the beginning, but Kindle — it was really a big risk.
I’m thinking, [you had to be able to download to the device]. But now it’s not about Nooks or Kindles, it’s all about your smartphone or your tablet and, what software do you want to download to read on? Barnesandnoble.com was never particularly useful or successful. It has always had a fraction of the audience of Amazon.com. And so they’re sort of now reverting to — I think Nook probably gave them some protected business for a while. But when the person gives up their Nook device and moves over to their iPad — if that’s what they do, then they’re not really locked into Nook anymore. And there are reasons why others — particularly Kindle — are a better place to buy. It’s just all part of the dissolution of the massive franchise that is Barnes & Noble.
Now it should be said — Borders went first, right? In other words, there’s an inherent problem being an incumbent. And Barnes & Noble has done better by double, surviving the digital revolution, than Borders did. And Borders was always considered to be a real smart operator. So on the one hand they’re not succeeding. On the other hand, they are playing a very tough hand.
Len: I believe you had a conversation recently with Nathan Bransford, where he published a post citing you at length about Barnes & Noble. One thing I learnt from that conversation was just how important Barnes & Noble is to what you might call the conventional book publishing industry in the United States. People in that world, as critical or cynical even as they might be about some of the decisions that Barnes & Noble makes, they obsessively watch the company.
There was one particular thing I wanted to ask you about. It’s come up on this podcast a couple of times, just because I find it so interesting. But back in autumn, I think it was the CEO of Barnes & Noble was quoted in media saying that one of the reasons sales were down was everybody’s cowering at home watching election coverage. [Note: It was not the CEO, it was B&N Founder and Executive Chairman Leonard Riggio] — eds.] And it struck me as remarkable, because it didn’t strike me as a serious thought. I wanted to ask you what you thought of that, if you heard it at the time, or what you think of that now — if this is the first time you’re hearing it.
Mike: I didn’t hear it at the time. But the thing is, I mean, Barnes & Noble is not having problems all by themselves, right? In other words, there’s a massive shift taking place here, where people are buying online, rather than going to stores. That’s true for all sorts of reasons that have nothing to do with — I mean, there was a bookstore chain somewhere in the mid-west that just shut 34 stores. I’m trying to remember their name, but what they said is, “Sorry, but the malls we are in have died.” The department store went first, they didn’t go first. The whole shopping environment has changed.
So I think it’s not helpful, if you’re running Barnes & Noble, or if you’re running any retail chain, to say, “Well, unfortunately there are going to be half as many retail stores five years from now than there are now, or 10 years from now,” whatever the number is. “And that means probably half for us too. And unfortunately this business has a shelf life.” Nobody wants to believe that, everybody wants to believe they’ll live forever.
So they try to do things that will make them live forever, but they can’t live forever. I’m not sure that — if you’ve read all this stuff of mine, you’ve read the fact that I tried to tell Barnes & Noble years ago they need to develop the smaller store. And Amazon is going to demonstrate that very clearly. I’m quite certain that Amazon, in two or three years, will have lots and lots and lots of small bookstores all over the place, and inside of other people’s stores, etc. etc.
But Barnes & Noble had built itself on the large store. They were the ones who perfected the large store, and the ability to get all these titles to it, and so forth. And so it’s just very, very hard to accept that what was a brilliant idea, that you executed on beautifully, and which worked — has been displaced by events and time. But that’s basically what happened.
Len: Speaking of displacement, if Amazon does build out, let’s say thousands of smaller stores in the next decade or so, and those stores can make stocking decisions based on the data that Amazon is gathering about consumers, down to the neighbourhood level — how do you think that will impact independent bookstores? I ask that partly because if you read the kind of talk around the book publishing industry, there’s talk of a resurgence of independent bookstores that’s been happening sort of quietly in the last couple of years.
Mike: It’s true that they have. It’s true that there has been a resurgence of independent bookstores. But let’s remember the amount of shelf space that’s been lost between the combination of Borders going under, and Barnes & Noble reducing both the number of stores it has, and the amount of space in each store devoted to books.
The independents in general, in the 70s and 80s, were big stores. Like Cody’s and Berkeley. They were superstores before there were superstores. Now the independents are little stores. The best numbers I’ve heard are that there are in the neighbourhood of 700 to 900 viable independents. And that for a major publisher, they amount to about 8% of the business.
Now that’s significant. It’s important. But it’s 8% of the business. And so I don’t really think that that’s going to grow substantially. I think that utimately, everything goes downhill to Amazon, and I think it’s going to continue to do that until the government does something about it. I don’t think that the industry is going to stop Amazon from just continuing to aggregate share. And they’re very smart. They know what they’re doing, and they’ve got all the advantages.
Len: I’ve got a couple of questions I wanted to ask you about that. You gave a talk a while ago on ethics in publishing. This was around the time of the Hachette controversy and the US government going after some very big book publishing companies for allegedly fixing prices. You talked at the time about how, if you say to politicians, “I’m going to bring down prices for consumers,” that’s — “
Mike: It’s catnip.
Len: Catnip to them, yeah.
Len: I wanted to ask you about that particular controversy. One thing I hadn’t understood was the apparent own-goal that Hachette scored by sending its lawyers to DC to try and encourage, I think it was the Department of Justice, to go after Amazon. And then the Department of Justice turns around and does things that aren’t very good [for Hachette] — they didn’t go after Amazon, let’s put it that way.
One thing you said in that talk was that the big publishing houses’ collusion around the practice of agency pricing, “has to be seen as a very big mistake,” even though you did not see it that way initially. I was wondering if you could give us your thoughts about that controversy, and why you came to see what they’d done as a very big mistake?
Mike: The mistake falls into two categories. One is that, whatever they did, they gave the Justice Department the ability to act against them. And by the way, the net result of that is that two companies have been strengthened: Amazon and Penguin Random House. In the case of Penguin Random House, that’s because Random House stayed out of the initial Apple store agency model. And so they steered clear of the collusion allegations. But the net result of that is that the dominant retailer and the dominant publisher were left unaffected, and everybody who’s trying to compete with them was negatively affected. That is not really helpful anti-trust policy.
The other reason that I think that the publishers made a mistake is that the maintenance of the high price is really a competitive disadvantage for them in many ways. It’s been successful in that it’s protected the print business to a certain extent. The fact that what I call the” branded” ebooks, or the big publisher ebooks, are not dramatically cheaper than the print book in a store, means that the bookstore owner is not embarrassed by having a customer walk in and say, “You’re selling me this for 15 bucks, and I can read the ebook for three” — which is what they are afraid of. And it’s sort of what Amazon was doing with controlling the pricing.
In other words, they fought a big battle to win the ability to keep their books priced high. And by the way, the discounting was being done out of Amazon’s share. So at the same time, they actually reduced their own revenues. So the whole thing didn’t really work out the way publishers would’ve wanted it to. And the net result is that you’ve got basically a two-tier market, where the books that publishers are really trying to sell as ebooks, are dramatically more expensive than lots and lots and lots of other ebooks that are are cheaper.
So any ebook reader that is price sensitive, is just not going to read what’s on the bestseller list. They’re choosing in other ways. And that’s not really good for publishers. It was always the other way around, right? Barnes & Noble was discounting the bestsellers. And Crown Books, in the 80s and 90s, was the discount bookstore — they only carried the bestsellers. So it used to be that the bestsellers were cheaper. And now in the ebook world, the bestsellers are the most expensive ones. It’s not the way publishers would’ve designed this world to look.
Len: I think seeing ebooks priced as high as they often are, from big publishers, is something that people find very confusing when they encounter it, and that explanation goes some way towards letting people know why that is.
Speaking of the Department of Justice, and the Amazon Bezos Washington Post, I suppose too, you’ve got a president who doesn’t like Amazon very much. Do you think that they might go after Amazon?
Mike: With this guy, anything’s possible.
But the thing which is saving us, as odious as he is, he’s also that incompetent. And it’s really a complicated challenge to go after….
What I think really should happen, is that Amazon should be barred from publishing. In other words, they control the distribution of books to a very large extent. I don’t have any really good suggestions about how to address that. Because it’s not you can say, “No, these people can’t buy their books from Amazon, they have to go someplace else.”
People are buying their books from Amazon, because it’s the best place to buy books, and the best online merchant. And I don’t think it really works to tell them that they can’t have brick-and-mortar stores. But I think it would make sense to say that anybody with that amount of control over the market should not be competing with the other manufacturers putting things into the market.
That’s one way I’d modify them. But it’s really complicated and difficult to figure out how to go after them in a way that’s reasonable and fair. I don’t have much faith in the intellectual capabilities of the current administration to figure that out.
Len: That’s a fascinating topic. What you’re invoking there is the concept of unbundling. I first came across it doing mergers and acquisitions in the regulated utility industry. One thing that happened in Europe was that, there are three elements to — let’s say electricity delivery. One is generation, one is transmission, and then one is the last-mile distribution. What was decided was that you shouldn’t be able to control all three levels, because then what you’re trying to do is, if you’re generating the electricity, you’re going to — to put it crudely you’re going to give favourable deals to your distribution company.
And this translates very well into media. We’re hearing it now with concerns about net neutrality, for example, where if the person who owns the pipes control — also produces content, then they’re going to give preferential treatment to their own content. And you end up with the equivalent of, let’s say your electric power company also makes toasters, and it starts charging you less for the electricity you use when you use their toasters.
I confess I had not thought about it before, but the idea that one way of controlling a potentially negative outcome from Amazon’s dominance, would be saying, “Hey, you guys are awesome at delivery and discovery, but you shouldn’t be making the content yourself. Because you’re going to end up privileging your own stuff.” That’s a really fascinating suggestion.
Mike: It’s what happening. It’s happening. The Amazon bestseller lists are increasingly populated with Amazon published stuff. Now part of that is of course because they know things about the readers and what they want. And part of that is because they’re good at marketing. And part of it is — who knows? — that they may load those bestseller lists? We just don’t really know. But anyway, it’s a very challenging problem. And by the way, it has always been.
Back in the late 90s, there were a bunch of publishers who said, “We shouldn’t let Amazon make all the money on selling books online, we should create our own.” Barnesandnoble.com started as Books Online, which was a joint venture with Bertelsmann. Barnes & Noble didn’t even do that on their own. So Books Online was the competitor. And then there was noise about publishers forming a consortium, so they could control these sales.
Well, they never discounted the books and built the online market that Amazon did. And they would never have built a company where the sale of books is, whatever it is, 3% of the company, or 4% of the company. That would have never been their ambition, they never would’ve done it.
You couldn’t compete with Amazon. Bezos had a vision of using the books as a stepping stone to a much, much bigger play. Nobody in the book business would’ve had that vision. So I’m not sure that anybody should be blamed for the situation that we’re in. Definitely, Amazon’s holding all the high cards.
Len: Another card that they hold that you’ve spoken about in the past, in a talk I found on YouTube, was that authors become free agents at some point. And you said, quote, “Amazon is going to take down those other publishers one author at a time.” End quote.
Mike: And that did not happen.
Len: My question was going to be, did that happen? And so the answer is no. Can you talk a little bit about why you think it didn’t happen?
Mike: It didn’t happen. Amazon — I don’t remember that particular piece, and I don’t know when it was. But Amazon, back around 2010 or 20011, hired Larry Kirshbaum, who was previously the publisher of Warner Books and Hachette, and who was now an agent, and who’s a very skilled and knowledgeable and connected publishing editor and acquirer — his job was going to be to beef up Amazon publishing. That’s probably when I was thinking along those lines.
I turned out he couldn’t sign anybody up. Because Barnes & Noble and the independent stores made it clear that they didn’t want any of those Amazon books. And it was pretty clear, pretty quickly that Amazon was not going to get bookstore distribution on the books that they acquired. For big-shot authors, it’s not just about the money. They want to see their books in the stores, and they want and [?] of that. So Kirshbaum’s job lasted a couple of years, and that was it.
Now when Amazon has stores, that changes. And even if Amazon stores are small — let’s just say for the sake of argument that Barnes & Noble has 500 stores, and Amazon gets to the point where they have 1,000 stores. Now Amazon’s 1,000 stores probably will do the business of 50 of Barnes & Noble’s 500, or 100 of Barnes & Noble’s 500. They won’t be nearly as big. But it’s 1,000 places they can put a book in front of the public. And Barnes & Noble only has 500. And there are only 500 to 800 independents. So when Amazon gets to that point, they can give a book as much physical exposure as anybody else can. And that may change the equation.
The other thing — frankly — it’s like expecting that Random House would start taking down the other four publishers one author at a time. That does not seem to be happening. Why? I don’t really know. Maybe Random House is not as cutthroat as they might be? Maybe the agents are doing the job of trying to maintain a world with five competitive bidders? Which they certainly would want. But for whatever reason, you start expecting that somebody with the bigger chequebook can start taking these authors out one at a time — and it hasn’t really happened in the case of Amazon or Random House.
Len: One big shift in book publishing that I wanted to talk to you about, that’s happened in the last, let’s say 10 years, os around self-publishing. You noted in a recent post on your blog that Carolyn Reidy, the CEO of Simon and Schuster, remarked at the recent Frankfurt Book Fair in October, that the share of the market taken up by self-published books is growing.
I wanted to ask you just generally your thoughts about what’s happened to self-publishing in the last 10 years or so. I’m saying 10 years because that’s when Kindle came out. How have things changed recently, and how do you see things evolving in the next few years?
Mike: I think it’s clear that you can successfully self-publish. I mean, there are ways to get to the readers successfully that did not exist 20 years ago when self-publishing was called “vanity publishing,” because you ordered 5,000 books, and they went into your garage, and there was no way to get them out. That’s no longer the case. There are a fair number of authors who have reclaimed their backlist. Which is going to get harder to do.
Publishers aren’t going to let backlists go out of print the way they did. There was an era here, where publishers or authors will be able to reclaim their backlist, and self-publish their backlist — and have a much greater margin on the sale. They give up a certain amount, they are not going to be in book stores on a speculative basis, because they don’t deliver books that can be returned through self-publishing. But they certainly get all the online sales, and both print and digital without a problem.
I think that there will be an increasing support structure for self-publishing. I think you already are seeing that literary agents are facilitating it. There’s one new publisher called Diversion Books that was started by a literary agent called Scott Waxman. There’s another major literary agency which had three or four people working on helping authors with self-publishing, who were dedicated to that within the agency.
And [there are] services of all kinds. Whether cover design or right selling in other markets, and so forth. All of these things are getting more and more institutionalized, so that an author can really put together a little publishing operation. I think Ingram is — they’ve got a program called IngramSpark, where they give full distribution to anybody who comes in the door and asks for it, more or less. I can see a suite of services being built up there as well, where it’ll just make it easier and easier for an individual to play like a company.
There are certain things, like putting out inventory that can be returned, that require a capital risk and certain amount of management savvy, that I think are always going to be a bridge too far for 99% of self-publishing efforts. So there’s going to be, at least for a very long time, a real role for publishers to play, quite aside from financing and expertise. But there really are things that require an operation at scale to execute on, and if you don’t have it, you’re going to be missing opportunities.
But on the other hand, the author keeps a much bigger piece of the consumer dollar when they self-publish. You might be able to make the same amount of money selling 40% of the number of units. So it’s definitely a part of the business, and will remain a part of the business. I suspect that we’ll also see more and more authors doing hybrid stuff, where they publish something short, for example, that doesn’t really work as a book, and they self-publish that.
Or they do something that’s sort of outside their — writers are writers, and maybe what I am is a novelist, but maybe I have a summer experience that makes a little memoir thing, and I’m not known for that, and nobody wants to pay me for it, but I’d like to publish it anyway.
So I think that the opportunity is there. It’s going to get used. And I suspect that it just becomes a permanent part of the landscape.
Len: Speaking of the landscape, one of the things that’s dramatically changed in the last 20 years or so, is the availability of data on sales, and that can help one plan marketing campaigns, and indeed political campaigns as well.
I wanted to ask you about OptiQly, which you co-founded, and what your thoughts are about the issue of data in book marketing more generally?
Just to pick an example, do you think that technologies that track people’s reading and say they drop off after page 50 unless you kill the vampire or something like that — what do you think about that issue?
Mike: There’s a company that I had a couple of conversations with, called Inkitt, which is a Berlin based startup. Their proposition is exactly that. They have some vast number of people who have reading software on their computers. And Inkitt, rather than uploading books, uploads manuscripts, and they track the reading, and they sign up the books that everybody blitzes through without stopping, and they don’t sign up the books where people quit on page 26 because they’re disappointed about the vampire, or not. I don’t know if they analyse that?
They just simply know that if everybody loves it, that that must be the right thing. And so, I think that there’s a certain amount of sense to that. Although, I’m sure, I don’t know what it took them to build up the large number of readers they’ve got, that it takes to do that kind of analysis?
I think in general that digital marketing becomes increasingly important. And the tools for it — both specific to the book business and not, just generally social marketing and digital marketing tools — become more and more ubiquitous. The number of people who know how to do this stuff, becomes larger and larger. So yes, I think that it becomes essential.
I think the big publishers have a lot of advantages, presuming they are building up their lists of email permissions, so that they can send emails alerting them to things. Assuming that they’re tying that back to what they what they’re seeing in Facebook and Twitter and so forth, about the reaction to various books and various other people’s books, I think even before they get to OptiQly, which really helps them understand how Amazon looks at books.
I’m not exactly sure — I have to admit, I’m a little detached from the day to day of OptiQly. I was a founder, I was working very closely with Pete McCarthy, when he basically thought it up. I brokered the agreement with Ingram to begin with. But I’m not on the ground with this at all.
The original notion was that Pete really understood how Amazon looked at the world. So he could anticipate how changing your Google Plus page could affect your Amazon recommendation ranking. That’s sort of where it starts. But because Amazon looks very broadly at the world in order to make these decisions, OptiQly is then looking very broadly at the world, as well as Amazon.
Among the things that it’s doing, is it’s helping publishers see where there’s opportunity and where there’s not. When they have thousands of titles on their backlist — where are the books where the conversation that’s taking place this week, suggests that you do something to help those books’ metadata, right? Because you can’t touch 20,000 books every week. You have to figure out which 50 or which 200 it’s worth writing a new paragraph of copy for, based on the fact that there’s a war in Iran or something, whatever it is. This is part of what Pete and the OptiQly team are skilled at. I think that they’ll be helping a lot of publishers with it.
Len: My last question, before we move on to talk about your climate change work, is: Of all the big predictions that you made about the book publishing industry, which one were you most right about?
Mike: I’d be hard-pressed to say what are the big predictions I made. I have to say that I don’t really keep score on myself very well. I definitely know that I’ve been wrong about a lot of things. But you can’t not be. I mean, when you’re trying to look three years ahead or five years ahead or ten years ahead — that you’re bound to be -
I think that I’ve had a very narrow view in some ways. Because I really just thought about the book business. But I think the thing I got most right is verticality. There are people who took that lesson on board early, and there are those who didn’t.
You had a previous interview with my friend Jane Friedman, and she talked about the enthusiast publishing that she did at F&W. They were folks who really understood verticality, because they understood that it wasn’t about the fact that we have books, videos and magazines on gardening — it’s about people who are interested in gardening. It just makes more sense for the three different gardening product people to be talking to each other, than it does for the book gardening person talking to the craft book person.
They rewired their company around verticality. I think that, to a certain extent, that’s happened in a lot of places.
But book publishers were very badly set up for that. Because in most cases, the general publishers had imprints, but the imprints didn’t have interest-defined lanes that they stayed in very often.
What Crown did versus what Goff does, versus what Penguin Press does — is not defined by subject. So if you’re at Penguin Random House, and you want to do a promotion on cookbooks, you’ve got to go to every single imprint in the company to pull together all the cookbooks. And that’s just not efficient.
I think that that’s another thing — that’s one of the things that’s going to still have to change in the big publishers over the course of the next five years, is to be more vertical, although they are naturally going in that direction.
Len: That reminded me of one of the very striking examples you had when you’re talking about verticality, which was, a lot of people bought the entire newspaper for the sports section.
We were talking about this with respect to Barnes & Noble. A little bit earlier you were saying, when something’s very near and dear to you, and it’s an industry that you’ve worked on and dedicated your life to — it’s kind of hard to contemplate a limited shelf life. And I think that the newspaper industry — I mean, not only I — but famously, the newspaper industry had a huge reckoning about what people really bought newspapers for.
Mike: Well actually, if you want to talk about something that I got right, that’s one. Because I saw the crash of the newspaper business in the 1990s as inevitable. And it was for all the reasons that we’re talking about now — that it would end up that there would be a few national — two or three or four national papers. And it would be pretty hard for anybody else to make it make sense. I think we’re pretty much headed in that direction.
Len: Speaking of directions we’re headed in, you’ve decided to devote your efforts to recruiting people in the fight against climate change. One thing I discovered, doing research for this interview, from your posts on Medium, is that you’re a big supporter of a carbon tax.
Mike: Yes. And you’re in one of the places that has one.
Len: Yes, I’m British Columbia, the province on the west coast of Canada, where we have a carbon tax. I’m not an expert on it, at least in the circles I move in, it’s uncontroversial here at this point.
I wanted to ask you why you support a carbon tax, as opposed to some version of cap-and-trade?
Mike: I don’t oppose cap-and-trade. I just think a carbon tax is simpler, faster, easier to understand. If I thought that cap-and-trade could be implemented more quickly, I wouldn’t object to it — I just don’t think it does.
I think people have a hard time understanding cap-and-trade. It is by it’s nature very intrusive. Because everybody’s got to get the permits and it keeps making decisions for you. Whereas the tax is more transparent and just simpler to understand.
I think to me, the main question is not so much whether the revenue is raised by cap or cap licenses or tax. It’s really more — to me, more about what happens to the money. I’m a big believer in dividend, which is simply give the money that’s raised back to the people pro-rata.
The reason for that is that — number pne, you have to protect poor people from a carbon tax. And funding the money this way effectively does that.
But the other thing is that the carbon taxes that we’re talking about are way, way too low to deliver what they need to deliver. If you do a dividend like this, two-thirds of the people get more money than the tax cost them. So if you tell them that the tax has to go up, it means they’re going to get more money. Which builds support for the idea of raising the tax. So that’s why I like the full dividend, whether it’s tax or cap and dividend. And because I think we’re just talking about starting points here.
I think in British Columbia, you’re at about $15 a tonne, which is about 15 cents a gallon at the pump. And we need $200 a tonne, $150 or $200 a tonne. We need to raise the price of gas by a buck and a half or $2 a gallon, not 15 cents a gallon or 40 cents a gallon. So that’s part of why I support the dividend. Because I think that’ll get us there faster.
Len: Yeah made an important qualification there, which was full dividend. I was wondering if you could talk a little bit about why that qualification is important? Because as I understand it, in the world of climate change activism, there is a large constituency that does not agree, that with carbon taxes there should be a full dividend. They think there should be a partial dividend. And so some of the money — to look at it at a high level, some of the money should go back to people in the form of literally cheques to individuals. But a lot of people argue that some of the money should go towards programs and incentives to help fight climate change in other ways. Is that not quite right?
Mike: No that’s not an unreasonable point of view. I consider that — unfortunately, the people who take that point of view, treat it as a moral argument. I treat it as a political and practical argument. I think as a political and practical matter, I would rather provide 100% dividend and build the will for raising the carbon tax more. Because I think it matters that it be high enough, more than it matters exactly what you do with the money — as long as you’re not screwing poor people.
But indeed, the most devoted environmentalists and environmental organisations tend to prefer that carbon tax or carbon cap revenue go to subsidise green energy in some way, one way or another. I would prefer to make that a separate proposition. Partly because I think that making it part of the tax has prevented us from getting the tax, but also partly because it will tend to curtail the ability to raise the tax. And there is nobody proposing a carbon tax that’s anywhere near what we need to get to in the next 5 or 10 years. So we need to not just tax carbon, need to tax carbon in a way that will enable us to continue to raise that tax.
Len: And for people who are doing what you’re doing now — advocating for things like carbon taxes, and trying to turn the ship of the United States in the direction of things like the Paris Accord and things like that — what can you do with climate change deniers at the head of the EPA and sitting in the oval office? Is the focus on getting things happening at the municipal level and the state level?
Mike: I think there’s been a lot of that. In other words, I think that there’s definitely been, among activists I know, a shift in focus to the state and local level. I see this as, this country is still composed of Democrats and Republicans. And the Republicans are badly split between the traditional GOP establishment and the Trump-istas, the new populous.
The GOP establishment has a very rational position on taxing carbon. The Trump-istas obviously don’t. On the Democratic side, there’s a general consensus I think that taxing carbon would be fine.
But again, you have the problem, on our side, that the activists want to control what happens with the money. And all the things that they want to do with the money, are things that no Republican will ever support.
So we’re stuck. And where I’m choosing to put my efforts, is to get Democrats to support the traditional Republican version of a carbon tax, which I think is just fine, and try to use that as a signal that it’s being bipartisan. In other words, to steal the mantle of bipartisanship for those people who still care about it. And there are some people who do. But also to change some of the Republicans into supporting the proposal that comes from their own party elders — which none of them have shown any interest in doing.
So I don’t know exactly how successful this can be, how fast. But we have no choice. I mean, we’re going to fry ourselves unless we stop burning fossil fuels. And the surest way to slow that down is to raise the price of them. And so it’s really transparent about what has to happen. I think we just can’t let the fact that the environment [before us] is difficult, discourage us from trying — because there are really no alternatives.
Len: On that note, I would like to say I’m glad to hear that you’re turning your vast energies in that direction to help save us all.
Although we covered a lot of ground, there were things we didn’t get to touch one, like your interest in sports and sports writing. But I can put maybe a link or two to that into the transcription of this interview as well for other people.
Mike: That’s nice of you, I appreciate that. It’s not as much important in my life as it once was. I had a website called baseballlibrary.com for years — that was actually an important part of my revenue life. But it was sort of obviated by Wikileaks.
I mean, in defence of Barnes & Noble — it’s happened to me, right? I had a website that was making money, and somebody came up with a new technology idea that basically mooted it. Looking back, there are things I could’ve done about it, and didn’t. But in any case, I appreciate the thought, about the sports stuff. And I appreciate the whole conversation today, it’s been a lot of fun.
Len: I had a lot of fun too. Thanks very much Mike for being on the podcast.
Mike: Happy to.
Originally published at https://leanpub.com/podcasts/backmatter/mike-shatzkin-23-12-17.