Fights and rights—Amazon and the evolution of publishing

Virginia Woolf. Flush- A Biography. London- Hogarth Press, 1933For some years now, Amazon and major publishers have been arguing about how the book industry should work. Most recently, Amazon has been tussling with Hachette. Alistair Fairweather has a neat overview in the Mail & Guardian:

For more than six months Hachette, a large publisher, has been wrestling with Amazon – the largest online retailer of its books – over pricing. The dispute soon escalated from private negotiations to a public brawl with all the hallmarks of a schoolroom hair-pulling fight.

(Read the rest here, it’s interesting.)

Amazon is becoming a vertically integrated book company, a single house that handles everything from commissioning to sales. That’s what many publishers were a hundred years ago. Think Virginia Woolf and the Hogarth Press. (In some countries, like Egypt, they still are, as Ramy Habeeb explains in this great talk.)

Over the years, businesses that specialised in certain parts of the publishing process became independent of the rest of the publishing chain, until they formed distinct industries of their own. Specialist printers took the work of the publisher’s printing department. Specialist agents and editors took on the role of curating authors’ work. Specialist booksellers took on the work of putting books in front of consumers. The days of the vertically integrated publisher were over, at least in the developed world where books are big business.

Some companies managed to keep two publishing functions in-house: rights and branding. Rights mostly means entering into contracts, and branding means deciding which stories to tell and how to package them. Pretty much anything else could be left to the specialists. But if you kept rights and branding in-house, you could call yourself a publisher, because you got to decide where and how your books would reach people. And so, in the world of books, we use the word ‘publisher’ really to mean specialists in rights and branding.

USE, Re-use, repeat, recycle, rejoice! via the Incline Press at Chetham's LibraryIn this world, for fifty years or more, the specialists lived in relatively peaceful symbiosis. This was possible while the constraints of the book trade were constant: given available technology and good sense, you could change very little about the way books were made, moved and sold. Advances like computerized typesetting and print-on-demand shuffled things a little, but they did not fundamentally change the natural constraints of making, moving and selling books.

Most of us grew up in that world, so we think it’s normal. But it’s really just a phase in the evolution of the book business. A phase held in place by constraints on what was possible. And perhaps the biggest constraint – an effect of the physical nature of books and the way we sold them – was the book-selling specialists’ inability to sell books to exponentially more consumers.

Amazon changed that. Bezos and his team solved the constraint on sales, as Fairweather puts it, “by consistently pleasing millions of customers for nearly two decades”.

With a key constraint removed, the symbiosis was over. For a few years now, Amazon has been vertically integrating publishing under its very big roof. Today, Amazon is a publisher (rights and branding), a self-publishing service in ebooks and in print, and of course a marketing and sales powerhouse. It owns a large piece of the Internet’s infrastructure. And last year Bezos bought a major newspaper, which may help Amazon do and learn more about marketing.

Don’t think that this is normal, either. Or that Amazon will remain the only troll under the bridge. This new phase may last fifty years, as the last did. Or the rapid change that the Internet makes possible will shorten it dramatically.

In the meantime, if you’ve been working for a publisher, it may be useful to focus on this: if rights and branding are what you’re good at, get better at it. Most importantly, be creative about it. Ever since the Internet made copies almost free, the biggest barrier between you and new customers is a rights barrier. Don’t make rights your admin person’s side job. And don’t clog your rights department with lawyers: a lawyer’s job is to eliminate risk, and finding new customers always involves risk. While you may have to lose battles with Amazon, you don’t want to lose the battles over rights, such as battles over exclusivity, lowest pricing, and territory.

Of course rights are exactly where Amazon needs to win on its road to vertical integration. Amazon often asks for exclusivity in key areas (such as lowest pricing), for instance. And its direct approaches to authors are a move on original rights. Your best defense in rights discussions may be your own precedents: if you are already creatively exploiting rights you control, it’s that much harder for Amazon and others to claw them off you.

There is another reason to get creative with rights, too. In another part of this galaxy, but not so far away, open-licensing players are getting stronger every day. They are doing high-quality, game-changing work. The publishing industry’s us-vs-them attitude to open licensing (see this PDF press release and this PDF paper) is self-defeating: open licensing isn’t other than book publishing, it’s a creative tool of business.

I would love to see the publishers of today become the creative rights managers of tomorrow. Not only would it make my job at Paperight easier, but because publishing companies employ so many of my good friends and family. Ultimately, we all care most about the individual lives affected by all this fuss; the people who make the books and the people who need them. Wherever they’re coming out ahead, the book business is doing well.

A publisher’s journey to tech and back

In 2005, I left a big-publishing job and, without knowing it, set out on a mission to reimagine publishing for emerging markets. Since then I’ve worked on dozens of innovative technology projects, from creating musical ebooks to teaching maths on tablets. And now, after nine years hacking through the technology jungle, I’m a bigger believer than ever in the power of paper. This is the text of a talk about that, originally delivered at U3A in Greyton near Cape Town.

I used to be a textbook publisher for two multinational companies. And when you’re a book publisher you realise pretty quickly that you either make books for rich people, or you sell cookie-cutter textbooks to government. Most people in the world – perhaps six or seven billion – could never buy the books you make.

Most South Africans, we can be fairly sure, live their entire lives without owning a book.

A 2006 study showed that “80% of South African children were not yet reading with comprehension after five years of schooling.” (Stephen Taylor et al). in 2011, 53% of all Grade 3 children and 70% of all Grade 6 children scored less than 35% on the Annual National Assessment language test (Nal’ibali).

So why is the world like this?

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Well, all traditional publishing works like this:

  1. The publisher develops a finished product, based on their best guess of market needs.
  2. Then manufactures it.
  3. Stores it.
  4. Ships it.
  5. Then a retailer displays it.
  6. Sells a few copies.
  7. And returns or destroys the copies not sold.

This is very expensive: not only are there multiple links in the supply chain adding costs and very little value, but the risk of getting the initial product design wrong is high. Many publishers will tell you that only one in ten books makes money. So, as a result, the industry’s customers must be wealthy to pay for all this, and its retailers must be located close to those wealthy consumers. This is as true online as it is in bricks.

The industry can’t expand beyond these little clusters of wealthy consumers. It’s stuck. And in this form it can’t even live up to its name, ‘publishing’: to make public, and so to spread stories and education and professional knowledge. It’s a problem that, in South Africa, I like to call the trap of very exclusive books.

Only a disruptive innovation could solve this problem, an innovation that fundamentally changes the way that books are made and distributed.

And in big publishing companies that would be hard to achieve, because of what Clayton Christensen famously described as the innovator’s dilemma: big companies must meet their current customers’ needs, and this prevents them from investing in the very disruptive innovations that will ultimately destroy them, especially in low-margin markets.

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Early attempts

In 2006 I left big publishing to start Electric Book Works, a small consultancy that would set examples for innovative publishing, with a focus on technology. My co-founders and I were a rag tag bunch of friends who wanted to use technology to make digital products, and also just to make paper books more efficiently.

But over the next few years, we failed again and again at creating good, replicable examples of inclusive books.

Here are some of the things we tried.

  • We made ebooks for publishers at loss-making margins to try to spur demand, and did lots of training of their staff: but we had to do it at very low margins because publishers needed to avoid spending money on what was really R&D.
  • We developed super lean production processes in creating a service that helped authors self-publish books, providing high quality design and international print and ebook distribution: but authors underestimated what it costs to create a book and we couldn’t make it viable.
  • We created ebooks with soundtracks, to test whether buyers would pay for more than just the story, but they didn’t. Perhaps bandwidth was too low to make the big files popular, and many popular ereaders didn’t support the technology standards we had to use. Perhaps people didn’t care.
  • We let nurses read our healthcare books and do quizzes and earn certificates online: but nurses couldn’t get to computers and didn’t have email addresses or credit cards for registering on our site.
  • We helped South Africa’s biggest media companies with their ebook plans, but just couldn’t mount a real challenge to Amazon, and we suspect that four years later they’re still not making a profit.

In many of these cases we were too early for the market, and that’s okay. We learned many valuable lessons and I don’t regret that. The biggest lesson was that by reaching for technological solutions to problems, most of the time you just create a new set of problems. Technology is no panacea.

Importantly, none of these innovations really spurred more reading among those who hadn’t bought books before. Maybe 45 million South Africans, ninety per cent of us. We were just making more products for the wealthy, and leaving everyone else behind.

Meanwhile, the digital divide, between the Internet haves and have-nots, kept getting worse as the lure of technology drew in more and more institutions, leading them to provide digital products for the wealthy, and to stop providing paper products that the poor once shared in.

  • Encyclopaedia Britannica went out of print – so you won’t find an up-to-date printed encyclopaedia in a libraries ever again.
  • Maps went online.
  • UNISA took its postgrad courses online.
  • Combined with a lack of imagination in the industry, piracy (copying and online) continued to make textbooks so expensive that poor students go without.
  • And digital became so sexy that even though paper still accounts for the lion’s share of the market, almost everyone has rushed to spend R&D money on digital, and have stopped innovating around paper.

It took several years for me to realise that the innovation we needed in South Africa would not come from a new, first-world technology. Adopting new technologies requires disposable income and the space and time to learn new things, and human beings are stingy and don’t change quickly.

For example, even in the US, fourteen years since ebooks became widely available, and after seven years of massive investment and ebook cost-cutting by Amazon, no more than 30% of all books purchased there are ebooks.

Given the ecosystem of devices, data, support and credit cards that they require, ebooks are just as exclusive as traditional books. Their overheads are just easier to take for granted when you’re rich.

Intermediate technology

So I realised we wouldn’t solve the problem in South Africa by throwing ereaders at schoolchildren, or asking everyone to read their textbooks on tiny feature phone screens. I’m glad some of my closest friends are working on that stuff, it’s important for the future, but right now we need something really simple to bandage our reading crisis. Something that requires no new infrastructure or technology. Something that builds on the energy of entrepreneurs and small businesses. It had to work for established publishers, but not rely on them to change their businesses.

Because, sadly, the local publishing industry seems utterly impervious to real change. And so it cannot seem to do anything substantial about the literary and digital divides, despite the desperate, desperate need for accessible, cheap books in South Africa.

Here’s an example of how bad the situation is.

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The value of local print publishing in 2012 by language:

  • English: over R156m
  • Afrikaans: over R156m
  • All 9 official African languages together: under R1.7m.

That means all 9 official African languages account for 0.005% of local print publishing. That’s five thousandths of a percent.

Let’s drill down to local fiction publishing in 2012 by language:

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  • English: R19.5m
  • Afrikaans: R48.7m
  • All 9 official African languages together: R17000.

That’s 0.0002% of local fiction publishing.

We’re told that technology is changing publishing: but after 20 years in publishing I see no real change at all. I see deckchairs shuffling, but the products are really the same, the business models are the same, and the people are certainly the same. I’m one of them.

What has happened is that, without meaning to, the formal publishing industry has found itself holding South Africa to ransom, saying: “pay us what we need to survive without changing, or we will lock up the country’s textbooks and literature behind expensive pricing, inaccessible technology, and bookshops in suburban malls. And if you can’t pay, then that’s too bad.”

In tackling this disaster, I wanted to find an intermediate technology to distribute books cheaply and sustainably.

Building Paperight

One answer may have arrived during a research project in 2008: there are thousands of photocopy shops around South Africa, printing CVs and flyers and booklets, and photocopying books every day. These shops are in city streets, townships, and rural villages. They’re in schools and churches, at the backs of hair salons and in converted shipping containers. We only needed to harness their power, and make it legal and easy for them to print and sell books.

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The key is ‘legal’: copy shops have long had a reputation for copying and selling books illegally. Where that is true, it’s because they are meeting the needs of their communities in ways the formal book industry can’t. I wanted to bring this informal market into the formal distribution chain, for everyone’s benefit.

So in 2011, with the Shuttleworth Foundation as our investors, I gathered a team and began building Paperight: a network of independent copy shops that print books out for customers quickly and legally.

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Our website, paperight.com, enables any print shop with an Internet connection to print out and sell books, paying only a small licence fee per book from a prepaid account. Amazingly, publishers can make the same margins that they do from their fancy editions, and still the total cost to the customer is usually less than a traditional book.

More importantly, the customer just walks to their local copy shop for it: no long trips to the bookstore to discover they’re out of stock, or waiting weeks for a delivery. No need for a credit card.

Books made on copy-printers are an example of what EF Schumacher, over fifty years ago, called an ‘intermediate technology’: a technology that’s more advanced than the poor are used to, but cheaper to set up than the first world’s cutting-edge stuff. Base of pyramid initiatives will always rely on intermediate technologies to be sustainable.

Intermediate technologies work today. Our member copy shops across the country have delivered thousands of books, many in places where no bookstores exist, like Peddie in the rural Eastern Cape, and the CBDs of Khayelitsha.

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But we won’t survive on those sales, they’re too low to sustain us. And to be honest, copy shop staff really struggle to think like booksellers.

I thought that by making books cheaper and easier to find on your doorstep, people would buy books. But I was wrong. I had underestimated the behaviour change necessary to create book buyers.

Behaviour change

I grew up in a non-foodie family. We lived on fish fingers and macaroni cheese. It was great. I had no wish for anything else. But when I met my wife I discovered things like vanilla pods, cumin and pomegranates, things I kind of knew existed but would never have bought for myself. I had no conception what I’d do with them, or that there was any reason to spend money on them, even though they’d always been in the supermarket right in front of me.

The same goes for a person who grew up without books. If you’ve grown up in a home without books, and your parents never had books, why would you suddenly start buying books just because you now can?

So to change behaviour, we need to do much more than put books in copy shops. I believe there are three key ideas that might be part of the solution.

  1. We have to make tertiary level textbooks effectively free. It’s ridiculous that exactly the students who are most book-poor can’t afford textbooks. And when students get to college or university, it may be our last chance to get them into the habit of reading.
  2. We have to grow readers from a young age. Growing readers is like growing bonsai: start early and take a twenty-year view. That means giving away a great many children’s books.
  3. We have to instill a love of literature in people’s home languages.

Free textbooks

First, free tertiary textbooks. To understand the textbook problem, we need to understand how textbook publishing works.

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When you buy a textbook, 70% of the price goes to the supply chain: printing, shipping, warehousing, wastage and retail. Now of course universities could subsidise this by buying in bulk from publishers and recovering the cost from fees. But they don’t: they require students to buy their own books because the university can’t predict what students are going to register for. (And because they’ve always done things one way and lack the will to change, but that’s another story.)

Today, we can change that in two ways:

  1. Print-on-demand paid from tuition fees: the moment a student registers, their textbooks could be printed on demand nearby, the same day, and collected tomorrow. The publisher would earns a rights fee, either through a system like Paperight or direct to the publisher.
  2. Open textbooks: textbooks developed by experts paid up front from philanthropy, and available for anyone to download and print (and adapt as needed) freely. There are many superb open textbooks available already, and where there aren’t, universities could easily afford to pay their best teachers to create them. (They would need to be slightly less obsessed with research outputs and a little more attentive to undergraduate teaching, but that’s also another story.)

In South Africa, open textbooks are already arriving in schools: the Department of Basic Education prints and distributes open textbooks created by Siyavula. In higher education, my company’s nursing textbooks are open-licensed. We still make money because people want to buy professional-looking books from us, but if anyone wants to make their own copies, we aren’t going to stop that. We want people to use our material, because the more they use it, the more dependent they’ll become on it, and the more we can build new revenue models around that.

Growing readers

Second, we must grow readers from a very young age. How many books would you like your children or grandchildren to own by the age of five? What is best for their development? 100? 500?

Let’s aim just to have every child own 100 books by the age of 5.

Imagine if we’d given away 500 million free children’s books in 1994. I think we’d live in a very different country now. We certainly wouldn’t be complaining that university students are graduating without being able to write a letter. We’d be selling more fiction. We’d have more smart young entrepreneurs.  We’d have better read, wiser and more eloquent leaders emerging in youth movements.

Today, to give every child under five a hundred books we have to give away 600 million books.

How can we afford to buy those from publishers? Never. Not only would it cost a staggering amount, but more importantly, the vested interests would be immense. A purchase order for a million books? The potential for corruption would be overwhelming. As a publisher you’d do almost anything to get your books among those being purchased in such big numbers.

Instead, we have to get volunteers to create books that anyone can print and distribute freely. Top writers and illustrators putting in their own time on solving a national crisis. Volunteer development has worked for years in software — open-source software runs most of the Internet. I see no reason it can’t work in children’s books.

Then we can get sponsors to print large quantities at the cheapest printers in the world, and give them away everywhere: every creche, every supermarket, every clinic. Imagine a world where free children’s books are as ubiquitous as Coca-Cola.

So my newest project, called Book Dash, aims to do that.

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Literature in local languages

Finally, we have to help young readers discover literature in their own languages. We are among very few countries to translate almost no major international bestsellers into local languages. If a teenager can’t get Harry Potter or Twilight in their home language, what are they supposed to read? That’s what the English kids are reading.

We simply must translate at least the major bestsellers, and make them available as audiobooks and cheap paperbacks.

Right now we’re negotiating the translation rights for a major international bestseller, and pitching for funding for the translation. We’ll start small by serialising the first few chapters as audio on radio, to see the response.

I have no idea how these grand experiments are going to turn out. But whatever happens, my eight-year learning curve shows no sign of levelling out. And I wouldn’t want it to, either.

In defence of rejection letters

We love stories about famous artists’ early rejections. We chuckle at the editor who rejected JK Rowling; the producer who turned down the Beatles. Here are a bunch more, they’re great stories. We sigh at their lack of foresight and say, ‘Silly person! I bet they feel stupid now!’

But they shouldn’t, really. A large part of any artist’s success lies in what their publisher or producer can do with their work: how they’d bring it to market and frame it for the right audience, how they’d nurture the artist’s strengths and work around their weaknesses. The editor or producer or curator must be the creator’s champion. They must have their own vision for the finished work, and they must feel confident they can work with the creator to pull off that vision. If they don’t, they must not go ahead.

We never hear the stories of brilliant writers, artists and musicians whose careers were ended prematurely because of a bad relationship with their champion. And yet that happens all the time. The creator–champion relationship is symbiotic, and it’s the champion’s first and hardest task to tell, on the basis of a tiny sample of work on a busy day, whether they are the right champion for it; whether this relationship will work. If they take on the creator and the relationship fails, they can kill the creator’s career. Working together will be like lighting a flame in a glass box: it will burn only till the oxygen runs out.

An editor, producer or curator who turns down a creator is a brave person making a brave decision. Good for them. It is better to let a creator free to find the right champion than to marry them badly.

Interview with AFKInsider

I enjoyed corresponding with Cornelius Fortune at AFKInsider recently for an interview about Paperight. Here’s an excerpt.

AFKInsider: You grew up in South Africa. What was that experience like? In what ways did it prepare you for the work you’re doing now?
Arthur Attwell: I was lucky that – unlike many young white South Africans – my parents made sure I knew what was going on: we were living a safe and privileged life compared to most South Africans, and we all had to work hard to fix it. White guilt is often unfairly maligned; it’s one of the most powerful forces for good in South Africa, and I’m very happy to say that I work hard at building businesses with positive social outcomes because I owe it to my fellow South Africans.
AFKInsider: Where did you get the idea for Paperight?
Arthur Attwell: I was a textbook publisher for many years, and it depressed and frustrated me that something as important as a book was absurdly expensive only because it was inefficiently produced and clumsily distributed. In my first company, Electric Book Works, I tried to tackle these problems with technology and ebooks. We could make ebooks cheaply, but we couldn’t distribute them, because very few South Africans are in a financial position to buy and read ebooks — they need devices, data, electricity, credit cards, and know-how.
During a research project in 2008, I was looking for cheaper ways to print books, and as I looked for smaller, local book printers, it became blindingly obvious: copy shops are the most ubiquitous book printers around. We just need them to print out the ebooks on demand. There is nothing magical about the idea, I’m no genius. I’m just the guy who decided it was worth trying, and found great partners to help.

Read the whole thing here.

Not Yet For Profit

The world is gripped by a startup fetish. And from it, or so it seems to me, more and more startups are looking for popularity before money: “Get big first, and figure out how to make money later.” For a time, Paperight was among them, till the end of our funding runway filled the horizon.

This way of thinking is cannon fodder for cynics. “That sounds like a really bad idea,” they’ll say. Of course it’s a bad idea – it’s a terrible idea! For the founders and their investors, at least, their odds of failure are enormous. Their families, too, face the prospect of catastrophic losses.

But for the rest of the world, it may be just what we need most.

We’re seeing the rise of an entirely new sector: a new kind of organisation, funded by speculators, that isn’t operating as a for-profit company and isn’t a formal non-profit. We might call it a ‘not-yet-for-profit’.

This kind of organisation can address problems in the world that others can’t. It doesn’t have to chase higher margins or short-term sales targets. It doesn’t have to fit the straitjacket of philanthropic money. It’s driven by committed entrepreneurs – not day-job managers or floppy volunteers – and these champions are aiming to do enough good for people that perhaps, one day, someone might pay them to do it.

A NYPF can and must be wildly ambitious. And it must build an audience not of customers but of followers: an army of believers in a grand movement, a new and better way, a growing crowd on a journey to a happier world. And to keep its following, it must remain true to its mission, or lose its hard-won support to the next NYFP.

This growing sector may already be attracting billions of dollars in investment: money going into enterprises that often have direct or cumulative social impact. This is a very good thing.

Of course they’re not all making a difference, or a difference you’d care about. Many can seem entirely meaningless. But very few, if any, are harmful.

Is this sustainable? The NYFPs themselves are almost never sustainable. Most will burn out in a couple of years. But others will take their place.

The real question is whether the investors funding them will all give up and go home. We can’t know, but I like to think that well-heeled people will always be looking to put a lottery ticket on a startup in the hope that they’re backing the next Facebook. Many want to do something meaningful with their money, too. And for as long as they do, the world’s better for it.