Tough truths about selling to publishers

Yesterday, I spoke at the inaugural Footnote Summit, South Africa’s new digital-publishing conference. Here’s my talk. Over the last seven years, I’ve pitched technical or otherwise innovative services to publishers over and over again, and learned some hard truths along the way. Here I list my top five, and what they mean for startups and publishers.

Tough truths about selling to publishers 1

As many of you know, I used to be with Oxford and Pearson, so I know what it takes to get through any given year as a textbook publisher.

In 2006 I left to start a little publishing-technology consulting company called Electric Book Works. We wanted to help publishers use existing technology better: from using styles properly in MS Word to turning printed catalogues into databases. But most of the time, publishers wouldn’t pay us to solve a problem they didn’t think they had, and so necessity led to invention as it does, and we experimented wildly, with mixed success, until Paperight was born: a way to turn ordinary copy shops into print-on-demand bookstores.

On paperight.com, we provide a library of books that copy shops can print out for customers on demand, and we work with publishers to license their content to our member copy shops. Some of you are already working with us.

Copy shops pay publishers a small fee for each copy. In the last eighteen months, we’ve added 200 print-on-demand bookstores to South African towns and villages, listing almost 2000 different books from over 100 publishers.

We believe we’ve achieved something important here. But in doing it, and over the last seven years, one of the hardest things I’ve had to do, strategically and emotionally, is to remain patient while pitching to publishers over and over again when, quite frankly, most of the time, their companies seem utterly impervious to technological change or innovation.

So I’ve tried to define why it’s been so difficult, and I think I can list five hard truths about pitching to publishers as a startup. Perhaps the publishers here today can tell me whether any of this rings true from your perspective.

1. People love you. Their organisations don’t.

Tough truths about selling to publishers 2

When I first pitched Paperight to publishers, I didn’t know what would make them interested in working with us.

  • Would it be the money we could make for them by opening up a new market?
  • Would it be the environmental appeal of not shipping books to and fro in trucks and ships?
  • Or would it be the social impact of making books accessible to people in poor and remote areas?

As it happens, I can’t remember a single publisher who was excited by the idea of making more money. When people buy a product or buy into an idea, it’s emotion that makes them do it. (Logic is just how they justify the emotional decision after they’ve made it.) And emotionally, publishers just don’t respond to the promise of more cash.

Oh, they’ll say they do because it’s their job to be financially prudent. But, as far as I can tell, money really leaves them cold.

Some publishers responded well to the environmental angle. But not enough to get them really fired up.

So I was happy to discover that, in the end, social impact really is what gets publishing people excited. In almost every meeting I’ve ever pitched in, the person across the table lights up when we talk about the possibility of putting every book within walking distance of every home.

But after I’ve left and the glow has worn off, they have to actually get a decision through their organisation. And the emotion I whipped up in the meeting just melts away. And all that is left is a cold hard day of noise and to-dos.

And the embers that remain in my poor contact have no chance against the anxiety of having to get the decision past colleagues, or the general covering of asses.

The point is that convincing a person is very different from convincing an organisation. The only way through is either to find an untiring champion in the company or to just keep pitching, again and again, till you’ve raised enough of a spark to survive the organisation’s decision-making process.

2. The right person is rarely the right person.

Tough truths about selling to publishers 3

One of the main reasons pitches go nowhere is that you’re not speaking to the right person. This is a common problem for innovative startups because most of the time there is no person for the thing you’re pitching.

When we pitch Paperight, we get bounced from the rights-and-licensing manager to the sales manager to the digital manager, and none of them are sure they can just sign up their company.

It’s even worse when you’re offering a service that crosses borders: the local office thinks you should speak to the international office, and the international office tells you to work it out with the local office. It’s a grand game of international pinball. We’ve spent months bouncing between local and international offices of major publishing companies, waiting for someone to decide they have the authority to make something happen.

In the end, when it does resolve, it seems less a matter of figuring out who is responsible and more a case of someone, somewhere just getting on with it. Our job seems to be to bounce around till that happens.

3. Most people don’t speak XML.

Tough truths about selling to publishers 4

Most of the services we sell to publishers as startups involve something technical. But most publishers won’t understand our technical jargon. They have their own vocabulary to describe their needs.

For instance, you might be pitching a web-based collaborative metadata-editing tool that runs a highly optimised AJAX-driven UI and maps to ONIX under the hood. You know that that would literally change people’s lives in publishing companies. But to the person you’re pitching to you might as well be selling thermonuclear reactor parts.

For me, the only way around this is to ask sensible questions, listening carefully till they describe the product they need in their terms. Then you can explain why what you’re offering solves their problem. This sounds obvious, but it’s really hard to do and takes lots of practice.

4. Anchored numbers are sticky

Tough truths about selling to publishers 5

Here’s a number: 55%.

Many publishers in the audience may recognise this number. It’s the gross margin that most publishers aim for on each book. In many companies, it’s a sacred number. The rule is: “Do not propose publishing a book that does not hit this number.”

Sacred numbers are very useful if you want people to produce the same kind of product over and over again, to sustain an established business that must please its current market. But when you want to innovate, especially if you want to do things very differently, sacred numbers like this are big obstacles.

Another set of numbers publishers know well is this: 1000, 1500, 2000. Those are common print runs. Also 5000, 10000: sales figures that define a bestseller in local trade publishing.

In management terms, these kinds of numbers define a company’s values. As Clayton Christensen and Michael Overdorf describe them, they are “the standards by which employees set priorities that enable them to judge whether an order is attractive or unattractive, whether a customer is more important or less important”.

So a 55% gross margin allows employees to consider a project worthwhile.

If you string a bunch of values together, you get company culture. This is different in a way from what you and I might mean when we talk casually about ‘company culture’, but it’s actually closely related. When the ways that a company’s staff can move are circumscribed by specific numbers, they define how a company thinks. In short, these numbers, and the extent to which they are followed and enforced, define the company’s culture.

In psychology, these sacred numbers cause what’s called anchoring. When a number is an anchor, we use it to evaluate any other number by comparison. For instance, you might think that a Coke costs about R10. If I try sell you a Coke for R100, you’re going to think that’s very strange, because R10 is your anchor for the price of Coke. Likewise if I sell it for 10 cents. Even though none of these prices may bear any real relation to the cost or value of Coke itself, it’s the anchor that matters.

In the case of a 55% margin, or a standard print run, publishers compare any number you give them to these anchors. So if you pitch a project that will make a million sales at a gross margin of 10%, they’re going to have trouble believing in it. Their anchors make it hard to fit those numbers into their company culture.

Every innovative publishing service or startup is trying to offer publishers a new set of numbers. But company values are big rocks to move.

At Paperight, we’ve found one number in our model that matches publisher numbers: net receipts less printing and distribution costs. Publishers usually make about 30% of the retail price after printing and distribution costs on a traditional edition. On Paperight they can make almost the same amount in the form of a licence fee. So when we pitch, we focus loads of attention on that, and pay less attention to other numbers in our model that would be new to publishers.

Of course, this works best when the person you’re speaking to actually knows their business’s numbers, and can do basic cost calculations. Often, publishers I speak to don’t know the real costs and margins on their products, especially costs like warehousing, wastage and other provisions that don’t appear on their standard costings spreadsheets.

As a result, they simply aren’t empowered to make the kinds of decisions that innovations require.

5. Risk and regret loom large.

Tough truths about selling to publishers 6

We all fear losing stuff. In fact, we fear losing stuff much more than we desire a corresponding gain. For instance, as the parent of a one-year-old, I fear losing CBeebies much more than I wanted it in the first place.

We also fear regret, especially the regret that comes from doing something that might turn out to be a loss. So, when you’re pitching a service to a publisher, they fear regretting their decision much, much more than they want your product. Even if they want your product a lot.

How the heck do you get around that?

I think you have to make their decision not feel like a final decision. For instance, we separate the signing of our Paperight distribution agreement from actually listing which books the publisher will license to us. That way, our contact can sign the agreement without actually putting any books on Paperight.

Once that’s in place, we can start an entirely separate discussion about which books to put on the system.

Except there’s another challenge: the publisher tries to ease their anxiety by giving us low-value, low-selling content, thinking this reduces their risk of failure. Ironically, this has the opposite effect: by putting low-selling content on our platform, they actually increase their risk of failure, because the chances are this low-value content will not sell at all. To make an innovation work, you have to maximise your chances of success by using it for the best content you have.

Conclusion

We’ve found that these five problems, and perhaps many others, mean that we interact with a given publisher at least seven times before they work with us, and that’s if things go well in the first interaction. There are several major publishers who took over three years for my colleagues and I to get on board, and several others we’re still inching along with.

The risk for publishers is that while these five issues hold you back, faster, more active companies are changing your market for you, and stealing your lunch. Amazon and Google are the usual examples, but smaller players like Siyavula and FunDza are increasingly influential, too.

Of course, it would be crazy to work with every startup that knocks on your door. But the only thing that’s crazier is taking months or years to decide whether to work with them. It’s better to decide quickly one way or another than to waste time. Progress requires forward motion.

If you recognise any of these five issues in your organisation, perhaps just knowing they’re there will make it easier to move forward in future. At the very least, you’ll save entrepreneurs like me a few grey hairs.

And let me know what you think. Fixing publishing is a group effort.

Thank you.

Tough truths about selling to publishers 7

Open educational publishing is commercial publishing

Recently I spoke on a panel at the Education Week conference about developing open educational resources. It was great to share a stage with innovators like Mark Horner of Siyavula, Andrew Einhorn of Numeric, and Brett Simpson of Breadbin Interactive. I spoke about the relationship between OER publishing and proprietary publishing – sometimes called mainstream, traditional or commercial, though those labels are neither useful nor accurate. Here are my speaking notes.

I’m Arthur. I’m a fellow with the Shuttleworth Foundation, so you know I’m going to be a fan of open educational resources. I’ve also founded two companies in book publishing that work with OERs: Bettercare and Paperight.

I wasn’t always this way. About ten years ago I was working as an editor for a big textbook company, Oxford University Press. One day I heard about this guy at UCT who was getting students to write free high-school science textbooks. Hah hah hah! What a lunatic, I thought. He sounded quite brave but a little naive. I reckoned his band of enthusiasts would never be able to produce books as good as mine, or get people to actually use them.

Siyavula Grade 10 Physical ScienceToday, those textbooks are on more learners’ desks than any other textbook in maths or science. They’re beautiful. And you can read them on paper or on your computer or on your phone. Wow, I’ve had to eat my words. And now he’s sitting here beside me, as the founder of Siyavula. Hi Mark.

To make matters worse, he married my cousin, so now we’re related. Hayi. Life is funny.

So I’ve learned from his example now. At Bettercare we publish some of the best nursing textbooks in the country. We can get dozens of leading experts to contribute to our books because we open-licence them. Those experts know that their work will be able to spread freely. We can do this because we make money selling the printed versions to hospitals and universities.

At Paperight, we make money distributing OERs from many publishers, because we work with photocopy shops to sell print-outs in their stores. (We earn a service fee for bringing the copy shops the extra business.) So in photocopy shops from Khayelitsha to Peddie to Petrus Steyn, people pay for print-outs of all kinds of OERs (and other books), because we make it easy for them.

What I’m saying is that open-licensed publishing is not the zero-revenue opposite of ‘commercial’, proprietary publishing. Open-licensing can be a powerful add-on to commercial models.

A few weeks ago the International Publishers Association released a press release and position paper on OERs. Despite its title (‘Publishers and Open Educational Resources can work together‘), it was a disappointing, deeply flawed, reactionary piece, which argues that books published under closed licensing models are inevitably better than OERs. It says the same kinds of silly things that said I myself when I first encountered Mark Horner’s work ten years ago.

This misunderstanding is based on the notion that OERs are produced in a kind of financial vacuum; that they emerge clumsily – through ‘untested content creation mechanisms’ – without any costs being incurred. Whereas ‘commercial’ publishers, they say, invest lots of money in proprietary books, and this makes the books better.

That’s not true.

Open resources are just as expensive to produce. But they’re paid for in the time of volunteers, by grants from philanthropists, and from commercial CSR or advertising funding. It’s not that the costs are different. What’s different is the customer.

Who benefits from a textbook, and therefore will pay for its development?

For proprietary books, the publisher’s customer is an individual school child and their parents, who must pay for textbooks for their child’s sole benefit. (Sometimes not directly in cash, but in school fees or by choosing lesser schools with state subsidies.) Development costs are bundled into that price.

For OERs, the publisher’s customer is civil society, who will benefit over and over again from that child being educated. In the forms of volunteer time, philanthropy and corporate sponsorship, civil society picks up the book-development tab as an investment in its collective future.

Eventually, this could reduce costs, because the more open-licensed material there is, the more we share and reuse it, and the less authors and publishers have to spend reinventing the wheel. Or civil society could just keep investing in making those resources better and better.

Traditional publishers have a tremendous opportunity to use their expertise to contribute here, by changing who their customer is. And if they can’t do that, then more and more organisations just like Siyavula will step in and do it instead. Open educational publishing is commercial publishing.

Thank you.

PS For more on the usefulness and high quality of OERs, follow the work of Shuttleworth Fellow David Wiley at Lumen Learning.

Let’s bust this “reading is dying” myth

In a wonderful piece for Time, Annie Murphy Paul argues that reading literature makes us smarter and nicer people. That’s something most book lovers would agree is a no-brainer. Apparently a professor at the University of Nottingham wasn’t convinced, so Paul did a great job stacking up the evidence.

In doing so, however, she worries that deep reading is dying, and that young people increasingly read only superficially:

“Deep reading” — as opposed to the often superficial reading we do on the Web — is an endangered practice, one we ought to take steps to preserve as we would a historic building or a significant work of art. Its disappearance would imperil the intellectual and emotional development of generations growing up online, as well as the perpetuation of a critical part of our culture: the novels, poems and other kinds of literature that can be appreciated only by readers whose brains, quite literally, have been trained to apprehend them.

She quotes a study by Britain’s National Literacy Trust full of ‘more-likely-less-likely’ stats about young readers that seem designed to leave us more confused than terrified. For me, surveys like this are far less useful or trustworthy than empirical evidence. It seems to me that deep reading is far from endangered among young readers. In recent years, young adult reading has boomed. The Mail Online wrote a year ago:

From Twilight to The Hunger Games teen fiction is booming, with sales jumping almost 150 per cent in just six years. In the first five months of this year more than 2.4 million books in the category were sold compared to 981,000 in 2006, according to figures compiled by Neilsen BookScan.

Here in South Africa, Yoza, FunDza and Bozza have enabled hundreds of thousands of teens to read long-form fiction and non-fiction on their phones – and engaging deeply with material that just wasn’t accessible to them before. Some have even become successful writers themselves.

Paperight Young Writers Anthology 2013At Paperight, we’re about to release the first Paperight Young Writers Anthology, a collection of the best poetry, essays, short stories and illustration from South African high school students. I was involved in the poetry selection, and I guarantee that these astonishing writers are voracious readers: it’s clear from their craft that they read deeply and often.

Young people love reading deeply. Let’s celebrate that, and build our literature around it, instead of worrying needlessly that the world we think we remember is going to pieces.

Building an open business

Over a decade ago, when I was working for a large multinational, I was deeply concerned that so many of my colleagues were unhappy. I decided I would one day build my own company. It would be founded on one key principle: a company exists as a way for its team to lead whole and happy lives: providing purposeful work and a comfortable livelihood. If it cannot do that, it should not exist, because its constituents would be better off doing something else. And a company of happy constituents simply had to be more effective than an unhappy one. The happiness of our constituents would be our competitive advantage.

One of the keys to running such a company would be transparency, particularly transparency about our supply chain, how our products affected the lives of customers, and how our finances worked. The more you know about the company you work for, the happier you are, because you can make informed choices: about what to focus on, who you’re working with, and whether or not to work for that company at all. And since a company’s constituents are not only its staff but its suppliers and customers, that transparency would have to extend to them too.

I began building that company in 2006 when I co-founded Electric Book Works, but am only beginning to really get it right at Paperight. We bake some of it into our employment contracts:

By joining Paperight, you’re taking on joint responsibility for the company’s financial, social, and environmental successes and failures, including how wisely it spends money on its team. You’ll have access to the company’s financial records and bank-account-balance details, so you’ll be fully informed at all times. It’s your responsibility – and that of every team member – to understand and engage with the financial affairs of the company. You should be a part of every financial decision, although final decisions are made by the company’s CEO.

We don’t hide salaries. (When you hide salary information, you’re planting a grenade in your company: because the day someone feels unhappy, they’ll dig up that hidden salary info specifically to have something to explode over.) Our job descriptions are three bullet points long, and describe areas of functional authority – not narrow, forgettable KPIs – so we can all easily remember each other’s priorities. We let anyone join Paperight, even tiny self-publishers and solo entrepreneurs running a printer in their shack. If a customer, supplier or journalist asks for financial information, we provide it (unless disclosing it requires disclosing a customer or a supplier’s private information). We own up to our mistakes as individuals and as a company. We celebrate audacious failures (a failed experiment teaches us much more than doing the safe thing over and over). We love watching and working with competitors (believing always that we can and must do better than them). We all wash dishes.

In short: we go out of our way to share. Actively sharing makes our transparency meaningful. It’s easier to make decisions and move quickly, because we don’t have secrets to worry about protecting. When we share, others share back. And all of this makes us happier to do what we’re doing. And that is what it means to run an open business.

Still, we’re not fundamentalist about it. We don’t take open for granted. In recent months I’ve actively explored and discussed and toyed with aspects of closed business models: strategic exclusivity partnerships, creating artificial scarcity, and raising barriers to entry for our members. We must know what we’re missing out on – what our opportunity costs are. If we want to put every book within walking distance of every home, would elements of closed – opacity, secrecy, scarcity, exclusivity – get us there faster?

OpenVsClosedBusinessModels

In small, strategic doses, perhaps. So we’ll experiment in small doses. For instance, we’ll deliberately make our Young Writers Anthology hard to find in places other than Paperight outlets. We’ll make short-term exclusivity deals to entice new partners to join our movement. In our communications, we’ll try holding back certain numbers in favour of others, just to see how people respond. In other words, we’ll carefully and deliberately sample what most other businesses do every day. And then we’ll be happy to share what we find out.

As I’ve talked to friends, funders and fellow entrepreneurs about this, it’s clear that transparency, tied as it is to sharing and openness, is still the key to our competitive advantage. And a transparent, happy company is the only kind we want to build.

A quick guide to self-publishing: start small and cheap

I was asked recently for advice on self-publishing a science fiction novel written by a teen author. He’s been quoted R9000 (about $1000) by an ebook-only self-publishing company, but was also keen to produce a paperback edition.

Now, paying R9000 for book production may or may not be worthwhile, as long as it doesn’t involve any kind of exclusive licence or copyright assignment, and the provider does more than just convert a Word file to EPUB format. But really that’s not the point. For a novel, he should be getting the book into the market himself, and saving that R9000 for later.

Every book is a unique project, so there is no simple template of what to do. In fact, publishing a book is like starting a business, with all the attendant risk and uncertainty. So the best thing for a new business is always to start off as small and as cheaply as possible, and to gather feedback from customers from the start. You must find out as quickly as possible what your customers want, and whether they’ll pay for your product.

The best guide to first-time publishing is really The Lean Startup by Eric Ries – it’s written for entrepreneurs, but the lessons are all the same for self-publishing authors. Its most important lesson is that you should spend as little time and money as possible before getting the product (your book) in front of customers and getting their feedback. The clearest feedback will be in actual sales, but verbal feedback can be just as valuable.

So, even though there’s no template for how to publish a first book, I would say these are some fundamentals:

  1. Create a single neat, edited file in something like Word, OpenOffice or Google Docs. (If you want to create an ebook file, you shouldn’t pay more than about R2500, or $250, for the conversion. You may want to pay for professional editing, too.)
  2. Distribute it as an ebook on Amazon Kindle using Kindle Direct Publishing. (There are loads of other places to sell ebooks, but don’t invest time on them till you have good sales on Amazon, which has about 80% market share in ebook retail.)
  3. Market it by telling your friends about it and hoping word of mouth spreads. Just use email, social networks, and meeting people at any events related to the book’s genre.
  4. If sales pick up, and you think there’s demand for it, use the proceeds to pay for more expensive versions like a paperback, where you have to pay for design and print distribution too.
  5. When you do produce a paperback, never print a large print run. Always use print-on-demand services like CreateSpace or LightningSource.

(If you think there’s a market in South Africa, consider putting it on Paperight, too, to reach a large, low-income market. Paperight is my distribution company, a network of independent copy shops that print out books on-demand for walk-in customers. It’s simple and free to sell books through the Paperight network.)

For some technical guidance on ebooks, check out the Electric Book Works Knowledge Base, which contains lots of guidance I’ve written on technical and admin matters. You could skip to the section on self-publishing ebooks.