Rachel Chou, the chief marketing officer at Open Road Media, noted that the company only publishes between twelve and fifteen front-list (new) titles per year; everything else is back-list. Most of the titles are available only as ebooks, but Open Road makes some available through print-on-demand (POD), and will do short print runs if a book is really taking off. “There are certain books that really need to be in a [physical] bookstore,” she told moderator Phil Olila, chief content officer at Ingram Content Group. “They deserve that table up front, they have that reader that really wants to hand out a gift.” Open Road starts print runs at 500 copies, and the largest print run they have done is 15,000 copies. “If we’ve done a print run and we find that it’s really taking awhile to get through the inventory,” she said, “we can switch it back” to POD.

Chou also noted that advertising has changed: “I think we’ve done three print ads in three years. The budgets have definitely gone toward digital and online and social advertising.”

Dan Weiss, publisher at large at Macmillan’s St. Martin’s Press, has overseen digital-only series like the Sweet Valley Twins e-singles. He noted that the cheap paperback mass market is shrinking, and said, “We think it’s gradually being replaced by digital-first.”

“We’ve done serials, we’ve done e-first, e-only, we’ve scooped up online writers like [Amanda] Hocking. We’ve done prequels, sequels, interstitials,” Weiss said. The company hasn’t done a print-only deal — like bestselling self-published author Hugh Howey’s print-only deal with Simon and Schuster for Wool — yet. “We feel it’s important as a full-service publisher to have all rights,” Weiss said. “That may change.”

While Weiss said that St. Martin’s doesn’t like to give away content for free, he has occasionally had difficulty convincing others at the company of the need to price digital content cheaply (a challenge that he said is not limited to Macmillan). “As the serial format continues to grow, getting publishers and getting my colleagues to understand that pricing is crucial has been really challenging,” he said. “We have to argue that this is the minor leagues, and we’re trying to build sluggers for the major leagues, that we can take into print.”

Photo courtesy of Shutterstock/Vladimir Melnikov 

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According to a court filing released on Tuesday, CEOs of the same publishing houses that once rejected the price-fixing theory will now offer evidence to suggest they colluded with Apple in order to increase ebook prices. The case involves allegations that Apple and its late CEO Steve Jobs organized a conspiracy with the Big Six publishers to introduce a commission-style pricing system in order to wrest pricing power from Amazon.

The new filing, posted below, says that the CEOs of Macmillan, Hachette, Harper Collins, Simon & Schuster and Random House will testify about various aspects of Apple’s role in the alleged conspiracy. All of these companies with the exception of Random House were also named in the antitrust lawsuit brought by the Department of Justice and agreed to settle the case last year.

The government’s new filing says Macmillan CEO John Sargent is expected to testify that:

“[T]he deal that 5 of us did with Apple meant someone was gonna have to do it. Just luck of the draw that it was me. . . . The optics make it look like I stood alone, but in the end I had no doubt that the others would eventually follow.”

Such evidence could prove damaging to Apple, which is also expected to confront testimony from Amazon executives. Apple will also be forced explain a growing list of possibly incriminating comments and emails. One of these, cited by the government to show Apple played an active role in the price changes, describes SVP of internet software and services Eddy Cue telling Jobs:

“In the end, they want us and see the opportunity we give them but they’re scared to commit! It [has] less to do with the terms and more about the dramatic business change for them. . . . They just have to get some balls.”

The new filing also includes the views of other prominent executives, including News Corp’s Rupert Murdoch. According to Harper Collins CEO Brian Murray, Murdoch was “pissed at Amazon” and wanted to “screw Amazon.”

In its own filings, Apple maintains its long-held position that it is not a “ringmaster” of a conspiracy, as the government alleges, but that it simply offered the same pricing system, which is based on a 30 percent commission, that it offers to any company that sells through its iTunes store. Apple also maintains that it helped to create competition at a time when Amazon dominated the ebook market.

The next important step of the proceedings will take place on May 23, when the parties meet before U.S. District Judge Denise Cote for a pre-trial conference.

Here’s the filing (all 156 pages of it!) with some of the key points underlined:

DOJ Motion of Facts and Law

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New ebooks will be available to libraries at the same time as the print edition. For new ebooks, Hachette is charging libraries three times the price of the “primary” print book. One year after publication, the price of an ebook will drop to 1.5 times the price of the print book. Hachette defines “primary” book price as “the highest-price edition then in print. The ebooks can be checked out an unlimited number of times (with each ebook only available to one patron at a time), and the library does not have to buy a new copy after a year. The publisher says it will review its pricing policy annually.

Hachette is working with all three major library distributors: Overdrive, Baker & Taylor and 3M. Because Hachette is working with Overdrive, this means that the ebooks will be available for Kindle.

The last couple of months have brought many changes to Big 6 publishers’ ebook lending policies, with Penguin and Simon & Schuster both announcing changes to their programs. Penguin announced in March that it would begin making new ebooks available to libraries again, a year after it had pulled them, though it is still only working with a limited number of libraries in a pilot program. Simon & Schuster is making its ebooks available to New York City public libraries in a trial.Random House makes all of its ebooks available to libraries, but at prices as much as three times higher than the retail price. HarperCollins allows its ebooks to be checked out 26 times before the library has to buy a new copy. Macmillan is running a two-year trial that makes 1,200 older ebooks available to libraries.

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Gumroad was founded by former Pinterest designer Sahil Lavingia in 2012 and aims to let anybody sell anything — whether it’s a song, a PDF, a video or a T-shirt — without having to set up their own store. The company has raised $8.1 million from Kleiner Perkins and Crunchfund, among others.

Readmill offers a clean, easy-to-use e-reading interface through its iPhone and iPad apps. Gumroad will let users selling ebooks on its platform add a “Send to Readmill” button that lets buyers send the ebook directly to their iOS device. (32 independent digital bookstores have also enabled “Send to Readmill.”)

“Reading should be an open and shared experience, for both authors and readers,” Gumroad’s Lavingia said in a statement. “Readmill and Gumroad will help authors make money doing what they love — writing — selling directly to their readership — so they can continue doing what they love: writing more.”

Separately, Readmill has partnered with Faber Factory, a U.K. based platform for independent publishers that is a joint venture between U.K. publisher Faber and Faber, U.S. publisher Perseus Books Group and Firsty Group, a U.K. company that helps publishers and authors sell ebooks directly. Readmill said these partnerships are part of its effort to “help independent publishers and retailers gain further traction and sell more books,” and says it is hoping to offer authors and publishers statistics on users’ reading data later this year.

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But how exactly ebook publishers reach that audience and how the industry tracks who’s interested in reading what is less clear. A series of ebook publishers who spoke at our PaidContent Live conference in New York on Wednesday talked about the critical importance of gathering data on readership and consumption, and using it to transform the industry:

“The old eveolution of the book publishers used to be very allergic to data. And what you just heard is a very different approach from that. For us it’s about metadata and surfacing. And then rinse and repeat,” said Dominique Raccah, the publisher and CEO of Sourcebooks. “Metadata is a new term in our industry, but it really is the key.”

Raccah pointed out that unless publishers know who is reading the content, it’s hard to craft specific marketing messages or know what people respond to:

“It’s really important to know that book publishers know a lot about what touches readers,” she said. “So it’s important to help craft those messages in interesting ways.”

Rachel Chou, the CMO for Open Road Integrated Media, said they’ve seen a lot of success working with Twitter, as well as sponsored stories in Facebook, to drive traffic and understand where customers are coming from.

“Then after a while, you start understanding what the best partners are,” she said.

Evan Ratliff, founder and CEO of Atavist, said they have a small team but because they’re especially focused on finding customers by building up the Atavist brand, understanding data on the company’s products is important.

“We’re also on a very small level, we’re experiment with different ways of reaching people and social media,” he said.

Check out the rest of our paidContent Live 2013 coverage here, and a video embed of the session follows below:

A transcription of the video follows on the next page

Go to page 2 (of 2) on GigaOM .

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Simon & Schuster had been the only remaining Big Six publisher that did not make its ebooks available to libraries at all.

According to the release:

“The participating libraries can acquire any Simon & Schuster ebook title at any time during the pilot’s one-year term, with each title usable for one year from the date of purchase. Each library can offer an unlimited number of checkouts during the one-year term for which it has purchased a copy; each copy may only be checked out by one user at a time. All of Simon & Schuster’s frontlist and backlist titles that are available as ebooks are eligible for the program, with new titles being made available simultaneous with their publication.”

“In making our full list available we think we will get a better sense of lending patterns and patron behavior,” Simon & Schuster CEO Carolyn Reidy said in a statement, “and I am particularly eager to start seeing the actual data so that we can better understand this still-new phenomenon.”

During the pilot, the libraries will also sell Simon & Schuster titles through their online portals, so that a patron who doesn’t want to wait on the hold list for a particular title can purchase it instead. The library gets a cut each time an ebook is sold through its platform.

Simon & Schuster would not comment on how much it will charge libraries for ebooks. (Random House, for instance, charges three times more than the retail price in some cases.)

Digital library distributor 3M is handling the trial for the New York and Brooklyn Public Libraries, with BiblioCommons powering the purchase option. Distributor Baker & Taylor is handling the trial and purchase option for the Queens Library.

With Simon & Schuster’s announcement, all of the Big Six publishers are making at least some ebooks available to libraries, with various restrictions. Random House makes all of its ebooks available to libraries, but, as noted above, at prices as much as three times higher than the retail price. HarperCollins allows its ebooks to be checked out 26 times before the library has to buy a new copy. Hachette only makes new ebooks available to some libraries in a pilot program, and charges more than retail price. Macmillan is running a two-year trial that makes 1,200 older ebooks available to libraries.

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As I wrote in October, Ganxy already lets publishers create digital “showcases” for books that include their cover, description, video and other marketing materials, and purchase options. Authors and publishers can sell books directly through the showcase or simply provide links to retailers, and they can track where their sales are coming from. The company added bundling options in December.

Ganxy co-founder Josh Cohen told me that until now, there hasn’t been a good way for publishers to control promotions by giving away ebooks only to a select group of readers and then track how they are accessing that content. With Ganxy’s tool, publishers pay $0.25 per content redemption — $0.05 up front and $0.20 when a user actually redeems his or her free ebook (if that never happens, publishers won’t pay that $0.20).

Glenn Beck’s imprint, Mercury Ink, used Ganxy’s new promotional tools to launch its “Wrath and Righteousness” series. The publisher gave away 45,000 copies of the first ebook in the series to a select group of people.

Ganxy is not the only company to offer some of these services. NetGalley lets readers — usually professional reviewers — request early access to publishers’ upcoming titles; if approved, they can receive a digital galley as an EPUB or Kindle file. Ganxy’s tool is designed to run promotions after books are published, however, and it works for any type of digital content, not just ebooks — though the company is focusing on ebooks and publishers for now.

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Revenues for the total U.S. trade book industry — in which the AAP includes religious publishing — were $7.1 billion in 2012, up 6.2 percent from the previous year. Of that, $1.54 billion came from ebooks: $1.25 billion from adult fiction and nonfiction, $232.8 million from children’s/young adult and $57 million from religious books.

This data comes from the AAP’s monthly StatShot reports, which survey around 1,200 publishers on category and format sales. It’s different from the data provided by BookStats, an annual survey from the AAP and the Book Industry Study Group that aims to estimate the full size of the book publishing industry in the U.S. BookStats data for 2012 will be available in May.

Photo courtesy of Shutterstock / Borys Shevchuk 

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Merkoski ran technology departments for a number of companies and headed e-commerce initiatives at Motorola before joining Amazon as a technology manager in 2005. For the next five years, he served at the company in a number of Kindle-related roles, helping to launch the first two Kindle models and the Kindle DX. “I first joined a team that built the electronic books for Kindle, but I went on from there to do it all,” he writes. “I invented some of the technology used in ebooks and launched the first few Kindles. I’ve traveled to book fairs in New York and London and Frankfurt to evangelize ebooks. I’ve watched ebooks being made in the Philippines and supervised the assembly of Kindles in China. I’ve talked to the White House, former presidents, and astronauts about ebooks.”

I found Burning the Page the most interesting when Merkoski discusses his experience at Amazon, working directly for CEO Jeff Bezos. “I worked in a modern version of Gutenberg’s workshop,” he wrote. But he can’t share much:

• “I believe Jeff [Bezos] wanted Kindle to be his legacy to history. He wanted it to succeed.”
• “The Kindle organization was in some ways a startup within Amazon and benefited from Jeff Bezos’s venture capital infusions, long-range vision, and full support.”
• “Jeff originally wanted the Kindle code names to come from Star Trek, since he’s such a Trekkie, but more literate minds prevailed.”

While Merkoski describes himself as “the closest there was to an ebook shaman, a tribal elder who could talk to all the people who joined Amazon after me about the early days of Kindle, provide the inside scoop,” he doesn’t (and may be legally unable to) provide any inside scoops in this book. So the next best thing is when he can speak specifically about e-reading platforms — including the advantages of Amazon’s competitors. The development of the Kindle was highly secretive: “No outsiders had seen the Kindle because it was created in a perfect vacuum from the very beginning,” Merkoski writes. That resulted, in 2007, in a $399 device that sold out in five and a half hours, remained out of stock for months and got a lot of mixed reviews (facts that Merkoski doesn’t mention).

Kindle’s flaws — and what competitors did better

Future versions of the Kindle improved on some flaws: Merkoski calls the Kindle 2, introduced in 2009, “truly an incredible device.” But “in fits of wakefulness, I thought about how Kindle lacked nuance, style, fonts, and things like multimedia…Kindle’s success made new ideas paradoxically difficult, as if everyone was walking around on stiletto heels on a glass floor, careful not to run, not wanting to take the wrong risks.”

Kindle competitors, he says, have done better in lots of ways. Take Barnes & Noble: “Out of all the retailers who sell dedicated e-readers, they’re the most innovative. They’re the first to release new book-reading features and to innovate on the hardware side. They were the first to have touch-sensitive e-ink screens…They totally get the social experience of books in the way that it crosses over from the real world to the digital. They can innovate so fast because they’re not burdened with their own R&D group.” Likewise, “companies with more humanistic sensibilities than Amazon will win the e-reader war by making the experience more human, more playful…let’s face it: there’s still something emotionally bereft about a Nook or a Kindle.” The winner on that front, he says, is Apple’s iPad.

Ultimately, Merkoski believes, “Amazon is winning the ebook revolution, but it may lose the war…Competitors like Barnes & Noble and Apple have successfully blurred the lines and proven that they can provide a great media experience, so Amazon’s brand matters less in the eyes of readers now.” He says “it’s hard to love Amazon…at best, you respect Amazon for its obsession to detail, for its cheap prices, and for how it achieves the promised arrival dates for its products.”

Oddly, Merkoski doesn’t mention the Nook division’s terrible performance these days, or the company’s inability to cut into Amazon’s market share. Nooks, he claims, are “downright futuristic.” And that’s really where he wants to go in this book: How will ebooks, reading and writing change?

What’s next: High-speed head plugs and a “Facebook for books”?

Let’s be clear: Merkoski loves books. An endless number of sentences like “Books are priceless,” “Books can inspire us toward greatness,” “Books hold the repository of human knowledge, and then some,” “Reading is an act of bathyspheric descent into the depths of an inky-black ocean,” “For me, it really is about books. They’re not commodities, but soulful voices that actually speak to you” become increasingly irritating as the book goes on and weigh down Merkoski’s ideas on what the future of reading could actually look like.

Once you cut through the platitudes, Merkoski envisions some specific innovations that are interesting and imaginative. For instance, “the future might hold some sort of high-speed plug that goes into an author’s head, some way of taking an author’s imagination and converting it directly into a digital format. The same high-speed cables will connect you to the author’s original experience.” That sounds horrible to me, but another idea — a screenless e-reader that uses a pico projector to project an ebook onto a blank surface (like a ceiling or the pages of a blank book), pulls ebooks from the cloud and is navigated by voice commands — seems like something that could actually exist in a few years.

Ultimately, Merkoski believes there will be

“just one book, a vast book that includes all the others inside it, which I call the Facebook for Books. You’ll be able to start reading from an ebook and naturally segue into a different one, just by following a link. It could be a bibliographic link, or just a link to a book that influenced the author and that’s been annotated as such by a reader like you or me. You will be able to link forward or double-back and keep reading…The more content you get, the more cumulative the connections are between books, and the more intertwined and rich the network becomes.”

The company best situated to make this dream a reality is not Amazon, Merkoski believes, but Google — thanks to its knowledge of search engines and the vast number of titles it’s scanned for Google book search, “Google has digitized more of human culture than any other retailer or library.”

For now, rights issues are in the way, and so books, “our greatest repository of knowledge and inspiration, aren’t participating in conversations with us online, with the exception of public-domain books that lag by at least ninety years.” It will take “a sea-change in opinion about ebook pricing models,” Merkoski acknowledges, before such a hyperlinked database of books can legally exist — even though we have the technology to put it in place now.

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In a ruling issued on Tuesday, a New York federal judge threw out the authors claim that Harlequin had used a corporate sleight-of-hand to pay them 3-4 percent of ebook royalties instead of the 50 percent they believed they were due.

The case, which turned on technical questions of law, is an example of the collisions that can arise as a result of book contracts signed in an age that pre-dated the current boom in ebooks. (In another case in the same court, parties are squawking over whether an author signed to a 1971 contract can shop ebook rights to another publisher.)

In the Harlequin case, the authors pointed to publishing contracts that granted them 50 percent of the digital royalties that the publisher collected. The authors believe this should let them collect half of the $4 Harlequin earned from an ebook with a cover price of $8.

Harlequin instead decided to pay 3-4 percent ($0.24 to $0.32 on an $8 book) on the grounds that this was half of the 6-8 percent it received from licensing the rights to a different publisher. The issue became contentious because the third party publishers in this case were subsidiaries created by Harlequin for tax purposes.

In a related letter to authors, Harlequin explained that, prior to 2005, no one had foreseen the growth of ebooks and that it was reasonable to pay authors less than 50 percent.

In a four-page decision, the New York court declined to consider the authors’ arguments that the “third party publishers” were alter-egos for Harlequin. Instead, the court relied on a narrow interpretation of contract law to dismiss the claim.

The decision is very brief and contains an unusual footnote stating that the judge’s clerk, a second-year law student, had largely researched and drafted the opinion (clerks often help with such tasks but judges rarely acknowledge this).

The authors’ counsel included veteran publishing lawyer David Wolf. Reached by phone, Wolf declined to comment and said his clients were considering their options. You can read the ruling for yourself here:

Harlequin Dismissal

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