Booksquare

Has there ever been an industry more unwilling to make its customers happy than publishing? Simon & Schuster and Hachette have (independently) decided they’re going to hold back the ebook releases of some titles. Not all of course. Most likely just the ones they paid far too much for anyway. They’re taking a stand by creating marketplace confusion…some books yes, some books no. Consumers will need to guess.

Gee, that’s a good idea. But not a problem for me. If the book isn’t available, I’ll buy something else. I won’t be checking back in three or four months, because, well, clearly the publishers don’t want my money. And the chances of me remembering? Going with nil to nada. And even if I do, what bright and shiny new books will capture my attention…?

This new delay relates to windowing, the concept of moving a product through specific retail channels for specific periods of time. Windowing is a concept that works really well in the motion picture industry, though studios are trying to compress those windows, while the music industry (another business prone to overpaying advances) works with simultaneous release of formats.

[Part One: Response to Nat Sobel]

The window argument, as practiced by the motion picture industry, is often cited as justification for withholding digital books (and even trade and mass market paperbacks). To me, this represents a flawed understanding of how money flows in the motion picture industry. Books and movies are not comparable.

But first, let’s talk about rebellion. Nat Sobel used the window argument with an unconvincing twist. He chose Cloudy with a Chance of Meatballs as an example. Despite being pulled early by a number of [unnamed] exhibitors, it grossed, am I reading this right?, $30.1 million on 3,119 screens. I haven’t seen this film, so I don’t know if the sub-Pixar numbers are warranted, but I can tell you this: with that many screens reporting for opening week (generally the most lucrative; mama didn’t raise no stupid exhibitors!), the protest was, at best, muted. Like books, movies suffer from the limited marketing attention, though motion picture awareness and dollars are much higher. New titles are constantly displacing old, to the point where a release from a month ago is largely forgotten.

(Engrave that thought on your brain.)

Yes, motion pictures (a category that includes feature films, television series, and made-for-video/DVD) cycle through a series of windows. Those windows are growing ever-tighter, especially the one between theatrical release and home entertainment. It’s a money thing. The difference between books and motion pictures is this: a revenue continuum with direct, indirect, and sometimes repeat consumer sales.

Say that three times fast!

So what do I mean by “revenue continuum with direct, indirect, and sometimes repeat consumer sales”? Good question. Let’s walk through an oversimplified (ha!) feature film lifecycle. I think it’s instructive to dissect if this what publishing thinks it wants. Note: I am purposely leaving out some, mostly ancillary, revenue streams (this is not a master class), and there may be steps skipped in real life. Also, I am leaving out marketing costs associated with trade shows.

• Theatrical: Movie is shown in a theatrical setting. It’s generally the first time people interact with the film, and if it’s good, they might pay two or three (or more) times to watch it again. Popcorn and really huge sodas are often involved. The money split is interesting, with studios getting decreasing returns the longer the film is in the theater (90/10, 80/20, 70/30, and so on; unless it’s an art house film, which plays out differently). Marketing costs are largely borne by studios (big, huge marketing costs) with co-op between studio and theater also in play. Consumer sales: direct.
• Non-Theatrical: This is a pretty big market with not a lot of dollars. It’s all showings outside the traditional theater setting (prisons, schools, boats). Airline sales are generally lumped into this group. Some consumers may be watching the film for the first time; others caught it in the theater. Most marketing costs are borne by the third party, though some co-op comes into play in “theatrical non-theatrical” settings. Consumer sales: direct (ticket, pay-to-view) and indirect (streaming on airplane).
• Pay-Per-View: A television-based market. Consumers pay to access a movie. First-timers and repeat viewers are engaged. New models are emerging. Marketing mostly a function of the third party, though, again, possibility for third party. Consumer sales: generally direct.

• Home Entertainment: Right now, this is mostly DVD, and for a long time, it was the golden egg. Home entertainment covered that awful gap between production, marketing, and print costs and, oh, profitability. People have largely finished with building their libraries, and now purchase more selectively.

  At its most basic, the home entertainment market breaks down into three areas: sell-through (consumer purchases product), rental/premium (Blockbuster, Netflix), and streaming (models emerging all the time). Again, first-timers and repeat customers. Marketing has trended toward the theatrical model. Consumer sales: direct and indirect.

• Pay Television: In this instance, we’re talking about the premium pay channels like HBO and Showtime. Big bucks are paid by premium channels for the privilege of an exclusive television window (U.S. only) starting about 12-13 months after theatrical release. First-timers and repeat customers tune in; people who paid in the theater or own the DVD are funding the license fee if they’re also premium pay subscribers. Marketing mostly borne by the third party. Consumer sales: indirect (money not associated with a specific product).
• Network Television/Basic Cable: Other stuff is happening between Pay and Network, and it’s discussed below. Once upon a time, the network debut of a motion picture was a big deal (and reasonably lucrative). It’s less so now. Basic cable has picked up some of the slack here. First-timers and repeat customers. Marketing largely borne by network/cable channel. Consumer sales: indirect.
• Syndicated Television: This is the never-ending revenue stream (or seemingly never-ending). International sales do kick in earlier in the lifecycle (and are a mix of pay and free, depending on the country), and domestic syndication happens after the network window. Films are syndicated like crazy. In a 24-hour programming world, there is always time to be filled. First-timers and repeat customers. Marketing largely borne by individual stations, though some additional dollars may shake loose, especially if a barter arrangement is employed. Consumer sales: Direct and indirect (mostly indirect, as a lot of this activity is ad supported in free television markets).
• Wash, Rinse, Repeat: In addition to the ongoing television sales, home entertainment sales continue. Sometimes a film will get be reissued theatrically, sometimes an older title will show up on an airplane (crazy, but it happened to me on a flight!). As long as a product can be sold, it will be sold. Marketing: situation dependent. Consumer investment: ditto.

So that’s what I mean about the revenue continuum. So how do books fit into this model? Well, let’s see. Gifts aside, books are generally a one time sale (more if that consumer suffers from my particular form of insanity and poor library management). As you can surmise from above, there is never an actual gap in the windows. Ever. Okay, books can do that.

And, as you can surmise from above, there is a marketing continuum. Studio and theater advertising leads to airline advertising leads to retailer and studio advertising leads to premium pay advertising leads to network advertising leads to endless commercials in the free television space. Well, I guess books can do that. I mean, it’s gonna take some work to keep titles in the minds of readers, but, sure, I’ll play along. The key to success here is constant marketing. Luckily the costs are spread among players. This stuff gets expensive. Trust me. I’ve been there.

Note: without this ongoing effort, all hope is lost.

Differences. “Windows” in books don’t have that lovely mix of direct and indirect money. They don’t have that revenue continuum. Authors only get paid on that first sale. Actors, directors, and other get residuals and participations, whether the sales are direct or indirect. A hardcover window doesn’t protect hardcover sales from anything but people who want to buy the book in another format (the horror, people who want to buy books!).

I’ll be absolutely frank about one thing: publishers have already lost the pricing battle. They’re being subsidized by Amazon and Barnes & Noble now, but if they cannot figure out how to make their business work in a consumer-friendly way, well, we saw how ugly it got for the music business. I love that some publishers argue that it’s for the authors, because we all know how many authors actually earn a living wage from their writing. It’s a business thing, I get that, and there is definitely concern for authors. There’s just as much concern for the bottom line.

No shame there. Truly.

Publishing has, I’d guess, a year, maybe two, to figure this out. I hate to be the bearer of bad news, but protecting the current business model — especially since publishers have done nothing to justify any aspect of their ebook pricing stance — is a zero sum game. You’re losing me and others as customers. How do you recover from that?

Personally, I’d look to another industry for guidance. In music, multiple formats have, with some blips, had simultaneous releases. In some cases, that lead to multiple sales. Yes, consumer behavior has changed, but it’s clear two separate formats can co-exist without diminishing the value of either. Look at how people can — with some teeth-gnashing on the part of the music industry! — move their music from CD to portable audio player of choice back to CD.

I would also look at the motion picture tradition of skipping theatrical releases when it’s clear some films are better as direct-to-video (sadly, a decision sometimes made after expensive production).

I get that this is hard. I’ve watched it happen in other industries. It’s been painful every time, but if you want to succeed, you make it work. If you want to go down with the ship, I have a lovely window seat for you….