How Random House Can Save Itself!

Tom Dupree alerted me to a Wall Street Journal article (the article is behind a subscriber screen) that indicates that Random House has opted out of the agency-model deal with Apple. Their books will not be for sale in the iBookstore, though they will continue to talk with Apple. Random House expressed fears that ebooks were being priced too dearly, inspiring piracy.

Random House books will still be available on the iPad via sales through Amazon and its iPad app.

This refusal to join with Apple may be seen as a victory by some, but it’s really a decision to make no decision. Choosing not to act can be just as big a disaster as acting in haste. To prevent that, I offer Random House the following wisdom. (If they want more, I know they have my phone number, and they’ll find my consulting rates reasonable.)

First, all websites are retail sites. Right now, if you go to the Random House website to order an ebook, you get a nice long list of online retailers who will sell you that book. By refusing to sell the books directly, Random House is giving away up to 50% of the retail price of the book. The retailers to which a buyer is referred charge whatever they want for it—which means it tends to be overpriced across the board. (Also, the Random House site only sends you to the retailer’s main page, so you have to repeat your search for the book—which is a quick reason never to come to the Random House site for help in the future.)

Random House has to start selling their books directly. Sure, keep them available on all the other sites. After all, if shoppers are not coming to your site, they can still find your books, but reap the benefit of having direct sales yourself, retaining some serious profit.

Second, Random House should begin an affiliates program, with two classes. If a fan hosts the link through which someone buys a book, they get a 5% kickback on the price. If an author hosts the link through which the purchase is made, they get 10% (equal to their paperback royalty). Pay these sales commissions every month. You’ll immediately have authors posting links to all their Random House titles in every social medium there is. Random House would foster an entire army of sales-people to spread the word about books through the net. Since publishers have agreed that the physical cost of printing up a book is 10% of the cover price (at the very least), this affiliates program would be a wash in terms of cost.

Third, provide speciality publications that readers can only get at the Random House site. Omnibus editions would be a brilliant place to start with this. Combine a trilogy of books into a single edition, and price it three dollars less than if you purchased all three books separately. Readers who want to buy the set can only get it directly from Random House. Another specialty item would be asking their authors to put together collections of their previously-published short stories. While publishers maintain that such collections do not sell, what they mean is that they don’t sell enough to justify the cost of printing, warehousing, shipping and calculating returns. A digital edition, on the other hand, won’t require anything more than cursory editing (since the stories have previously been published) and a cover graphic. Cost is so minimal that profit is guaranteed, even if it is priced as a loss-leader introduction to that author. It doubles-down on authors in whom they are already investing; and if the book sells well enough, a short-run physical-edition could be offered to all those who bought the ebook version (and you’d have their email addressed for the solicitation of same).

Fourth, Random House can practice bundling: you order the book in a digital bundle from them, download the electronic copy immediately and they’ll mail you the physical copy. Another bundle which is perfect for download is ebook/audiobook; and if such deals are only available at the Random House website, that’s where traffic will head.

Fifth, truly lower prices. Right now publishers rely on the “get it now” tariff. This is why hardbacks are sold at a premium; and why folks who aren’t buying a physical product bristle at the idea of paying more to buy electrons. The premium used to be justified by the presentation, and that doesn’t fly anymore. Make up the difference by re-energizing the backlist through bundles and omnibus editions to pick up the slack. (The backlist doesn’t sell these days because it’s all out of print. Put it back in print and you profit from it again.)

Lower prices actually do spur more sales. I dropped the price of one of “>my novels on the Kindle to $1. Not only did sales on it increase, but sales on the sequel increased. That makes sense, of course. But sales also increased on another novel that was in no way related to the first two. Of course, my books are all priced at $5, which is more than reasonable for what will be 6-8 hours of entertainment.

Sixth, experiment with different story styles and lengths. As long as the prices are low and the work is good, readers don’t balk at paying for it. They balk at (and pirate) what is priced unreasonably high. The idea of a monthly release schedule worked in the antedigital world, but now what drives traffic is new content, and a fairly consistent stream of it. Imagine TV shows only coming out in monthly lumps, as opposed to weekly. We want our distractions now, so work out a plan to accommodate your audience.

Seventh and last (until you call me for that consulting gig): treat your authors and audience with respect. In terms of authors, I know you’re never going to return to the 50% share of ebook sales, but do the right thing and get rid of the lag-time in paying royalties. Payments twice a year, with a three-month accounting window is ridiculous. If Amazon can pay in 60 days, and Apple in 30, you should be able to do better than 6-9 months. Random House just initiated a direct-to-bank-account system for royalties, so the accounting system is set up for this sort of thing. Pay your authors faster and you get them less of an impetus to sell directly themselves, becoming your competition.

And your audience needs respect, too. Gouging them to protect your profit margin isn’t the way to go. Publishers believe that Random House and Hatchette and MacMillan et al., are brands. They’re not. No one goes to a store to buy a Random House book. They purchase based on genre and author. We all know that. The audience is going to go wherever they can to get the best work at the best price. If Random House isn’t the source for what they want, they’ll get it elsewhere—and pretty soon that’s going to be buying direct from authors at our websites.


Because authors are brands. (The brands you’ve all very successfully created.)

Random House has a narrow window in which to act. I’ll go out on a limb and suggest that if they don’t have the above program in place by November of 2010, they’ll never be able to implement this plan, nor any other, that will preserve their relevance in the post-paper era. Authors are already making moves that both sell direct to retail customers, and are taking part in projects that support and promote each other—a prime service the publishers used to perform. We are very close to the tipping point that the music industry experienced, and only through quick and intelligent action can Random House survive after the market flips.

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7 Responses to “How Random House Can Save Itself!”

  1. If only this could become the standard business model. I’m a reader and an aspiring writer. As a reader, I am balking at investing in electronic media when I know most of the ebooks are going to cost me twice what a paperback novel does. As soon as prices come down across the board, I will SO be on that bandwagon. As a writer, I hope to make this a career, and it’s frustrating to see small royalties paid in an antiquated manner with poor accounting and massive delays.

    And you’re right about the branding. I buy books written by authors, for the stories they tell. As a consumer, I could care less who the publisher is. That will only become a factor to me when I’m ready to start selling my own work.

    Here’s hoping that some of the big publishers out there start listening. In the meantime, in addition to developing my skills as a writer, I’m working equally hard to learn the business skills I’ll need to manage a career (hopefully) in a world where more and more opportunities are favoring authors with the savvy to exploit them.

    Love your blog!

  2. Headless Unicorn Guy 08. Apr, 2010 at 10:32 am

    “We are very close to the tipping point that the music industry experienced, and only through quick and intelligent action can Random House survive after the market flips.”

    Here’s another analogy to the music industry: Remember the RIAA’s reaction when their market flipped?

    * Armies of lawyers to sue anyone downloading or uploading. (Remember what happened to Napster?)

    * High-profile jackboot raids (and Million-dollar Copyright Infringement actions in court) against 15-year-olds ripping the one good song off a 20-track, $20+ CD?

    * Making “This Video Removed by Order of the RIAA” one of the more common entries on YouTube?

    * Churning Boy Bands and Lady Gagas into deliberate one-hit wonders, discarding and flushing them after a single hyped CD?

    * Trying to get Napster-style downloading and file-sharing made a Federal Felony?

    Sure protected their monopoly, didn’t they?

    (We saw something similar in the early days of computer games and home video. Trying to make copying a Federal Felony, fording more and more copy-protect stuff that got cracked the first week, and jacking prices to near $100 a pop (in 1980s money) to turn a profit before it could get pirated — never mind that those prices just scream “Rip Me Off!” It wasn’t until George Lucas undercut the pirates by releasing his box set of Star Wars for $20 that prices returned to sanity AND all the video piracy eased off.)

  3. Nice list!
    Just to add a couple of ideas: (Nothing new probably)

    * Free sample chapters (maybe the first two or three) of all(?) books. Or at least a couple of short stories from the author to see if I like his style. I really like to go to the local bookstore and browse the books there. If a book catches my eye, I usually read the first page or so. And then I buy it or not.

    * When someone buys a book, add a couple shortstories with a similar theme from other(!) authors for free. Hey, no better advertising than that.

    * Package deals: In the end, I want to read whatever I want whenever I want. So, let me pay 50$ or so a year and read whatever I want. Of course, this generates a lot of problems, because of the royalty system, but that’s a thing I’d like to see as a consumer

    * Reminders/Newsletters/RSS feeds. Often the next book in a series or from an author is not out yet. Usually I forget it and remember a couple of months later. Or never. With an automatic reminder in place, I would buy it the moment it came out.

  4. Hehe, I took the opposite approach until I started buying almost solely through kindle I was bad about going into the book store and reading the ending of a book. If the ending made me interested then I would grab the book up in a second. I’ve always been of the opinion that a good story isn’t ruined by knowing about it. That just makes me want to read it all the more. Case in point I read the ending of Talion and that is what made me buy it. 🙂 Actually, I read the ending of all his books I bought before buying them and reading them.

  5. Just saw this. You put your finger on a basic misconception among major publishers, sometimes shared by other forms of entertainment: the distributor is not the brand, the artist is. When’s the last time anybody said, “Let’s go see a nice Universal movie, and then download an album, maybe something from EMI”? It’s the author, the actor, the musician, the creator. The only brand in publishing I can think of is Harlequin, and that’s still not going to woo you away from another romance author that you really want to read.


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