PunditGuy

Pick a Climbing Buddy – partner with experts.

If your publishing house hasn’t committed to a digitization process yet, you might wonder who’s out there doing this kind of work and how you can find them. Digitization services is a commodity business these days. Most of the heavy lifters in digitization are located off-shore. You’ll find large scale companies with locations in India, the Philippines, China, and most other countries in Southeast-Asia. But don’t worry, you won’t have to learn another language or bank lots of air miles to pick your partner. Nearly all the major digitization companies have local U.S. based offices. Working together with them will be just like working with the company you use to print your books.

Not just icing anymore – digital rights income can taste a lot like cake.

How many of you have booked a million dollars in digital rights revenue? $500,000? $100,000? How about $50,000?

Admittedly, digital rights licensing has not yet become a primary profit center for many publishers. Why? The obvious reason is because print still drives the vast majority of revenue for most publishers (therefore, print-centric work-flows continue to be a practical reality). Other reasons; most publishers don’t clearly understand how digital products are sold. And if they happen to know how the product is being sold, they misunderstand who the customer is. They believe e-books are priced dramatically less than their print counterpart and therefore two things happen – less revenue is generated and print sales are cannibalized. They look at royalty calculation methods and see nothing but pennies. And since the expectation of getting rich is so low, many publishers sign contracts that virtually guarantee it. Worse yet, some publishers become so confused that they take the easy way out; they avoid the category completely.

The truth is, money can be made. In some cases, the revenue can be significant. In other cases, it can be incremental. As a publisher, it’s important for you to be aware of the potential revenue streams and take a ‘more is better’ approach.

Lots of Flavors to Taste – there are many revenue models

Different types of books will generate different amounts of revenue. Books should be matched to fit their market. Reference, text books, or better yet, books you open to the middle rather than at page 1 make better selling digital products in some channels than the latest John Grisham title or Harry Potter book.

When licensing digital rights, sign non-exclusive deals. If there are two or more suppliers in a market, don’t lock yourself into just one, but be sure one of those is the market leader. Make sure your licensing policies are flexible enough to accommodate a ‘one size doesn’t fit all’ market. Get to know your partner and their product. Gain a clear understanding of who their customer is and how they buy digital products. There is no single business model, so get used to hearing a lot about how “this type of content sells best at this price and in this kind of configuration.”

Avoid the temptation to think that selling digital products is the same as selling individual print copies. Many products sell best when multiple books are bundled together. Digital library products exclusive to certain disciplines can be very lucrative for publishers who commit with multiple titles.

Smorgasbord vs. Ala Carte – selling digital book collections

My company sells a product that includes 330 reference books, costs $630 and includes over $6,100 in equivalent print editions. You might think, “Wow, that’s nearly a 90% discount from list price on each book.” Well, you’re right. And when you look at the individual royalty revenue each book generates when sold this way, your first reaction would be to say, “Who in their right mind would want to license books for this product?” But what you may not know is that we sell tens of thousands of copies of this product each year. Those kind of sales provide a lot of potential royalty revenue for the publishers who have licensed books to us. But of all the publishers represented in the product, some are much happier than others. Why is that? Well, some publishers own and have licensed to us dozens of titles in that box. Others have licensed one or two books in there. The publishers who represent dozens of books are collecting tens of thousands of dollars from us in royalty revenue each year, while the others are collecting under one thousand dollars.

In our model, more is better due to the volume of bundle sales. If your publishing house is taking a conservative stance as to which books you license to us and you limit the way we can sell them, your revenue will reflect that.

When to Open Your Own Place – publishing your own content digitally

Most publishers have fewer than 100 titles available digitally and many of those have come to market through sub-licensing deals with partners. If your publishing house is small or medium sized, there’s good reason to keep licensing digital rights. After all, committing to your own digital publishing means higher costs over the short-term and a stretching of (already stretched) resources. But, for those of you who believe participation is better than spectatorship, there are models you can follow to begin publishing your own digital editions.

At my company, publishers partner with us to bring their own digital products to market by licensing the technology we create. In many cases, we act just like a packager does. We help publishers identify the books that will sell best together. They pay us to digitize the books (if they’re only available in print) and work with desktop publishing formats for books that are already digital. Once everything is formatted for our technology and made searchable, we create a master CD or DVD-ROM and hand that back to the publisher. At that point, they create the product packaging and enlist their own sales and marketing team to bring the product to market.

By partnering with us this way, the publisher avoids the cost of developing a custom e-book technology and the ongoing burden of providing technical support services. They pay us a small royalty on their sales, and in exchange we handle everything for them.

But that’s just one way for a publishing house to bring digital products to market. There are lots of digital book technologies and lots of great companies to partner with.

Remember I mentioned that at my company, the ‘more books are better’ approach yields more royalty revenue for our publisher partners. This ‘a lot of a little’ philosophy is shared by major publishers who do their own digital publishing. In 2001, HarperCollins offered 188 digital titles which were chosen selectively, and as a result, the revenue generated was small. Since then they increased the amount of digital books published and here’s what they found. Today, 75% of the revenue generated from digital books sales by HarperCollins is from titles selling less than 49 units per month. In fact, 95% of HC titles sell fewer than 49 units per month. Yet, their revenue climbed over 800% from 2001 sales. By June 2008 they will offer over 4,000 titles in the market.

The lesson here is, if your publishing house is going to jump head first into the digital publishing pool, don’t forget the water. And don’t be afraid of its temperature either.

Each year I speak with hundreds of people working at publishing houses who are responsible for managing rights. After a typical conversation with them, I almost always come away with the same impression – rights people are busy and have a lot on their plate. To do their job effectively, they need to be organized and have information available to them at a moments notice. Unless they are endowed with a photographic memory, their ability to recall specific contract details is only as good as the database they use. And most publishing houses I’ve encountered have pretty good systems in place to track the important stuff. But the data they have becomes more limited the further back in time they go. I’m sure that’s why I end up being the type of call they are least able to handle. In my business, we make requests to license electronic rights to books published in 2007, books published in 1925 and every year in-between. Guess what contract data is readily available to most rights people?

I can expect to get a pretty quick answer to the question, “Can you let me know if electronic rights are available for a book published in 2005?” I might even get lucky on that question if I’m inquiring about a book published in 2000. Unfortunately, the further back in time I go the less likely I’m able to find out quickly about the rights status of a book. Here’s the type of answer I get from a rights manager when I ask about an “old” book — “Oh, of course the data is available. It’s just down stairs, in file boxes, in the cold, dark, dank basement. And did I mention that no one goes down there anymore?”

1999 to the present: digital sub-rights in your boilerplate

In this digital era, it pays to know what rights you have. And even more importantly, you need to be sure the books you publish today allow you the freedom to create as many flavors as possible. Any book deal you’ve signed in the last five years should already include rights to publish digitally. Be sure your boilerplate language is specific.

If a Picture Paints a Thousand… – license digital rights to photos, artwork, and EVERYTHING!

Be sure your standard contract includes not only e-book rights, but electronic version rights. What’s the difference? E-Books are merely facsimiles of the original print edition. This typically means that all of the content from the book is reproduced in the digital edition. PDF books, audio books, e-books on CD-ROM and those for handheld devices – these are some examples of what a run of the mill e-book is. But when your publishing house wants to exploit their copyrights digitally, why limit yourself to only e-books? By securing electronic version rights, you license the content that didn’t make it to the print edition, but rather ended up on the “cutting room floor”. Chances are it was left there because of reasons specific to the print edition. Those ‘left overs’ might lend themselves well to a digital version of the book which isn’t limited by the normal printed page constraint. Make sure you have the rights to use everything submitted by the author.

The Amendment Paper Trail – travel back in time to secure digital rights

But what about the books published before you had that catch all digital rights clause? Just because you don’t think a lot about these backlisted titles doesn’t mean they can’t be extremely valuable in digital form. Get your contract amendment language together and go treasure hunting. It pays to go back and revisit contracts for the best sellers of yester-year.

Yes, I know this is hard work requiring heavy resources and I don’t mean to minimize the task. The further back you go, the harder it will be to find authors and in some cases, their heirs. Orphaned works are appropriately named – there’s no one left who knows enough about the work to do anything with it and the lack of available data can look like a liability to a publishing house. Set investigative limits. If it looks like you might need to put weeks into the recovery of a copyright, be sure the time you put in equals the return you’ll receive.

Diamonds in the Rough – protect the perennial best sellers

The most logical backlisted books to go after are the best sellers, and I don’t mean just the ones that are in print. An out-of-print book published in 1985 might have stopped showing positive sales numbers by 1990, but that doesn’t mean life can’t be breathed back into the title today in a new digital edition. When a customer becomes a consumer of digital books, a funny thing happens. They tend to want to own a lot of digital books. And those aren’t just your front-list. They want digital editions of the books they loved as a child, or as a student in school. Much in the same way music lovers moved from LPs to cassettes to CD formats, often purchasing the same music over and over again, digital book buyers will be looking for backlisted titles. Guess what that means? Your new ‘digital’ customers can be your old ‘print’ customers. Be sure you have the rights to offer these new products to your lifelong customers.