The Business Rusch: The Nook Inspiration

The Business Rusch: The Nook Inspiration

Kristine Kathryn Rusch

I had planned to write this week’s blog on the trip to Los Angeles.  (See why I’m not in Los Angeles here.)  Instead, I’m sitting in my office, fending off a very needy cat who couldn’t even handle the 36 hours we were gone.  I shudder to think what she would have done if we had been gone for the full week we had planned on.

Before I left, I figured the trip would inspire the column.  If I took true inspiration from the actual trip, I’d write about insurance or planning for emergencies.  Of course, I dealt with both topics in the Freelancer’s Guide already.  I could also write about a usually reliable chain restaurant that we nearly stopped at, until we saw that this particular restaurant was so dingy and dirty, you couldn’t see in the windows.  Only the signs that had come directly from the home office were bright or fresh or inviting; everything else, from the hours sign to the name of the restaurant itself was faded and/or damaged.  The access road next to the restaurant had been dug up, and the mall beside it was dying.  Everything about that place screamed “fending off bankruptcy,” so of course, we drove on, to a restaurant that looked a lot more inviting.

Sad as that was—and it does haunt me, so I suspect it’ll appear in a story or blog later—I’d rather talk about the only other notable business experience on our very short trip.

On our way down, before the heat got to Dean, we stopped at a Barnes & Noble in Medford, Oregon.  I’m not sure how B&N ranks its stores, but I would consider this a small B&N.  You could stand in the main doorway and see every section of the store.

It was Monday afternoon, sunny and hot outside, cool inside.  Surprisingly, to me at least, the store was crammed with people of all ages (including, on one side of the store, a querulous elderly woman complaining that her daughter was walking so fast there was no time to look at books and, on the other side of the store, a querulous eight-year-old girl complaining that her mother was walking so fast there was no time to look at books).  A big display announcing the Nook, B&N’s new e-reader, stood a yard inside the main doorway, where the new books rack usually is.  The display was actually a booth with a gigantic sign behind it.  The booth had sides that were about shoulder high for me, with Nooks on them.  The front, though, was a table, and on it were Nooks that customers could touch.

An employee stood behind the booth, demonstrating the Nook for anyone who wanted to know how the machine worked. Sitting near him was a professorial type who was reading a Nook.  Whether or not Professor Nook was an employee is anyone’s guess, but he sure looked comfortable.

The impressive thing to me, and I do mean impressive, is that the line in front of the booth was three deep and four across for the entire time I was in the store.  I was there for at least thirty minutes.  The line remained, although individual people shuffled in and out.  These people weren’t browsing. They were interested and thinking about buying an ereader. They just weren’t sure which ereader they wanted.

I figure that at least sixty people had gone near the booth during that half an hour, most of whom asked questions.  At the checkout, I asked if this was normal. The employee there told me that there was always someone looking at the Nook, even at the deadest hours of the day.  And then she told me to come to one of their Saturday demonstrations—an actual Nook seminar—to really see a crowd.  I forgot to ask how many Nooks they sold at these events, but to be honest, I wasn’t interested in that number as much as I was interested in the interest.  For some reason, I didn’t realize that ereaders were catching on in quite this way.

I know the statistics.  Ebook sales have grown exponentially this year.  They went from less than one percent of the market to seven to ten percent (depending on which source you read).  While the growth is astonishing, seven to ten percent of the market means that 90-93% of all book sales are still paper copies.

The growth is continuing at an astonishing rate.  Most experts believe that ebooks will be a quarter of the market by the end of 2012, and half of the entire book market in 2015.  No one is saying that paper books will go away.  Personally, I think paper book sales will increase if you look at the actual number of books sold rather than the percentage of books sold, and briefly, here’s why.

Bound books have existed for thousands of years.  Mass-produced bound books have existed since Gutenberg.  Readers know and love the form.  If you love a book and must own it forever, you buy the paper version, because you know you’ll be able to read it, in that format, fifty years from now.

We don’t know what form digital books will take ten years from now, let alone fifty years from now.  I don’t base this prognosis on the idea on any book model; I base it on the music model.

Since the invention of the phonograph, people have been able to own music performed by someone not in the room.  The advent of recorded sound must have felt to the people at the time the way that the advent of the written word felt to people who had only heard stories told orally.  Suddenly something precious could be preserved.

But music preservation formats have changed.  In the late teens or early twenties, my grandfather bought my grandmother a phonograph (which we kids played with [carefully] whenever we went to her house).  She kept all the records—thick unwieldy things that wouldn’t play on my parents’ expensive stereo.

In my lifetime, recorded music went through several forms: the 78 rpm record (that’s revolutions per minute for those of you who have always wondered [and look at me, explaining something every kid knew, back in the dark ages]), the 45 rpm, the 33 rpm, the 8-track tape, the cassette tape, the CD, and now the MP3 digital download (which I greatly prefer).  In other words, ways to access recorded music have existed for more than a century, but those ways have always changed.  I know people who rebought their entire record collection when they went from vinyl to CD and are buying enough hardware to store their digital library (okay, that second part includes me).

None of this happened with the book. The book has been stable since Gutenberg.  Yes, there have been additional formats—the trade paper format, the mass market format—but they were still words, printed in ink, on paper, bound in some kind of material.

That kind of stability breeds faith.  If you love a book that you read digitally, you will buy the bound version so that you will always have a copy in a reliable format.

That makes it sound like bound book sales will go down.  But they won’t, because readership will increase as access increases.

Right now, only a small percentage of books get sold in actual bookstores.  Because I’m tired and a bit cranky from the long (and rather stressful) drive, I’m not going to look up the actual number.  But it’s surprisingly small.  Most people get their books while buying something else—groceries, diapers, newspapers.  The bulk of all books sold sell from places like grocery stores and Wal-Mart, not from Barnes & Noble.

Put that fact together with these two facts:  75% of all teenagers have cell phones.  Smart cell phones, like the iPhone, have several reading applications.  On my iPhone alone, I have three e-reading apps: Stanza, Kindle, and Borders.  I’d have more, but I keep forgetting to download the app.

Other statistics have shown that people who have fiction available on their smart phones read more books than they did before they carried a smart phone.  They now read like I do: in line at the bank, in the movie theater before the lights go down, as they wait for friends to meet them at a restaurant.  The only difference is this: I used to carry a book with me everywhere.  Most people didn’t.  Now I carry several books with me in my phone, and so do they.  When they get a minute, they read.  They no longer need designated reading time.

As more and more people read more and more books, the number of books sold will increase dramatically.  I know that I buy more books now that I own a Kindle than I did before—and I bought more than most people before.

Why am I buying more? Access.  In the past, if I read a review of a book that sounded interesting, I had to remember two things: I had to remember to write down the title and author, and I had to remember to bring that paper with me to the bookstore when I visited.  Since I might not remember the paper right away, I might miss my chance to buy that book in the store because a bookstore can only carry so much stock.  (See Dean’s blog on books as produce [which was my analogy before he stole it.])

When Amazon.com came into being, I still had to make the transition from the review source to looking up the book on Amazon and maybe ordering it or maybe not.

Now that I own a Kindle, I read the review (often on my Kindle), then click onto the bookstore, find the book (if it exists as an ebook), and download the free sample.  I don’t read the sample immediately, but when I do, I often download the entire book.  Or I go to my computer at that moment, and order the bound copy.  (The difference for me is this: I make margin notes in almost every nonfiction book I read, so I prefer a hardcopy.  I don’t like the notation system on the Kindle or the other ereaders that I’ve seen.  So I order bound copies of nonfiction, but generally order ebook versions of fiction.)

I am buying more books because I remember that I wanted to read them.  Anecdotal evidence shows that I’m not alone in this.  There’s another phenomenon that statistics are beginning to bear out, and again, anecdotal evidence shows that it skews young:  People who buy ebooks will often buy two copies of the same book for themselves—one bound copy as well as the ebook copy.  Sometimes they buy the bound book to have a permanent copy on the shelf, and sometimes they buy the bound book to read at home, and have the ebook copy to read on their phone or their ereader.

Also, statistics have shown that the number of people who read books grows each year, and has done so since the GI Bill in 1946.  Yes, I know, there was that one stupid Census “study” a few years ago that showed reading had decreased, but if you actually looked in the guts of the study, you realize that some “statistician” (and that’s in quotes because no real statistician would ever do this) looked at a decline in reading in 1000 households and extrapolated that data to show that reading declined in all of America.  For those of you who don’t understand statistics, let me simply say that 1000 households is so insignificant that it is closer to zero than it is to a recognizable percentage of the U.S. population.  In other words, it’s not something you can viably extrapolate over millions and millions of people.

So, if more and more people are reading, and they have greater access to books, then book sales will increase dramatically.  For the next ten years or so, books will be a significant growth industry.  But we will lose a lot of major publishing imprints and a lot of established publishing businesses. Why? See last week’s post, Fighting The Last War.  Most of established publishing doesn’t understand the upcoming change.  Many of those who do understand the change don’t know how to change their business model to capitalize on that change.

So smaller, more nimble companies will take advantage of the change.

For those of us who read, these changes will make no difference to our reading habits. We’ll still buy books for ourselves and friends. We’ll still discuss them and enjoy them and think about them.

For those of us who write, these changes will either be enriching or devastating depending on the way we view the world, how quickly we change, and whether or not we’re capable of adapting.  A lot of writers will see little or no change at all because they’ll continue to function in the old model—which will remain viable.

What most people don’t understand is that books aren’t changing, reading isn’t changing, and writing isn’t changing. But the delivery systems are changing.

Not very long ago, it used to be hard to get a book from writer to reader.  A writer could self-publish a book, at the cost of thousands of dollars, but still she wouldn’t be able to get the book into more than a few bookstores (if any).  Publishers put the book in physical form, then gave that form to their sales force. The sales force sold the book to actual distribution companies as well as to bookstores.  The distribution companies also sold to bookstores. But the distribution companies also sold to grocery stores and Wal-Mart and truck stops and all those off-market places, the places where people buy the most books.

The system was and is unwieldy.  Books are the only product that I know of where the producer takes all of the risk.  Unsold books can be returned to the publisher for full credit.  This returns system, instituted in the Great Depression to help bookstores stay alive, now costs the book industry millions of dollars.  For every book purchased, another book gets produced—and destroyed.  So built into the price of the book you buy is the price of an identical book that no one will read.

The returns were part of the business model, just like the difficulty of getting books into the distribution system was part of the model, just like the difficulty of getting new books noticed was part of the model.

With the personal computer, anyone could publish a book on their website, but that book would be hard to read.  Many people didn’t like to read an entire novel on their P.C.  No matter how hard innovators tried to change this, it didn’t work.

Then the ereader came along. The Kindle makes ereading easy. From the look of the other ereaders I’ve seen reading seems easy on those devices as well.

Ereaders are changing the distribution system.  Anyone can upload a novel to Kindle, and theoretically get to thousands if not millions of readers.  Same with other ebook devices.

The music industry went through the same distribution change with the advent of iTunes and other MP3 stores.  Now savvy musicians simultaneously release their new music in multiple formats—MP3, CD, and vinyl, as well as cassettes.  And the industry has changed accordingly.

In August, Taylor Swift’s latest single got leaked on the internet weeks ahead of the scheduled launch.  In the past, her music label would have sued the leaker (if he could be found) and any site that played the song.

Now all that the label did was scramble to officially release the song two weeks earlier than planned, so that people who heard it could buy an official copy.  The single leapt to Number One on iTunes within 36 hours.  Yet that excited Swift less than hearing the song played on the radio—the old-fashioned way of letting people know that the song exists.  The scheduled launch of the entire album is weeks away, but the new distribution systems make parts of it already available, which only seems to build excitement.

Such changes will—and are—happening in publishing now.  Things change by the week.  Some of those changes will occur in businesses other than publishing companies and writers.  The big distributors—Ingrams and Baker & Taylor, for example—will have to adjust to changes I can’t yet foresee.  Bookstores will need to scramble to become relevant.  They’ll need to find new ways to get readers into the stores to buy the books there.

I think Barnes & Noble is on the right track here with the Nook.  B&N offers Nook exclusives that you can only download when you’re in an actual store.  I’m sure that they’ll come up with other promotions as well, things that will keep the readers packed into the brick-and-mortar store at five o’clock on a hot Monday afternoon.

I am inspired by all these changes.  I knew about them before I left home on the aborted LA trip, but some of them didn’t sink in until I saw that constantly changing line of interested buyers at B&N in a small, relatively blue collar Oregon city late Monday afternoon.

This is an exciting new world for all of us touched by books.  If we can only keep up with the changes….

My business blog is one of those changes for me.  I would never have imagined doing this a year ago, and yet I enjoy writing each entry.  If I inspire you or make you think, click the donate button or make a comment.  I love hearing from you guys.  Topic suggestions always welcome.

“The Business Rusch: The Nook Inspiration” copyright 2010 by Kristine Kathryn Rusch.