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Publishers Buoy Bookstores

On Sunday, Media Decoder’s Julie Bosman reported on a promotion from Algonquin Books which allows consumers to get deals on e-books if they buy hardcopies in specific brick and mortar stores. The publisher’s hope is to buoy their endangered compatriots by driving consumers to physical book stores.

It seems publishers are trying to boost sales of physical copies by giving away digital copies. To people of my generation and younger, this tactic seems almost willfully ignorant of the direction media is heading. Sales of e-books are growing at an astronomical rate: around 200% growth in 2010. And while many of us, myself included, love the sensory experience of reading a real book… they’re just not very practical.

In fact, book stores (which again, I love) aren’t very practical. They’re not practical for the consumer or for the industry. To the consumer, it’s so much easier to download an e-book than to drive to the store, scour the shelves, ask the snarky sales associate for help, find out they have to put it on order, and finally come back a week later to actually purchase the darn thing. For the industry, the physical locations and the sales staff are extra expenses that arguably add to the cost structure of the industry without adding to their value proposition. In fact, typically publishers give book stores a 50% discount on the retail price of the book. That means, half of the cost of a book I buy at Barnes and Noble, for instance, is for my shopping experience! (Granted, Amazon gets a 30% share of their ebook sales.)

So why do publishers love physical book stores?

One popular explanation is that these old publishing houses are just stuck in their ways and respond defensively when threatened by change. I find this explanation to be lazy but also a little bit true. On the one hand, business models are hard to change. The publishing industry has been operating under one model for decades and they can’t completely change their ways over night. But because their old model is threatened by these shifts in consumer behavior, publishers must change or die. And they are changing! The fact they are using digital copies to lure buyers to brick-and-mortar stores shows that they are attempting to confront the issue. However, this response does seem defensive, rather than pro-active.

The Media Decoder article touches on one major reason why publishers would support book stores:

“If physical bookstores continue to disappear, publishers worry, their books will not have an opportunity to be discovered by customers who wander into a store without knowing what they want to buy. “

At first glance, you might be confused by this quote. Surely consumers are equally capable of discovering books online without knowing exactly what they’re looking for. The real problem is that the internet is a lot more crowded than a brick-and-mortar bookstore. Big publishers have a big advantage in book stores. Because of their existing relationships and their large portfolios, big publishers are infinitely better positioned to get their books into stores (and displayed in prominent positions) than an independent publisher. In other words, book stores are a key marketing tool and a source of advantage for big publishers.

But I think publishers are fighting a losing battle. They should look at the music industry and the state of the major record labels for a glimpse into the future. Brick and mortar stores are all but dead, because the only thing they added to the industry was extra cost. Yet the major labels have survived, despite the proliferation of independent labels. But they fought the digital revolution tooth and nail and it cost them dearly. Publishers should learn from what the labels did wrong and what they did right and start embracing the higher margin digital publishing business.

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