By Stephen Windwalker
Editor of Kindle Nation Daily ©Kindle Nation Daily 2010

Update: Apparently Random House does feel strongly that it has legal arrows in its quiver to fight this development, and Random House spokesman Stuart Applebaum told Publisher’s Marketplace this morning, “We are disappointed by Mr. Wylie’s actions, which we dispute.  Last night, we sent a letter to Amazon disputing their rights to legally sell these titles, which are subject to active Random House publishing agreements.  Upon assessing our business options, we will be taking appropriate action.”

The power shift in the publishing industry continues, and we’re seeing some signs that there’s an A-list of players holding the trump cards: authors, agencies, and Amazon. Today’s announcement of Kindle exclusives for 20 contemporary classics may seem like a small addition to the Kindle catalog, but if you have any doubt about the significance of The Wylie Agency establishing an imprint to become a direct publisher of ebooks, take a look at Wylie’s client list at http://www.wylieagency.com.

With publishers trying to hold ebook royalties in the 25 per cent range, authors and agents calling for 50 per cent, and Amazon offering 70 percent in direct publication deals, it’s not surprising that a powerful literary agency like Andrew Wylie’s has, to quote a Publisher’s Marketplace post this morning, “made good on threats to create his own company to distribute ebooks by making deals directly with etailers rather than traditional publishers.”

There’s no word yet either on Wylie’s financial arrangement with Amazon or on the royalty rates that Wylie will pay to authors and their estates, but I’ll speculate that Wylie will be paid 70 percent of the Kindle list price by Amazon and that royalties will fall somewhere between 50 and 60 percent of the Kindle list price. Now that such a deal has been made, it will add significant traction, in terms of the financial consequences of various alternatives, to two major battles: the debate over what standard ebook royalties should be, and current and prospective legal battles about who owns ebook rights for backlist titles.

Random House, which owns the print rights to many of the newly published ebooks, sent a letter last December to literary agents claimed that it owned digital rights to the entire Random House print catalog even if those rights weren’t specified in the publisher’s contract. While that sounded like a warning salvo from Random House foreshadowing litigation against authors and agents’ disaggregation efforts concerning ebook rights, the publisher has yet to file any lawsuits and has instead focused on negotiating agreements with agents to publish backlist titles in digital form.

Today’s announcement is likely to strengthen the hand of agents and authors in such negotiations, and perhaps even empower them to decline further negotiations in favor of direct deals if publishers continue to demand a 75-cent donation from every dollar of ebook proceeds.

By Stephen Windwalker
Editor of Kindle Nation Daily ©Kindle Nation Daily 2010

Here’s wonderful news for serious Kindle readers, and another stunner for the publishing industry!

Amazon has just announced a hugely significant deal  to publish $9.99 Kindle exclusives of, for now, 20 of the great classics of contemporary literature from, mostly, the second half of the 20th century, and the publisher is a literary agency, The Wylie Agency. This news will have earthshaking ramifications for the Kindle catalog, for readers, and for authors, publishers, and literary agencies: yes, The Wylie Agency is a literary agency, not the publisher John Wiley, and this represents the first major foray by a literary agency into the world of Kindle content publishing, but not the last, but more about that later.

For now, let’s look at this from the point of view of readers. We’ll share the full list with you in just a moment, but as you look it over and download a few of your favorites, imagine how the success of these books on the Kindle platform will affect the authors and authors’ estates behind other backlist classics. There will be plenty for them to sort out with agents and publishers, but this first trickle of backlist classics is bound to create a flood:


The 20 books being published by Odyssey Editions and made available exclusively on Kindle are:

• “London Fields” by Martin Amis
• “The Adventures of Augie March” by Saul Bellow
• “Ficciones” (Spanish Edition) by Jorge Luis Borges
• “Junky” by William Burroughs
• “The Stories of John Cheever” by John Cheever
• “Invisible Man” by Ralph Ellison
• “Love Medicine” by Louise Erdrich
• “The Naked and the Dead” by Norman Mailer
• “Lolita” by Vladimir Nabokov
• “The Enigma of Arrival” by V.S. Naipaul
• “The White Castle” by Orhan Pamuk
• “Portnoy’s Complaint” by Philip Roth
• “Midnight’s Children” by Salman Rushdie
• “The Man Who Mistook His Wife for a Hat” by Oliver Sacks
• “Fear and Loathing in Las Vegas” by Hunter S. Thompson
• “Rabbit Run” by John Updike
• “Rabbit Redux” by John Updike
• “Rabbit is Rich” by John Updike
• “Rabbit at Rest” by John Updike
• “Brideshead Revisited” by Evelyn Waugh

The deal comes as authors, agents, and publishers are battling to sort out a new ebook royalty structure against the backdrop of Amazon’s new 70 percent royalty structure through the Kindle Digital Text platform.  As I wrote in a post yesterday, “Publishers who try to lowball authors and agencies on ebook royalties will find themselves sending their established authors in the direction of the DTP or to innovators like Open Road Media and RosettaBooks.” Obviously, we can now add to that list The Wylie Agency, one of the world’s most successful, venerable, and controversial literary agencies in the world, with 30 years of history, offices in New York and London, and a Hall of Fame client list.

The Wylie Agency has created its own publishing imprint, Odyssey Editions, which Amazon’s release said “is the first digitally native literary imprint launch of its kind.”     





“As the market for e-books grows, it will be important for readers to have access in e-book format to the best contemporary literature the world has to offer,” said Wylie, President of Odyssey Editions. “This publishing program is designed to address that need, and to help e-book readers build a digital library of classic contemporary literature.”

Writing in the current issue of Poets and Writers Magazine, Grove/Atlantic senior editor Jofie Ferrari-Adler  said, “In case you don’t know, people do not like Andrew Wylie. I would not go so far as to say that most people in the publishing industry actively want Andrew Wylie to die, but I would sat that most people in the publishing industry are excited by the idea that Scott [Moyers] may take over for Andrew Wylie some day. Now that I think about it, hiring Scott probably proves that Andrew Wylie is some kind of genius.” Well, I think we can turn up the dial a bit both on the publishing industry’s dislike for Andrew Wylie and on the notion that he may be some kind of genius, but for anyone who is thinking that publishers will stop accepting Wylie manuscripts now that the agency is a competing publisher, best to take a look at the Wylie client list. More likely the major publishers will be begging Wylie not to take those A-list clients directly to the Kindle without the publishers’ profitable (if only for the publishers) intermediation.

This is the first time any of these titles have been available electronically, and all of the books are exclusive to the Kindle Store for two years, Amazon said in its news release. It will be interesting to see how publishing insiders cover the deal, and how long it takes them to find out the structure of royalties for affected authors.

The 20 e-books published by Odyssey Editions carry an elegant and unified new look designed in collaboration with Enhanced Editions (www.enhanced-editions.com), Amazon said. Features include:

• Newly-designed jackets
• Interior typography adhering to best conventions of book design and reading on Kindle
• Colophon, book covers and series design optimized for the Kindle screen

Thanks to Glitrbug who wrote in with a concern that we might be disappearing from the Kindlesphere based on an email that arrived in her mailbox today!

I got a note from Amazon Blogs saying your blog wasn’t going to be offered anymore and that I would get a refund. What’s up?

Well, thank you, but au contraire!!!

Kindle Nation Daily will remain very much alive!

I’m guessing that perhaps you received an email about the discontinuation of Amazon’s in-house Kindle blog, called the Kindle Daily Post, yes? Here’s the copy that I received of that email, and as you can see it is not called Kindle Nation Daily! Close, but no cigar….

But thanks for checking,
Steve

Amazon Blogs
to WindwalkerBooks, account-update

show details 3:02 PM (6 hours ago)

Dear Loyal Customer,

“Kindle Daily Post” has been discontinued and is no longer available on our store. We apologize for any inconvenience this has caused and will refund your account for a one-month subscription. We appreciate your business and encourage you to visit amazon.com where you will find a great selection of more than 9,000 blogs along with over 100s, newspapers and magazines available for reading on Kindle.

Thank you for shopping with us and hope to see you again soon.

Sincerely,
Amazon Kindle Team

• © Kindle Nation Daily 2010 – Originally posted to Kindle Nation Daily 7.21.2010.

By Stephen Windwalker, Editor of Kindle Nation

• Before November 19, 2007, few if any of us read books on a screen and even fewer of us knew anyone who really, really wanted an ebook reader. 
• Within a year Amazon’s first venture into manufacturing became the “bestselling, most wished-for, most gifted product” of the world’s largest online retailer, and the Kindle has maintained that status for over two years now. Some complained the the first Kindles were ugly or clunky, but Amazon quickly achieved dominance by showing the world that, for serious readers, an unbeatable combination of connectivity, catalog, and convenience trumped color and coolness. 
• By achieving sector dominance in 2008, Amazon gained the seat at the head of the table in determining the ebook reader feature set for its eventual competitors. 
• By showing the world in 2009 that ebook readers and ebooks would quickly become dramatic growth sectors, Amazon ensured that it would have plenty of “competition.” 
• And by rolling out Kindle app after Kindle app in late 2009 and 2010 while many competitors failed to achieve launch or market traction, Amazon turned the most serious competitors — i.e., its real competitors for readers’ eyeball time and mind share — into partners. 

How could Kindle books be outselling iBooks listings on Apple’s own device? Well, Amazon disclosed Monday that its sales units ratio of paid Kindle books to hardcovers was 143:100 for the second quarter, and then told us that the ratio for the month of June alone was 180:100. While there is a certain amount of guesswork involved in trying to solve this equation for April and May, there would be a tidy and logical symmetry to a rough solution of 106:100 in April, 143:100 in May, and 180:100 in June. The specific numbers are less consequential than a general arc showing month-over-month gains of 25 to 30 percent. A significant portion of this dramatic growth in content sales, of course, would have come from the dramatic growth in Kindle unit sales.

But if we keep in mind the difference between a high percentage for monthly Kindle unit sales growth and the much lower percentage gains that this would cause in the installed base of the Kindle hardware, the data is likely to send us looking for an answer to this question: what else changed in the second quarter? Only a little head scratching should be necessary before it occurs to us that the April 3 launch of the iPad and the Kindle app for the iPad was the other big event, and it may well be that, among that subset of iPad owners who read anymore, the Kindle Store’s 20:1 advantage in non-public domain catalog titles is helping to drive the dramatic increase in Kindle content sales and, possibly, at least temporary dominance of ebook market share on the iPad. I don’t want to speculate that Steve Jobs’ wardrobe range is predictive of his approach as a bookseller, but while there may be retail businesses where carrying an unlimited supply of just a few items works well, bookselling is not one of them.

Apple and Amazon both benefit from intense customer loyalty, but observers and investors alike would do well to keep in mind the no-brainers that (1) most of Apple’s customers are also Amazon customers, and (2) most Amazon customers consider Amazon their favorite bookstore or, at the least, their favorite online bookstore. And, as analyst James McQuivey notes in a Forrester post today, “this game isn’t even about which devices ultimately sell. It’s about which bookseller captures the customer today for the long run.”

McQuivey says “Amazon intends to be that bookseller,” and in agreeing with his assessment I would also point out that the company has created an ebook ecosystem that backs up good intentions with the same kind of extremely compelling search, sort, and browse infrastructure that, over the past 15 years, has won and cemented Amazon’s position as the world’s largest and most favorited bookseller, not just online but anywhere. Apple’s comparative inexperience as a bookseller is evident not only in the fact that the iBooks paid catalog is less than one-tenth the size of the Kindle Store’s, but also in the frequently noted customer experience that, even within that much smaller iBooks catalog, it’s difficult to find anything beyond its oddly named Top Charts listings.

Six or seven years ago, had many of us in the book trades been able to see clearly ahead to 2010 without knowing how specific individual companies would adapt to changing technologies, we might well have been as bearish about Amazon’s future as about the future of traditional book publishers, newspapers, or brick-and-mortar bookstores. If Amazon hadn’t gone the ebook route, but we were still somehow on the way to publishing industry consultant Mike Shatzkin’s prediction, quoted in yesterday’s New York Times that “within a decade, fewer than 25 percent of all books sold will be print versions,” then Amazon would be a company whose core business was dying.

It seems clear instead that (1) Amazon did see that future, even if without so aggressive a timetable; (2) neither the company nor CEO Jeff Bezos panicked; and (3) by 2003 Amazon was hard at work turning the nightmare of the declining print-book future into plans and blueprints for the Kindle hardware and, equally important, a Kindle content ecosystem that is either enormously attractive (or too powerful to ignore) both to readers and to a growing share of authors and publishers of many, if not all, shapes and sizes.

Just to drill down on the basics here, Amazon’s much-discussed “tipping point” press release on Monday, when combined with other data, makes it clear that:

• The largest bookseller in the world, with over 20 percent of the US bookselling market, is now selling 180 paid ebooks for every 100 hardcovers.
• That ratio is now rising dramatically each month, and we are well on the way both to Random House president Gina Centrello’s recent prediction that eBooks will be 50 per cent of book sales in five years and to Shatzkin’s prediction that “within a decade, fewer than 25 percent of all books sold will be print versions.”
• Amazon’s market share in ebook content continues to be dominant. Some publishing industry insiders were quoted anonymously late last year saying that Amazon’s ebook content market share then was significantly higher than 90 percent, and numbers released by Hachette Book Group on July 6 and Amazon on Monday provide us with the tantalizing if anecdotal conclusion that 76.1 per cent of James Patterson’s ebook sales came from the Kindle Store. The overall market share could be even higher, given the fact that Random House is not represented in the iBooks store and that most of the titles in the Kindle Store are not available anywhere else as ebooks.

Could Amazon maintain a dominant majority market share among ebooks even as ebooks rise to a majority share of all books sold? There are many serious reasons why this seems somewhere between unlikely and impossible, but if you are betting against it, you are betting against a company that has prepared itself brilliantly for the future ecosystem of the book business:

• Amazon stands ready to compensate authors and publishers with greater royalties and gross margins (70 percent in both cases) than they have ever experienced before on increasing sales volume, but it will also compete directly with publishers through its digital text platforms (DTP) for Kindle and CreateSpace and future incarnations of its AmazonEncore imprint. 
• Publishers who try to lowball authors and agencies on ebook royalties will find themselves sending their established authors in the direction of the DTP or to innovators like Open Road Media and RosettaBooks. 
• Publishers who decide to take their books and go home would be hard-pressed to become anything other than irrelevancies. Brick-and-mortar booksellers will probably never be able to hold their noses and make the kind of bundling deals with Amazon that I’ve suggested in this recently republished post, but as Shatzkin noted in this blog piece last week it is hard to see how else they can survive. 
• If traditional publishers and brick-and-mortar bookstores die off and leave orphaned rights or surplus books behind, where do you think these assets will end up? Amazon Marketplace, the DTP, the Kindle Store, and CreateSpace, as likely as not.

“To the extent that the publishing industry press or industry insiders are offering a perspective that may become the basis for industry strategy, it seems counterproductive if not downright destructive to assemble factoids that lead their audience to miss the basic point here, which is that with each new wave of data the ETA of the tsunami that is the digital publishing transition gets moved up,” I wrote earlier this week. “Major publishers who convince themselves that there was anything insignificant about Amazon’s press release may soon find themselves looking up only to discover the tsunami arrived yesterday.”

Publishers should take Jeff Bezos’ proclamation of a tipping point, but what about investors? Complaints have been widespread this week that Amazon may be trying to mislead investors by providing incomplete information. Personally, I suspect that the company simply decided to stick with its longstanding policies of playing definitive item-by-item sales numbers as close as possible to the vest and steering clear of offering interim updates to quarterly guidance. By releasing the information contained in the press release Monday Amazon remained true to those policies but provided some information that long-time followers of the company and its practices may be able to triangulate and spin into gold.

Was Amazon’s press release tantamount to raising its guidance?

Only one thing is certain: we’ll find out after the market closes on Thursday. I will be tuning in here to the webcase of the earnings conference call that will take place that day at 5 pm Eastern.

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