My Colleague is Correct: Everybody in Hollywood Needs an eBook Strategy

My industry colleague Mike Shatzkin hit the nail on the head in his recent blog post.  Read this and then register for the conference on October 22, 2012.

[FULL LINK HERE]

Everybody in Hollywood Needs an eBook Strategy

Posted by Mike Shatzkin on May 14, 2012 at 7:50 am

As a result of spending my college days at UCLA, I had a handful of contacts in the Hollywood community when I came back East to live in 1969. When I started becoming familiar with New York publishing in the 1970s, I found myself, on occasion, shopping movie or TV tie-in projects. Armed with a script and a release plan, one could make the rounds of editors at the mass-market houses that had been assigned specific responsibility for this kind of acquisition.

At the time I was doing this kind of thing 30 or 35 years ago and more, the book business was growing wary of tie-ins to TV movies. They didn’t have the same promotional life as theatrical releases, even in those days when about one-third of the country was watching any network broadcast. Films that ran in movie theaters were definitely preferred as desirable book properties.

In the decades since then, the link between Hollywood and New York publishing has not exactly been severed, but it certainly hasn’t strengthened. One agent I spoke to told me that interest from Hollywood can definitely help raise the profile of a book project being peddled in New York, but the same agent agreed that the tie-in sale, where a script is novelized to just take advantage of the exposure the title and story will get through the movie, is all but dead.

Another agent, one with strong Hollywood connections through his office, had a slightly different point of view. He says it is still “humbling” to see how much being tied to a movie or TV show (“or even radio”) can “move the needle” on a book sale.

To the extent that the agent who believes in the power of Hollywood exposure to move books is right, the relative reduction in interest by New York publishers only increases the opportunity for Hollywood entities who exploit publishing through ebooks (and judicious and selective use of print) on their own.

(I recall two specific deals from my past relevant to this post. In around 1977 or 1978 I sold the book tie-in rights to a TV movie called “Cotton Candy”, which was produced by Ron Howard. In 1985, I sold the rights to two books to tie into the third “Nightmare on Elm Street” movie: one was a novelization of the first three films and the other a heavily-illustrated “making of…” book. I’d say the “Cotton Candy” deal today couldn’t possibly happen and “Nightmare”, which went to a major publisher, would be a real long shot.)

New York’s interest in Hollywood-originated content was, of course, centered on big properties. Hollywood’s enthusiasm about getting a book deal was often not very great. It didn’t add a ton of revenue (big publishing money for a big movie was small money to the movie producer) and the “promotion” done by publishers was trivial compared to what the movie studios did for the film.

In fact, there were often rights issues that got in the way. Even if the screenwriter had conceded the tie-in rights to sell the script, the studio might still be required to get clearances on the novelization, which would be a nuisance for a book project that often had annoyingly tight deadlines and not much benefit. If the screenwriter had held the tie-in rights and was the one selling to the publisher, it could become a bureaucratic nightmare to get art and logos from the film, which would be controlled by the studio, to promote the book.

New York’s incentives were often too limited to interest Hollywood. Hollywood’s unpredictability on things as basic as release dates, as well as the diminishing likelihood over time that any particular movie property would enjoy enough theatrical success to give real legs to the tie-in book, made systematic efforts unproductive for publishers. There haven’t been dedicated tie-in editors for decades.

But digital publishing changes many things. The relationship between Hollywood and the book business, because of the changes brought on by ebooks, will almost certainly be one of them.

In the digital age, what it takes to succeed as a publisher are access to commercial properties to publish and an ability to let an audience know an ebook of interest to them is available. Those are the core requirements. Everything else can be put together from services, and they can be put together one project at a time (although most people in Hollywood aren’t really aware of that yet.)

A Big Six CEO told me last week that the two core skills and competencies that publishers require are “editorial”, picking the books and developing them, and “marketing”, letting the interested public know the book is there. This CEO would be happy to outsource just about everything else. Starting where this executive wants to end up — with commercial properties in hand and an ability to tell an audience about them but with no overhead or organization to support — is essentially where Hollywood entities get the chance to begin.

Things have changed in Hollywood too. Digital tools make it cheaper and easier to make a movie, just like it is now cheaper and easier to make a book. But, just like book publishers, producers of Hollywood content find the growth in competition mushrooming. The corrolary to the fact that making movies can be cheaper is that promoting them is that much harder and, much more than decades ago, every revenue stream counts, even pretty small ones.

The change in both industries means that Hollywood has enormous opportunities through the digital publishing world, as soon as they figure it out (which we plan to help them do).

There are some early signs that this is beginning to happen.

The most ambitious project we’ve become aware of so far comes from Warner Brothers Digital Distribution. They’ve announced their Inside the Script series that will issue 300 classic scripts (think “Casablanca”) as ebooks, starting with a release of four titles. Doing an entire program enables them to take a templated approach to creating the ebooks, which will cut their costs of making really good products. Whether classic scripts will sell robustly is an open question, of course. But the cost of the experiment is low in a Hollywood context, and they gain the additional benefit that their classic films get a shot of recognition and reader-adrenalin which can only increase Netflix views and DVD sales.

NBC has established NBC Publishing to begin to exploit this opportunity. Michael Fabiano, the NBC VP who is the General Manager of this operation, says that “In general, text will come from titles already published, direct relationships with authors and, in some cases, from the staff of NBC News. We will also utilize a network of professionals as needed.” They make it clear that NBC will continue to work with established publishers. (Left unsaid, but I’d assume: they’ll work with established publishers for projects that have a big print component or where they can get substantial advances.)

ABC has a venture called ABC Video Books. This is being done in conjunction with the publisher they own, Hyperion. They position the initiative as “a new storytelling experience, enhanced with ABC video.”

Thinking about this has led me to believe that every network, every studio, every producer, every agent, and every screenwriter in Hollywood needs to have a digital publishing strategy. If fledgling novelists with no Hollywood presence can blog and tweet their way to commercial success, and some do, certainly a Hollywood-developed story would have an even better chance. Novelizing a screenplay (which is just one of a number of ways to do a Hollywood tie-in as an ebook) isn’t a trivial job, but it isn’t a massive one either. And publication as an ebook can be done for less than the cost of a few lunches. Even cheap lunches.

Broadly speaking, there are two categories of opportunity here. One is for legacy brands: all the stories (like “Casablanca”) that have been made famous over a century of film-making. Publishing scripts or novelizations are the simplest things that can be done. Why not publish all the Seinfeld or All in the Family scripts as ebooks? How would they sell? We don’t know, but the cost to find out is low and the availability of the book constitutes additional promotion, even of a long-established film or TV show.

The other category of opportunity is to build interest in a developing property. This will work better for projects that are about something substantial: a historical event or person or an issue (divorce, alcoholism, etc.) that people would search under looking for reading matter. If you’ve written a screenplay about Babe Ruth and Lou Gehrig and you’re trying to develop interest, you could do worse than publish the script or a novelization as an ebook. People searching their favorite ebook retailer for Babe Ruth or Lou Gehrig will find it (and this happens every day) and some will buy it. You can develop fans and a following. You can get revenue.

Of course, you can also get more creative. Characters can “write books” (an approach that has already been tried.)  And successfully.

Discussing these ideas with players in Hollywood today, I have learned that there is a growing awareness of the ease of ebook publication with another motivation as the catalyst. It is apparently easier for the owner of a screenplay to keep ebook rights out of their movie deal if they’ve already published the ebook. There would seem to be very little risk in that strategy. As we’ve seen, movie studios don’t much care about book tie-ins so they’re not likely to walk away from a deal because these rights have already been exploited. And book publishers are increasingly aware of self-published ebooks as a farm system. No book publisher would decline to buy rights to a book becoming a movie because an ebook had already been issued. (The owner would almost certainly have to pull the self-published ebook off sale, but that would be painless if a publishing deal made it worth it. That precise strategy has been executed by indie publishing star Amanda Hocking and her new full-service publisher, St. Martin’s.)

The first step for networks and channels and producers in Hollywood is to learn how to utilize their new revenue and marketing tool: ebooks. We’re going to jumpstart that effort with a Publishers Launch Conference at the Hollywood Renaissance Hotel on Monday, October 22 called “FILM/TV-TO-BOOK: How Digital Publishing Creates New Revenue and Marketing Opportunities for Hollywood”. We’ll be co-located withF+W Media’s Story World Conference. We think this could be the start of a long-running conversation.

Publishers Launch Hollywood will emphasize what the Tinseltown players can do on their own, which is the big opportunity presented by digital change. But we’ll also present players from the publishing world: both new entrants from the “ebook first” world and established players. None of them want to do every pr0ject Hollywood should do, but when they want to be involved, they’re still almost always the best path to the biggest market.

Enough Chatter About % Splits – Show Me The Money

Recently I was chatting with a well-established, successful literary agent at the London Book Fair.  A sharp guy who has seem much come and go in the industry, he was nonetheless somewhat perplexed by the confusing calculations that hide among the reeds in the swamp that is eBook royalties.  For the past couple years dedicated literary agents have been navigating mire as they negotiate with traditional publishers and take meetings with a new crop of eBook publishing enablers.  Some agents and authors have also connected with Premier Digital Publishing, a multi-format digital publisher (full disclosure: that would be me).

Whenever I meet an agent, the conversation quickly turns to the fog of numbers and percentages that are flying around the industry and the resultant challenge in figuring out the actual royalty an author receives.  I typically suggest a simple question, “Why don’t you just ask, ‘What is the net dollar figure the author receives on a $9.99 book and how often do we get a royalty report and remittance?”  Before you know it, we are huddled over a white piece of paper deconstructing percentages into cash royalties.

First, traditional publishers.  To understand how astonishingly bad these 75/25 eBook deals can be, one need only start at the beginning:

A traditional publisher employing a wholesale deal garners something in the neighborhood of 45% (+/-) of the agreed-upon suggested retail price.  On a $9.99 book, this is $4.50.  25% of this is $1.14.  Not too impressive.  If the publisher is employing agency pricing (which is a whole other story involving conversations with government law enforcement), the publisher receives $7.00 on the $9.99 book and pays 25% which is $1.75… better than $1.14 but certainly not case for celebration.

There’s another category that fits between wholesale pricing and agency pricing in which publishers receive approximately 35% of the suggested retail price along with promises of certain promotional or merchandising benefits.  In this case, the publisher receives $3.50 on the $9.99 book and pays 25% which is $.87.  The obvious assumption here is that the publisher took this deal anticipating that the number of books sold will be higher.

Now, all of the foregoing assumes a $9.99 price point.  At $.99 all the above numbers get cut in half.  A 50/50 deal is better (and some publishers are offering such to decidedly Tier 1 authors) but it still does not address the key point:

Content is king and without good content there is no business (ask the movie studios).  The creators of content must be properly rewarded for the content they produce.  Inefficient business models, horrifying levels of overhead and legacy systems are, essentially, a massive tax pad by the content creator who waits at the end of the line for what’s left over.  These creators are not assuaged with statements like “Oh, you need to understand this is just how it is.”  How is that fair?

When discussing percentages with potential eBook partners (or your existing publisher), the numbers can be confusing.  Authors, Agents and IP holders should ask this simple question; “What % of the retail price do I receive?”  If the answer isn’t over 50%, give us a call.  In our view, a “50/50” or “70/30” deal that yields the author or IP holder only 25% – 35% of the retail price isn’t such a good deal.  Then ask how often you get paid.  We pay monthly because we get paid monthly by eBook retailers. If you are not being paid monthly… who is being permitted to sit on your money?

“When the amount of time spent properly characterizing a problem approaches zero, the amount of chatter and Scotch employed solving the problem approaches infinity.”

Just ask “”What % of the retail price or net $ do I receive and how often do I get paid?   If the economics are satisfactory, then it’s time to dive into deal duration (why lock-up for 10 or even 5 years?), ancillary rights (why give up non-eBook rights?)  and recoupable or non-recoupable costs.  Those conversations are irrelevant if it’s a weak financial deal in the first place.

At Premier Digital Publishing, we deliver 50% of the retail price to authors, estates, IP holders, studios and small imprints.  That’s 75% of what we receive from our distribution partners.

I will now go answer my hate-mail.  😉

Microsoft and Nook Do A Deal

I live in Los Angeles.  I get up early – usually by 5:30 AM.  Still, that’s 8:30 AM on the East coast and before I was awake my inbox was already brimming with news and questions about Microsoft and Barnes & Noble forming “NewCo” and stocking it with Nook, College Textbooks, access to Windows 8 and, oh yeah, $300 Million.

What’s up?  Whaddayya think?  What’s your take?

OK, rather than send 100 emails, I figured it was easier to just make a post…

My response is fairly straightforward: Barnes & Noble have made no secret about plans to spin out Nook.  This makes sense and we’ve seen this play before: Kobo split from Borders in the aftermath of the unfortunate collapse of the retail division.  Kobo was summarily acquired  last November (2011) by a Rakuten, a Japanese e-commerce company, and they are now growing, particularly in international markets.

What we didn’t see coming was Microsoft.  Why not?  First, the Nook technology team is located in the SF Bay Area not far from Google HQ and Nook, as we all know, is now essentially an Android Tablet.  Second, Google is making a play (ha, ha) in all forms digital content dubbed Google Play.  So, the logic goes, when Barnes & Noble opens the window and lowers Nook to the ground, Google would be there as prince charming (and, for dramatic effect, holding one of those oversize checks that golfers get for winning a tournament.).

That could still happen… maybe… or not.

Microsoft owns 17.6% of th new enterprise which has an implied valuation of approximately $1.7 Billion.  Now, Google could buy the remainder with less than 3% of it’s current cash.  One would assume, however, that Microsoft has a placeholder option in the form of a right of refusal to buy the rest of “NewCo” if another bidder comes along.  Either way, Nook is in good shape to keep driving and be a formidable force in the digital publishing space.

So, for now the story is this: Barnes and Noble receives a welcome capital infusion to the tune of $300M, and Microsoft receives a Windows 8 partner – and it badly needs such partners.

Time for coffee.

Good News: Pew Research Says eReaders Lead to Reading More (Duh)

I have always believed that in digital media accessibility is a key driver of consumption.  Through that lens, I am not at all surprised to read that the Pew Research Center has found that there is a correlation between accessibility to quality eReader devices, available eBooks and increased overall consumption (reading more books).

  • Consumers equipped with mobile phones with better user interfaces TXT more
  • Consumers equipped with early dial-up Internet service read more about things they enjoy
  • Consumers equipped with High Speed DSL or Cable Modems consumer more online video

It should not be such a newsflash that consumers equipped with easy to use, economically priced, connected eReader devices would, (OH MY!) read more books.  The report is summarized in the today’s news:

More Americans are reading e-books than ever before, on more kinds of devices, a new reportfrom the Pew Research Center has found. That news won’t come as a shock, given the rapid spread of e-readers and tablet computers and the rise of e-content. What might be a surprise, though: The report contains good news for print lovers, too. Readers of e-books like to read in all formats, they favor print books for sharing and to read to children, and on average they read more books over all than print-only readers do.

“They’re heavier readers. They’re more frequent readers,” said Lee Rainie, director of the Pew Internet & American Life Project, the group behind the report. “These devices have allowed them to scratch that itch.”

The report, “The Rise of eReading,” analyzes findings from a survey of almost 3,000 people nationwide in November and December 2011, along with data from follow-up surveys of about 2,000 people in January and February 2012. Twenty-one percent of respondents reported, as of February 2012, that they had read an e-book in the past year. That figure was up from 17 percent in December 2011, before the holiday surge in purchases of e-readers and tablets. The average e-book reader said he or she had read 24 books (electronic and print) in the past 12 months. Those who didn’t read e-books averaged 15 books over the same time period.

This should surprise no one and excite everyone in the digital publishing space (such as me).

How do you Read?

I was scanning this morning’s news when a summary by Frédéric Filloux, a Guardian-UK reporter / blogger (is there a difference anymore?) caught my eye:

In the past 12 months, I’ve never bought fewer printed books – and I’ve never read so many books. I have switched to ebooks. My personal library is with me at all times, in my iPad and my iPhone (and in the cloud), allowing me to switch reading devices as conditions dictate. I also own a Kindle, I use it mostly during summer, to read in broad daylight: an iPad won’t work on a sunny cafe terrace.

There you have it.  A “fully enabled” 3 device eBook aficionado who is probably does not realize the automatic sync-to-location feature has single-handedly changed his left.

Are you a 3 device junkie?

I am now.