Kindle: The Greatest Publishing Business Model Since Gutenberg

In the final week of May 2009, BookExpo America—the vast annual book publishing conference—took place at the Javits Convention Center on the West Side of Manhattan.

According to the MediaBistro blog GalleyCat, a panel featured 56-year-old editor Tina Brown (Tatler [UK], The New Yorker, Talk, Vanity Fair and currently TheDailyBeast.com) railing against Amazon.com for its lowball pricing of books for the magical new e-reading machine, Kindle.

“$9.99 is a paltry, pitiful sum,” Brown proclaimed.

Brown is a great editor, but she doesn't know squat about book publishing or business models.

The History of Book Printing in 154 Words

• First came the monks, scribes, scriveners, copyists, illuminators—those dedicated men who saved the knowledge of humanity by creating one-off books by hand. They painstakingly handwrote every individual letter and word, and these manuscripts were bound as books for the rich and powerful.
• Next came woodblock printing. Type was hand-carved on blocks of wood, enabling a printer to create multiple copies of single pages that were assembled and bound into books.
• Then c. 1450 AD, Johannes Gutenberg invented movable type, where individual letters of the alphabet were cast in metal and assembled into sentences, paragraphs and pages. After the pages were printed on a press, the type was disassembled to be reused over and over again.
• Seven centuries later came the next great breakthrough in book publishing, Amazon’s Kindle machine. It catapults Jeff Bezos (Amazon's CEO) next to Gutenberg and Jason Epstein (inventor of Print-on-Demand) in the pantheon of book publishing innovators.

The Genius of Kindle
My wife, Peggy, is a member of a local book club. Members read one book a month and meet to discuss it. In May 2009, the chosen book was F. Scott Fitzgerald’s classic “The Great Gatsby.” Could I get it on my Kindle? Peggy wanted to know.

I fired up the Kindle and “shopped the Kindle store.” The title was available for $9.80, and I ordered it. Within 30 seconds, it was in my reader. I handed it to Peggy, and she started reading “Gatsby.”

To Tina Brown, $9.80 is a, “paltry, pitiful sum.” I maintain it's more than fair—a hell of a deal for Peggy, for Amazon.com, for the publisher (Scribner) and F. Scott Fitzgerald’s estate. Here’s why:

Great for Peggy:

• She had the text in her hands within four minutes of telling me she wanted it.
• Amazon offers to send a sample of any text for free, so the reader can get a feel for the story and how the author writes.
• The cost: $9.80 billed to my credit card.
• We didn't have to make the rounds of local books stores, racking up time, gas and parking charges at Borders or Barnes & Noble in the hopes one of them had a copy.
• If special ordered, it would have taken several days, and we would've racked up more time, gas and parking charges to retrieve it.
• Had we ordered the printed book from Amazon, the price of the printed book would have been the same, $9.80, but I would have to pay extra for shipping.
• If we wanted a used edition, we could have gotten one from $2.82 to $3.87, but I would have had to spend time shopping, waited a week or more for delivery, and that delivery fee probably would have wiped out the savings.

Great for Amazon.com:

• Zero cost. This “Gatsby” is a smidgeon of electricity—no paper, printing, binding, shipping, warehousing or reserve for returns, no hurt to the environment. The $9.80 (minus a few cents for the wireless transaction, which Amazon.com pays) drops right to Amazon’s bottom line.

Free Money for Scribner:

• “The Great Gatsby” was first published April 10, 1925. After a slow start, the title has been racking up sales for 85 years. This is free money, for which Scribner has done nothing.

Great for Authors:

• This was also in the pockets of the author’s grandchildren, Bobbie and Cecelia Lanahan, with zero deductions for projected returns.
• Amazon.com is keeping old titles available, something no bricks-and-mortar bookstore can possibly do—not even the giant boxes of Barnes & Noble or Borders.

Kindle vs. Mainstream Book Publishing
Today, the main business of mainstream book publishers is gobbling up vast quantities of energy in order to turn trees into landfill. Books are printed on paper, bound, jacketed and shipped on a fully returnable basis to the booksellers that ordered them. The leftover books are sent to warehouses.

This bizarre consignment system—unique in retailing—is detritus leftover from the Great Depression that nobody has had the cajones to change in 80 years. Bookstores do not need to pay for books for 30 to 90 days, which means the publisher takes all the risk. As a result of this nutsy-fagen consignment system, somewhere between 35% and 40% of all books shipped to booksellers are returned to the publishers’ warehouses, whereupon one of three things may happen to them:

1. They are reshipped to booksellers that sold out their original orders.
2. They are sold as remainders for a tiny fraction of the original cost and shipped to bargain bookstores.
3. They are pulped and become landfill.

Consider the 20 Separate Costs of a Printed Book
Once the editorial process is finished, the book goes to the printer. Here are the costs:

(1) Paper (for text); (2) boards for binding; (3) paper for jacket; (4) printing the text; (5) printing the jacket; (6) printing the binding; (7) binding the book; (8) jacketing the bound book; (9) carton, cartoning and packing the books; (10) shipping to bookstores and warehouses; (11) warehousing; (12) unpacking and shelving books at bookstores; (13) carton, cartoning and repacking unsold books (35% to 40%) of original order; (14) shipping returned copies to warehouses; (15) unpacking and shelving returned books; (16) shipping returned books to remainder stores and/or (17 ) to the pulping company; (18) pulping; (19) sending pulp to landfill; (20) plowing the pulp into landfill.

Consider the Cost of Kindle
(1) An automatic, wireless phone call and data transfer from Amazon’s server to my Kindle.

Steps 1 to 20 above are unnecessary. Whether it be an 85-year-old backlist title like “Gatsby” or a current one, the system is hugely profitable for everyone concerned.

For example, I was watching Chris Matthews’ “Hardball” on MSNBC. He was interviewing Newsweek’s Richard Wolffe (a regular guest) about his new account of the 2008 election, “Renegade: The Making of a President.” (Obama’s Secret Service handle during the campaign was Renegade.)

I grabbed my Kindle, “shopped the Kindle store,” and “Renegade” was in my hands before the interview with Wolffe was finished. My cost for this e-book (which has a publisher’s msrp of $27) was $14.30—less than Amazon is charging for the hardcover edition ($15.60 plus shipping).

Other Kindle Benefits

• The battery lasts for hours. Once the type is flecked on the reading surface, no further electricity is used. Only the turning—or changing—of the page requires a tiny shot of juice. A drain on the battery does occur when you turn on the wireless to communicate with the Kindle store, but you learn to make the transaction quickly and turn off the wireless component.
• My old Kindle can contain 200 titles. The new Kindle holds 1,500 titles—enough to take care of a cross-country flight, as one journalist wrote. My friend Gordon Grossman cruises the world six to eight months a year. In the past, he had to lug 60 pounds of books to the ship and store them in his cabin. Now he's a Kindle devotee.
• Instead of lugging a cumbersome hardcover book around, Kindle is a pocket-sized jewel just 5-1/3" x 8" and weighs a mere 10.2 ounce. With the push of two buttons, I can change the font size from tiny to H-U-G-E.
• With 300,000 titles in print (so far), I can have two, three or more books going on my Kindle at once. It remembers my place whenever I switch to a different title.
• No risk for the publisher. In the main lobby of BookExpo were two giant banners touting Dan (“The Da Vinci Code”) Brown’s upcoming novel, “The Lost Symbol.” Doubleday is printing 5 million for September release. Let’s say the thing is a crashing bore—as dense and ponderous as the Tom Hanks film of “The Da Vinci Code.” Under the consignment system, Doubleday must take back all unsold copies. If 4 million of the things come back, Doubleday and the environment will take massive hits. The only guaranteed profits in book publishing come from the e-book (if there is one).

Note to Tina Brown
Before mouthing off on subjects you know nothing about, study the business model. Do the arithmetic first.

But before anything, I suggest you spend time doing the arithmetic on your Web site, The Daily Beast, which regurgitates the day’s news, usually hours after it appears on Drudge, Huffington or The New York Times.

The Daily Beast is (1) free and (2) has one teeny ad for British Airways.

Tina, how do you pay your bills? I understand Barry Diller is your sugar daddy in this venture. Dare I ask what’s in it for Barry?

55-WORD BOOK REVIEW
Note: In the May 8, 2007, edition of this e-zine, “The Book Business: An Industry of Whiners,” I proposed an online (for-profit) book service, QuickieBookReviews.com, that features short reviews (55 words) with one * to four ****—just like movie reviews. You are invited to submit a 55-word review of any really good book that readers would enjoy, or a not-so good book that will save them time and money.

[NOTE FROM D.H.: The review below is a pan of a book mentioned in the text above that was wildly hyped by Chris Matthews and Andrea Mitchell of MSNBC as a favor to their “regular contributor to MSNBC,” Richard Wolffe, Newsweek’s senior White House correspondent. They endorsed it without having read it, and I feel royally ripped off by Matthews and Mitchell.]

(0 stars) "Renegade: The Making of a President" by Richard Wolffe. “Renegade” was Barack Obama’s Secret Service handle during the campaign. A raw, woefully unedited stream-of-consciousness rush job of psycho-babble blather that jumps all over the place, only briefly coming alive with the description of the win in Iowa. The subtitle, “The Making of a President,” demeans the magnificent oeuvre of Teddy White. Crown, 368pp, ISBN-13: 978-0307463128, $26, hardcover. —DH 06-09-09.