Mike Shatzkin

• Mike Shatzkin is the founder and CEO of The Idea Logical Company, co-founder of Publishers Launch Conferences, and co-founder of Logical Marketing.
• Mike grew up around publishing under the influence of his father, and has been involved as a professional in the publishing industry in some shape or form for nearly 50 years.
• Mike’s specialty is “change”, particularly as it relates to digital strategy and the publishing supply chain.
• His most recent book, co-authored with the late Robert Riger, is entitled The Book Business: What Everyone Needs to Know®.

• https://www.benbellabooks.com/
• https://www.idealog.com/
• http://publisherslaunch.com/
• https://www.logicalm.com/
• https://www.ingramspark.com/
• https://www.amazon.com/
• https://www.ingramcontent.com/publishers/print
• https://global.oup.com/academic/product/the-book-business-9780190628031?cc=us&lang=en&

Glenn Yeffeth: Welcome to the Building Books Podcast. I'm Glenn Yeffeth, publisher of BenBella Books, and on this podcast we will talk about ideas, authors, and how publishing really works.

Glenn Yeffeth: I'm delighted and thrilled to have today Mike Shatzkin, someone I've admired and whose blog I've followed for many years. He's been involved with publishing for nearly 50 years. He's the founder and CEO of The Idea Logical Company, co-founder of Publishers Lunch conferences, and co-founder of Logical Marketing. As I said, I've been a favorite reader of Mike's blog for many years, and I can attest that his insights into dynamics of publishing industry are a must read for anyone in publishing. I'm thrilled that he agreed to be on the podcast.

Mike Shatzkin: Happy to be here.

Glenn Yeffeth: Thank you, Mike. All right. Well, a lot of issues I want to get into, but let's just start with a little bit about your background, how you got into publishing.

Mike Shatzkin: I was born into it. It was really sort of the path of least resistance. My father was a publishing executive working at Viking Press when I was born; working at Doubleday for 10 years, that took me to my early teens; working at Macmillan through high school, McGraw-Hill through college, and then he went out and started his own business just about the time I graduated from college. So after I got done with the McGovern campaign, I went to work for him.

Glenn Yeffeth: Wow.

Mike Shatzkin: I don't know if anybody else would have had me or not. We had two service companies: one was a production company that served as a production department for publishers, and the other one was a sort of a forerunner of all the distribution companies, called the [Two Continents 00:01:43] Publishing Group. We had a sales force warehouse, the whole distribution setup on behalf, at that time largely, of UK publishers that wanted to do some direct publishing in The States rather than selling rights. That was sort of the shift that was taking place in the '70s when we were doing this.

Mike Shatzkin: So I got trained by my dad. And then when those businesses didn't quite make it because ... All sorts of reasons why small businesses don't make it.

Glenn Yeffeth: Right. [crosstalk 00:02:18].

Mike Shatzkin: And starting in 1979, I found myself very knowledgeable about a lot of things and somewhat connected because my father had had a career in publishing, so I knew a lot of people. And I've been gainfully unemployed ever since.

Glenn Yeffeth: Now what do you focus on these days?

Mike Shatzkin: Well, I tried to shift my focus away from publishing to climate change about two years ago.

Glenn Yeffeth: I remember reading about that.

Mike Shatzkin: Yeah, I'm not being as successful as I wanted to be. A number of publishing projects keep sticking their heads above the parapet, but most of them have to do with helping people navigate the new opportunities that are available in publishing. What's changed is that you don't need to have an organization anymore. Every piece of publishing that is scalable is available for rent.

Glenn Yeffeth: Right.

Mike Shatzkin: So what you do need is a manuscript and a vision. It helps if you have some cash, although you can probably even get by without much of that. And you need to understand digital marketing, which is something that nobody even thought about 10 years ago. But all of those things together mean that anybody with a manuscript and certain amount of traction in any vertical area of interest can actually publish successfully using a variety of tools, including prominently those that are offered by Ingram and Amazon.

Glenn Yeffeth: So am I hearing you argue that publishers are obsolete now?

Mike Shatzkin: No, they're not obsolete. Matter of fact, the publishing function is required, and as a matter of fact, that's one of the things which I think is still part of the unpaved road. What Ingram and others can provide is all of the things that cost a lot of money and require overhead. So the warehouse, the billing system, the sales force, all of those components.

Glenn Yeffeth: Right.

Mike Shatzkin: But they require direction. As a matter of fact, I remember Ingram did a book, and I'm going to blank on the name of the publisher of the book, that was, don't know, $650. They sold several thousand copies of it. So it was a phenomenal commercial success. And Ingram was very proud of having provided all the capabilities, including the printing capabilities to make it all happen.

Mike Shatzkin: But when you investigated it a little further, you found out that the self-publisher hired Bruce Harris, who is a rough contemporary of mine, and a very experienced publishing brain who created Harmony Books for Crown in the 1960, was president of the Random House sales organization for 20 years. And Bruce was the guy who figured out that the books, if I'm getting the price right, should be $650, not $500, not $800; what should be in it, what the targets market were, all of the things that require publishing expertise to aim and channel and utilize the resources that Ingram has in order to execute. And that function is always going to be necessary, and the single book publisher does not ... Generally speaking, going to have that.

Glenn Yeffeth: Of course.

Mike Shatzkin: But what is different is that a publisher does not need to own all of the means of production and distribution and invest in them at fixed cost. Everything is variable cost and everything is scalable.

Mike Shatzkin: Now what that does mean to the commercial publishers, which is not good news, is that you don't have to have commercial intent anymore. There are individual authors that are more interested in their fame than they are in money. There are cause organizations of all sorts that are from the AARPs of the world to chambers of commerce.

Glenn Yeffeth: Right, of course.

Mike Shatzkin: ... Right, who have reasons to want to publish things that are not primarily commercial or financial.

Glenn Yeffeth: But does that really hurt publishers, because that stuff is not that commercial?

Mike Shatzkin: No. Well, first of all, you can't read two books at once, at least not simultaneously unless you have your brain cleaved. So while you're reading ... While a thousand non-commercial books come out and sell as many as 100 commercial books would have, whatever they do sell is occupying the brain and the budget of someone.

Glenn Yeffeth: That's a good point.

Mike Shatzkin: Okay, so what's happening is that the business is getting bigger, but the business that's available for commercial exploitation is getting smaller. And that is something which I believe is inexorable. And in fact if you think about it, I don't know if these models have changed, but when I was ... 25 years ago AMACOM, American Management Association, had a business book model that basically was, "Oh, you give speeches? You can sell your book at speeches? We'd be glad to publish your book. We'll give you a $3,000 advance. Of course, we want you to buy 5,000 copies over the course of the next two years at a 50% discount, but you'll have these books. You'll make money selling them at your speeches, and we'll make money publicizing them." And that business isn't there anymore because nobody's going to make that deal anymore when they can do it themselves. They can get commercial distribution themselves. They don't have to guarantee 5,000 copies purchased. They don't have print any inventory, which they used to need a publisher to do for them, but they don't anymore because Ingram's got print on demand. So they don't even have to print them.

Mike Shatzkin: So all of these opportunities where the publishers were essentially gatekeepers and you couldn't get into bookstores, and you couldn't get into libraries, and you couldn't get yourself available without a publisher to allow you through the gate, that's no longer true. So that changes the landscape considerably.

Glenn Yeffeth: And looking big picture, the world is evolving and things are going to be different, I will say that writing today, I don't think we're there yet. I'll just say my personal experience we picked up, I can think of three self-published books that all sold at least in the five figures, so very successful self-published books. We took them in and did a factor of 10 increase using the marketing, using better distribution. What you're pointing at, I think, is where we're heading. I think we're not there yet.

Mike Shatzkin: Oh, no, no. We're definitely not there. And also it's not all one thing or the other.

Glenn Yeffeth: That's right, that's right.

Mike Shatzkin: This is about the ratio. There was always self-publishing. There was self-publishing 50 years ago. It just didn't sell any books. But there was such thing as Vantage Press that would charge you whatever they would charge you to print up some books for yourself. And you're absolutely right that the self-publishing world is a farm system. And that smart publishers are looking at self-published efforts for opportunities where the self-publisher is not getting the full commercial value out of the project. But the problem is ...

Mike Shatzkin: It's easier to see in genres. Let's take something like romance fiction. Publishers had a great business with romance fiction for years, but then authors discovered that they could get a large part of the market for themselves for $3.99 eBooks, and that they would make more money on $3.99 eBooks that they sold themselves than they were making on $12 and $15 paperbacks that the publisher was selling. And then the publisher now ... Publisher can't sell eBooks at $3.99 and be in business. They have overhead.

Mike Shatzkin: So what you're seeing, I believe, is that publishers are retreating from the genre fiction field, and it is being increasingly taken over by self-publishers or fledgling publishers that don't have overhead and can live in a low-priced world.

Mike Shatzkin: So what's happening is you start to see a shift of what works for publishers and what doesn't work for publishers, and where's their farm system, and where's their changed economics that make it very hard to do anything at all.

Glenn Yeffeth: Now, Mike, that's definitely right. You're definitely seeing that. So let's talk about Amazon. And sometimes when I read your blog, it's almost like you feel Amazon is a natural monopoly, that unless somebody does something, they will basically just increasingly take over the entire book business. Is that how you see it?<

Mike Shatzkin: That's a little bit of an extreme notion. What I see in Amazon is this is similar to the problem that I was describing for publishers earlier. Amazon's not trying to make money from the book business. And that is an unfair advantage over everybody else who is trying to make money from the book business. So back in the 1990s when Amazon was just starting, there are two tales that are worth retelling or recounting because they are instructive. One is that when they first started, it was really on Ingram's back. Amazon, Jeff Bezos, moved to Seattle because that put him two and a half hours from Ingram's Rosemont, Oregon warehouse. And what he knew was that any book that was in that warehouse, and he knew which books were in it because they had a microfiche ... Any book that was in that warehouse, if he ordered today, he would have it tomorrow. And if you ordered it from him, he'd be able to ship it tomorrow, and you'd have it the day after tomorrow. So all the books that were in Ingram's warehouse he could put on his website and say, "You will have this in three days." And he didn't have to own the book.

Mike Shatzkin: And not only did he not own the book, you paid him, he ordered it from Ingram, Ingram shipped it to him, he shipped it to you, he kept the money, and 45 or 60 days later he had to pay Ingram.

Glenn Yeffeth: That's a nice deal.

Mike Shatzkin: So not only did he not have to have any inventory, he didn't have to have any money to pay for inventory. The inventory for him was cash flow positive. That's how Amazon started. But then, Ingram found that ... Ingram suddenly said, "Well, wait a minute. If Amazon can do this, anybody can do this. We're the ones doing this." So Ingram formed something they call I Squared S Squared, I2S2, Ingram Internet Support Services. And they went to every publisher and they said, "Look, we can," ... Every bookseller. "You don't have to let Amazon take this business. We can handle this business. You can handle this business. We'll give you the database, you put it up online, people order the book. You tell us, we ship it to them with a box that has your name on it, and you're in business." And Amazon at that moment cut their prices dramatically and took all the profit out of selling books.

Glenn Yeffeth: I did not know that. That's interesting.

Mike Shatzkin: And so the bookseller said, "Hey, I've got a business to run here. I don't have time to sell books at no margin." So they can have this crummy little direct marketing business, which is after all, in 1998, two percent of the business or three percent of the business. It doesn't really matter. I've got a bookshop to run. So that was the first thing when Ingram just basically did this discounting.

Mike Shatzkin: Now at about that same time because the consciousness of the discounting thing was very slow, as a matter of fact, it's still not completely appreciated that they're not in this for profit, and that's why they have an unfair advantage. But about that same time there were a lot of publishers who were saying this is crazy. Why are we letting Amazon take this middle man position? With the public, we'll take the middle man position. We'll form a consortium of publishers and, in fact, books online was Barnes and Noble's initial attempt, was a partnership with [Burnisman 00:14:56]. People forget that.

Glenn Yeffeth: Oh, I didn't know that.

Mike Shatzkin: Barnes & Noble bought [Burdlesmun 00:15:00] out in about 2001 or 2002. So the publishers thought, "Well, this should be our business." But the fact is they would never have been able to compete because the publishers would never have formed a book selling consortium whose objective was to break even on selling books and collect names and customers so they could sell them something else in the future.

Glenn Yeffeth: Right.

Mike Shatzkin: And because that was Amazon's game plan, no one could compete with them to sell books. So similarly, it's very hard to compete with them to publish books because they're not really trying to make money publishing books. They're trying to beef up their hegemony in the book field by having books that other people don't have, which makes them the first place to shop. And all of this is very sensible from their point of view, but very hard to compete with if you're Barnes & Noble, and very hard for a publisher to do much about in terms of leverage because Amazon's now half your sales and you really have to just cooperate with whatever it is they want.

Glenn Yeffeth: Right. You know, I've noted that Amazon has been creeping up the eBook prices. They probably have the credit card number, pretty much, of every book buyer in America at this point. So I think they are starting to turn to greater margins. The discounts do seem to be dropping to me.

Mike Shatzkin: Yeah, well, I don't claim to be privy to Amazon's inside thinking. I really don't know. I have enormous respect for them, and I think that ... I wouldn't call what they've done necessarily at natural monopoly, but they have, in my opinion, legally and ethically built an engine which naturally grows and grows and grows, and which is very difficult to compete against if you want to be a profitable book publisher or a profitable bookseller because they are both a publisher and a bookseller with another model that doesn't require them to be profitable on each book that they sell.

Mike Shatzkin: So it's a very tough situation. My own hunch is that ultimately the government will decide that they can't be the bookseller they are and be a publisher too, that that is an integration which is threatening to free-market economics. But so far of course they haven't succeeded in publishing like they have in bookselling, partly because the rest of the world won't play. Barnes & Noble won't buy a book that's published by Amazon and put it on their shelves. Independent booksellers won't buy a book that's published by Amazon and put it on their shelves. So they had to abandon the notion of being general publishers and they stick to areas where they can sell most of the books.

Glenn Yeffeth: But as their share grows, the cooperation of other is less and less needed.

Mike Shatzkin: Yes. Well, as their share grows, it gets harder and harder for people to say no to whatever is the proposition they're putting forward.

Glenn Yeffeth: Right. So what are your predictions about Barnes & Noble?

Mike Shatzkin: I don't see a happy end to this story. I think Barnes & Noble is fighting two trends that will not stop. One is that more and more people are getting their information from eBooks or they're reading from eBooks. I don't buy the idea that they've leveled off or slipped. I think that's an accident of who's keeping the records. I think that commercial publishers have seen their eBooks sales level off because they're still trying to sell eBooks for $10.99 and $13.99 and $16.99. But I think if you counted in all the eBooks that Amazon's selling at $1.99, $3.99, and $5.99 that aren't being counted by publishers because they're not visible to publishers, you would find that eBooks are still growing.

Mike Shatzkin: But the second thing that's even more important, and this will not stop, is that people ... And it's not just books. People are buying more and more of what they buy online rather than stores, and that is not something that has to do particularly with books, although books are a prime example because there are ... I think Ingram has 16 million titles in the lightning database. So Ingram can deliver you any one of 16 million books tomorrow without having a single copy on the shelf today, right?

Glenn Yeffeth: Right.

Mike Shatzkin: No store can deal with ... I mean, stores are getting smaller, not bigger, right. So the big store used to sell 150,000 titles when there were only 400,000 in print. That was impressive, and it was a big chunk of what was available. Now 100,000 titles out of 16 million in print, and the store doesn't sell 100,000 titles anymore. The successful independent stores are more like 10 or 20 or 25,000 titles. So the fact is if you know what you want, you're crazy to go a store to look for it because you'll go online, you'll find it, you'll have it in a day or two or three. Very, very few people need a book in the next five minutes.

Glenn Yeffeth: And if you do, you can get it as an eBook.

Mike Shatzkin: And if you do, you would get it as an eBook. So again, you're buying online. So Barnes & Noble, who is primarily a brick and mortar seller of print, that's what they are, that's where they have competitive advantage against everybody else, they're in a shrinking market. And there will be less and less demand for print and there will be less and less likelihood that the person who wants print is going to go a physical location to buy it.

Glenn Yeffeth: So why hasn't Amazon opened up bookstores?

Mike Shatzkin: Because Amazon has a supply chain that makes opening a small store ... They can sell you the book. When you come online to buy it, they don't care whether it's sitting on a store shelf in Columbus Circle or a warehouse in New Jersey. They know where it is. And if you bought it and you want it, they can ship it to you from wherever it is. So from their point of view, it's not all the inventory that is in their stores would necessarily have been in their possession if they didn't have the store, but not all the inventory that's in their store is there only because they have a store either. So they just have ...

Glenn Yeffeth: Right, so their costs are inherently lower.

Mike Shatzkin: They have all sorts of competitive advantages and they're not just selling books in those stores. They're selling Prime Memberships. They're reaching audiences to convert them. You know, when Nook started, it succeeded because ... In 2007, Amazon launched the Kindle. So everybody who was exposed to buying online was exposed to the Kindle and had a chance to buy the Kindle. And Nook came out in 2008 or '09. That time is 10 years ago. There were still a lot of people who bought a lot of books, but didn't shop online. They bought in stores. And those people were not aware of the Kindle. So when they went into a Barnes & Noble store and they saw the Nook, this was a new thing and it was a good thing, and it worked for them, so they bought it. So initially, they were in a world where there were uneducated book buyers who didn't know about buying online, and Barnes & Noble could introduce the Nook to them. This does not exist anymore. Yeah, it does exist. I'm sure there's 10% or 20% or even 30% of the book buying market that just never goes online, but it's not enough to build a business on.

Glenn Yeffeth: Yeah, no, that's right. So if you were made head of Barnes & Noble, do you feel like there's things you could do, or you feel like they are just in an nonviable condition.

Mike Shatzkin: I would manage them to take out the maximum amount of cash as I closed it down over a period of time, which is what I think they're actually doing.

Glenn Yeffeth: That's sad. Okay.

Mike Shatzkin: But having said that, I expect Barnes & Noble to be here three years from now. I don't expect what happened to Borders to happen to them. I think that they will ... They have been shrinking. They have been shrinking the number of stores, and they've been shrinking the amount of shelf space for books in the stores, and that will continue to happen. But they will still be a significant purchaser of books from publishers for the foreseeable future.

Glenn Yeffeth: Right. Thinking about Amazon getting into publishing and the failures they've had because of distribution, but I do wonder if there's another factor, which is ... Now, I'm not talking about self-publishing, but actually publishing authors with advances and so on. It's a very time-intensive, people-intensive, messy business that doesn't seem to fit what Amazon does well, which are these economies of scale and leverage. I wonder if just it's not a great cultural fit for them being in publishing.

Mike Shatzkin: I think that's right. And I think that their interest in publishing is probably very capable of being disposed of. In other words, I don't think publishing per se interests them. I think that what publishing offered was a chance to be further disruptive in the book space and to get books ... And I think at the time, remember they started out by hiring Larry Kirshbaum.

Glenn Yeffeth: I remember that.

Mike Shatzkin: ... And who is a master at getting very, very big books and working with very, very big authors. And I think that Amazon figured that if they could have three or five of the top 15 bestsellers ... Were Amazon books, that that would either give them exclusive ... That would drive more traffic to their website or would force the stores to start to accept Amazon books as part of what they would sell even if they didn't want to. And they saw that there were strategic reasons. It wasn't a matter of a little more margin or a little more profit. It was strategic. And I think they abandoned it because it didn't work strategically. What does work strategically is genre publishing, which they've doubled down on, which tends to need less of the kind of individual sculpting and hand-holding that you were talking about. It's a little more formulaic and a little more just drop it into the slot and it'll go.

Mike Shatzkin: But I think your characterization is correct. They don't want things ... Amazon is not designed to have a lot of human effort invested in individual book projects.

Glenn Yeffeth: Right, right. What would you advise the big publishers or maybe the medium-sized publishers? What's the best way of thinking to thrive in the next 5 to 10 years?

Mike Shatzkin: Well, I think that there's a few things. One is that specialization really helps because what you need to do is you need to own some customers. You need to build lists and reach so that reaching end consumers is more efficient for you than it is for the guy down the street.

Mike Shatzkin: Now so the most obvious thing is, I don't know, if you publish books about The Revolutionary War in The United States, I'm picking a subject out of the air, and you manage to build lists of 75,000 who are interested in books about The Revolutionary War, then when you find the long-lost memoirs of Benedict Arnold and have a scoop, you have a way of reaching an audience that is virtually free that can launch the book. Now generally speaking, that's non-fiction, although it's also fiction. Certainly romance ... It's in genre fiction.

Glenn Yeffeth: Yeah, Tor does ...

Mike Shatzkin: Yeah. Tor, I did a piece on Tor, a blog post, in around 2010 or 2011. And this was in the fall. And prior month Tor had sent out 600,000 emails, of which 200,000 had been opened, of which 40,000 people had taken an action, which they had asked them to take. That was almost 10 years ago, certainly more than five years ago. So you've got to believe those numbers are multiples of that now. Well, that's very, very powerful. And the average person or a maybe a very good publisher that doesn't have that kind of list is not going to be able to publish science fiction the way Tor is going to be able to do it. I think that's really writ large. Not many people are going to have email lists of millions.

Mike Shatzkin: But on the other hand, it's building up that ... It's not so much that the public needs to know you for what you do. You need to know the public one-by-one for what they do so that you can reach them through the websites they're at, through emails et cetera, et cetera that are cheap, that you can hit them over and over again. And you need to publish in the areas that enable you to use those lists.

Glenn Yeffeth: See now, in the non-fiction space, that inevitably drives you to going beyond books. You know, you're looking like F+Ws, and now you're doing magazines, you're doing conferences for craft people or what have you. It's almost like a mini version of the Amazon strategy that once you've got that customer, you want to sell them more and more things because building a database of emails is expensive and maintaining it and all of that.

Mike Shatzkin: You're absolutely right. And there is going to be ... I think events are going to be of increasing interest to publishers for that reason. I think even management is a skill which is going to be able to be pedaled to publishers. But even there, I mean, F+W did what they did, and I worked for them for ... Digital book world was my baby, and I did it for seven years. Even there, things don't last forever. Digital book world is trying again under new ownership, new management, and new vision this October. But my suss is the digital book world is something whose time has passed, that there was a period that started in the middle 1990s that is sort of over where publishers are suddenly, "Holy smoke, this digital thing is important. I need to know more about it."

Mike Shatzkin: And we've gone from there to a period where publishers know a lot about it, and the big [crosstalk 00:30:27] ...

Glenn Yeffeth: It's just book world now.

Mike Shatzkin: Exactly. It's part of what we all do. There's no such thing as a book publisher with no digital consciousness. The big publishers have all hired people that have extensive experience with digital in various places. So all of the reasons for having conference and educational forums and so forth that were really powerful in the '90s and in the first decade of this century and even up until maybe five years ago are really not as compelling anymore, and it's not ... As you said, it is not digital book world, it's book world. And digital is part of book world, and I think that's right.

Glenn Yeffeth: So let's talk a little bit about audio. I mean, I've been a huge fan of audio since the days you have to put the cassette tapes in and pop them out and put them back. But now it seems like everyone is getting into audio, and it's exploding.

Mike Shatzkin: Yes, that's right.

Glenn Yeffeth: Thoughts on that?

Mike Shatzkin: Well, I think that we can thank the iPhone for that primarily. I think that audio and video have completely changed positioning in terms of technology and access. In 1990, the simplest, easiest thing to create, store, and distribute was text. And anything that was more complicated, that was not text, required additional steps. So a photograph would be on film. You would have to convert the film to something that ... First to half-tones initially, right, so that you could distribute them some other way. And the video, nobody had the bandwidth to deal with ... Even images, bandwidth was a problem in the beginning, right.

Mike Shatzkin: But also the creative part was challenge as well. When we fast forward to now ... And actually, printed words are the hardest thing. The easiest thing is for me to take out my cellphone, record you audio or record you video, and throw it up on Facebook and it's published. And so there's a combination of ease of production and ease of distribution, which has changed the pecking order of things. And as a ... I'm not an audio consumer because I've always been a hearing-challenged person. Although even that's changing with iPhones that are now connected to my hearing aid by Bluetooth so that the audio experience ... I mean, whenever I watch videos I watch them on my phone because it's easier for me to get the audio through my phone than it is for me to hear things through the imperfect microphones of the hearing aid.

Glenn Yeffeth: Right, that's interesting.

Mike Shatzkin: But now audiobooks would be totally accessible to me, whereas they would have been very clunky in the days where I would have had to wear a headset or earbuds, which I couldn't use because my hearing aids are plugging up my ears already.

Glenn Yeffeth: Right, right.

Mike Shatzkin: So all these things, the technology has changed the pecking order of things, and now you're seeing, and you will see more and more audiobook originals where the words ... My terminology is words on a flat surface because that could be paper or a screen. Words on a flat surface are a step away from an audiobook in certain cases. Well particularly if ... For example, I think the day will come that something like this podcast, you would have a transcript and people would have the choice of reading it or listening to it. And I think that that's going to become pretty much automatic. And people will understand, well, if it started as a podcast, the transcript will be a little bit imperfect, just as they'll understand that if it started as a written thing, and I'm using text-to-speech, that the speech is a little bit stilted compared to if real human beings were talking.

Glenn Yeffeth: That's right. That's right.

Mike Shatzkin: So where it originated will matter, but it will not be as confining as it used to be where it took real production to move to another way of presenting the content. And now that it doesn't anymore, everything is much more ubiquitously available, and because audio was expensive and hard to produce. And now it's cheap and easy to produce, we're really seeing a difference in the amount of audio available.

Glenn Yeffeth: And the flurry of podcasts and the tremendous success of podcasts has kind of trained the listener to be more tolerant of less than perfect audio in the sense that when you get a Stephen King audiobook, the narration is excellent, it's perfect. Whereas in a podcast it's more casual and it's more um's and ah's, and people are accepting that.

Mike Shatzkin: Yeah, well I think that it's always been about the content. I mean, it's much more important that this be something that I'm really interested in and something that I'm benefiting from receiving the information about. That's more important than the form to most people. Now there are certain minimum levels of delivery quality that are necessary. Something that isn't perfectly copy-edited is one thing, something where every fourth word is misspelled is another thing, right.

Glenn Yeffeth: Right.

Mike Shatzkin: Something where the audio is imperfect is one thing, something where it drops out and you lose 10 seconds every now and then would be another thing. So there's definitely our minimum standards of quality, but I think you're right that we're now ... It used to be that it didn't get to you unless it made it past the gatekeepers who enforced the quality. You didn't used to have the choice of listening to the slightly lesser quality thing, but it was more about the subject that you were more interested in because it never got to you. Now everything can get to you, and I think that's another thing that created the change.

Glenn Yeffeth: No, that makes a lot of sense. I'm just going to read a quote from you that you put on your blog. You say, "There's no Sword of Damocles, but it's fair to say the publishing business just keeps getting a little bit harder day-by-day." Now as someone in publishing, that almost sounds optimistic because we felt the Sword of Damocles was about to fall. Do you feel like things have stabilized a bit or do you think there are some very dramatic upsets ahead?

Mike Shatzkin: Well, there definitely are some step increments ahead. I mean, there will be the day that Barnes & Noble says that we're closing half the stores or whatever it is. And there will be the day when one of the Big Five buys another of the Big Five. Or there will be the day that one of the Big Five announces that it's no longer going to maintain its own warehouse and all of the sales organization that it has, but it's going to offer that to one of their competitors or do it with Ingram or do it some other way. So there's definitely going to be ... We're not done with major changes. And I do think that if you look, I don't know, 10 or 15 years from now, it's hard for me to see five major publishers competing for the big books. It seems to me there would be one or maybe two. But that's not next month, and it's something which will happen over a period of time, so it won't seem so sudden when it happens, and it won't all be in one fell swoop.

Mike Shatzkin: But we are headed for a world where I think we are going to see, unless the government does something about it, Amazon creating dozens and dozens and dozens, or hundreds and hundreds and hundreds, or thousands and thousands and thousands or little bookstores or places where books are on sale alongside of other things and make it more and more of kind of a specialist thing for somebody to have a book store that isn't that, that isn't purely utilitarian and driven by algorithms. And that will have happened because more and more of the books will be bought online as everything else is being bought online.

Mike Shatzkin: One of the things that I really see and I don't think about the book business per se, but I live in a doorman building in New York City, and in the last five years the doorman's job has completely changed. There are, I would say, 100 units in our building. There are hundreds of packages coming in every day.

Glenn Yeffeth: Oh, of course.

Mike Shatzkin: The package room, which used to be virtually empty, is now virtually full. The doorman job, he has to log in each of these things because I get an email. It's a system. The building has a system. They log in the package, they put it in the system. I get an email that tells me there's a package for me. That used to be something that happened once a week. Now it's three times a day or twice a day with all the various things that get delivered. So you just see and you see ... And the other thing that I'm seeing, which we're seeing all over the country, is empty storefronts.

Glenn Yeffeth: Right.

Mike Shatzkin: And they're everywhere. And my local Democratic club has had a meeting, and specific exploration of all the empty storefronts, and we're talking about midtown Manhattan here. We're talking about the center of foot traffic and commerce, let alone these malls that lose an anchor store or two or three key stores, and then suddenly they're deserted.

Mike Shatzkin: So we're saying some big changes that are not all about book publishing, but we live in a world that we share with a lot of other industries and things. And all of that is changing, so I don't think we're out of the woods.

Glenn Yeffeth: Do you think that the publishers understand the situation or do you feel like they're in some denial?

Mike Shatzkin: That's a really hard question to answer because there's a lot of publishers in the world. I think that people in jobs are seldom incented to take a long view, and they are ... Most big companies report to shareholders in some way on a quarterly basis. Most employees are reviewed on an annual or a semi-annual basis. Very, very few employees have a 5 or 10 year window on their jobs. So people just don't think that way anymore. And actually, that's another place where Ingram is really different from almost anybody else in that they sort of celebrate their 5 and 10 year employees, and they have ... It's still a family business. That's not true in most situations.

Glenn Yeffeth: You're right.

Mike Shatzkin: And in fact, Ingram did Lightening, which is a core element for their business where they can print of any one of 16 million books. It took seven years for Lightening to become profitable. There's no corporation reporting quarterly that can take seven years to develop an investment initiative before it becomes profitable. So I think that I wouldn't say that the employees or publishers are in denial. I think that most of them, if you said, "What do you think is going to be the situation 5 or 10 years from now?" ... Would recognize that it's going to be pretty drastically different. But I don't think that most of them think that matters much in their day-to-day job. They have to get the advance on this spring list. And if that's harder because three stores that they were counting to take 20 copies each have just gone out of business, then that's the way it is and you've got to figure out a way to get past that and find a few other stores to take some additional copies.

Mike Shatzkin: But that's how people think and that's how they work. And I think that even at the management level, people know how many years it is until their retirement. They're not really thinking about where the corporation's going to be five years after they're gone.

Glenn Yeffeth: That's very interesting. And I find it fascinating what you say about Ingram and the long-term employees because I think big companies ... One of the things that I went through when I went to business school and all the business reading I did since then, it's all about, well, people are used to staying in a job for their whole career or maybe two jobs in a career. Now every 18 months or two years they're going to shift jobs. And we talked about that like that was just a given. But it's actually very problematic and very disruptive. And I'll tell you at BenBella, in our tiny little firm, even our more junior people have been around five years. And there's tremendous advantages to creating an environment where people don't have to move to get a raise, don't have to move to deal with some issue that's bothering them. They have a real environment that people are going to stay, that adds huge benefits to the firm.

Glenn Yeffeth: I have a lot of authors that came from other publishers who are like, "I was orphaned. My editor left." Things keep turning over. And I feel like we don't take that seriously enough as an issue.

Mike Shatzkin: Well, I think that you're definitely right that there's circumstances, and BenBella's obviously one where the value of the long-term relationships is tangible and commercial and real. The fact that you're an exception doesn't change the reality.

Glenn Yeffeth: No, you're right.

Mike Shatzkin: Right. But it still doesn't make you the rule. And I think that in general that many companies say, "Well look, Random House just offered a buy out to any employee over 60 who's been with the company for more than 10 years or something." That was announced yesterday.

Glenn Yeffeth: I saw that.

Mike Shatzkin: And that's because they're seeing that they've got people making $130,000 a year that two people making $40,000 could more than replace in their eyes. That's another thing. They're probably doing fewer titles. This is something that's also changed. When I was a kid in the business, one of the ways to tell somebody who really did not understand the economics of publishing is they would say, "We're going to do fewer books and make more money," because it was just not true. Until about 1995 or 2000, maybe 2005, every big house made some cash on almost every book they published because big houses always sold a couple thousand copies of just about everything they did. So if you didn't print stupid and you didn't pay a ridiculous advance, you might not have made the 40% that you figured was what the overhead is that every book has to make in order to be profitable, but you made something.

Mike Shatzkin: And in fact, my dad used to encourage an exercise where they'd say to a publisher, "Okay, you said a book's not profitable unless you make 40%. Well, here's my suggestion. Go back and look at all the books you did last year and take out the books that didn't make 40%. They made 5, they made 8, they made 14, 22. Take those out. Imagine you didn't publish them. Redo your numbers." What do you find out? You lost your shirt because the total volume that was done on the ones that made 40% wasn't enough to run a business on.

Mike Shatzkin: So now this is no longer true because the environment has become so competitive that big publishers can do a book and also sell 125 copies. And no matter how you do the math, you're losing money if you only sell 125 copies. So it is no longer true that the more books you publish, the more money you'll make, which was the case for many, many years. So publishers now can very intelligently say that we did 100 books last year, this year we're doing 85, and we're going to do just as well. Or we're going to do better or we're going to do better than if we tried to do 100 and did 15 books that were crappy that lost money. So that is something that's changed not just in my lifetime, in my recent lifetime.

Glenn Yeffeth: Right. But of course a lot depends on your ability to pick the 20 books that were the wrong books to acquire.

Mike Shatzkin: Yes, well, that's always part of it. I mean, there's no question that picking the right books is ... That's a requirement that does not change.

Glenn Yeffeth: Right, right. Well, I was very much influenced by your post about ... Because I could feel the tremendous urge to do fewer books. We're going to do them better, we're going to do bigger books. And that is a powerful psychological force that unless you do the math, it can overwhelm you.

Mike Shatzkin: Yes. I think that's right, and it's more gratifying to be able to spend more time and do more on a book. But the other thing it does is escalate risk because every book you do presents the possibility of that book hitting the jackpot. And if you do enough books, some books hit the jackpot that you didn't think were going to hit the jackpot. That might have been the one that you didn't do if you were a little more careful. So you have to be careful what you wish for there.

Glenn Yeffeth: That's right. That's right. And there is so much unpredictability, black swan quality, to this business.

Mike Shatzkin: Exactly.

Glenn Yeffeth: So if you had a friend, let's say, whose son wanted to start a publishing business or who started one, that started a publishing business, would you say, "I'll talk you out of it," or would you say, "If you do it, you ought to do it this way?"

Mike Shatzkin: I think starting a standalone book publishing business that is not anchored to some other organization or objective or product possibility, I think that's a real long shot. I've made a career of not telling people what to do, but telling people what I think and what I see because I think that circumstances are highly individual and people's talents are highly individual. And I just don't really want the responsibility of that.

Glenn Yeffeth: Of course.

Mike Shatzkin: But I would say that it is a very hard challenge to make a living as a standalone book publisher, and it's not going to get easier over the next 20 years. So it's a little bit like opening a blacksmith shop in 1925. And there are still some, right.

Glenn Yeffeth: Right.

Mike Shatzkin: I mean, they haven't completely ... There are still horses. They still need horseshoes, but it's not a growth industry.

Glenn Yeffeth: Right, right. One thing I will say is as the big publishers get more cautious and consolidate, I feel like the world has tilted toward a more flexible, smaller publisher who's willing to be more innovative.

Mike Shatzkin: Yes.

Glenn Yeffeth: So sometimes in a flat market where things are consolidating, if you're flexible and entrepreneurial enough, there can be opportunities, but it isn't easy.

Mike Shatzkin: No, I think that's absolutely right. I think that the big publishers have become structurally more and more risk averse. They keep looking for a more and more consensus about what they do. And so an editor doesn't bring it in and have a vision and just do it. The editor has to consult their colleagues. If the buy is big enough, they have to consult the sales department and the marketing department and the digital marketers, and everybody gets a piece of the decision. And if you can't bandwagon enough in the house, it gets shot down, whereas a single publisher with a vision and the ability to manage their organization can see opportunities as we've talked about in certain other cases, specific cases where you can see something that many big publishers won't necessarily see. I think that's right. I think that the change always favors flexibility and is always hardest for the bureaucracies, and big publishers are very big and they're very bureaucratic.

Glenn Yeffeth: Right. So I understand you've got an upcoming book, which hopefully we'll talk about more in the future on publishing. You just want to say a word about that?

Mike Shatzkin: Yes. I'm very excited about it, although also in a way sad about it. I coauthored a book with a dear friend named Robert Riger who was quite a prodigy. He was head of book of the month club and literally guild before he was 30. He ran Pimsleur language programs. He ran Spark Notes for Barnes & Noble. He did a lot of things in his career. And he and I wrote for Oxford University Press for their Everything You Need To Know series, a book on book publishing. And we turned the manuscript in in December, and unfortunately Robert died in January.

Mike Shatzkin: So we had a wonderful time writing the book together. He was a fantastic guy. He left me to deal with the editing of the galleys and so forth, which I've done. I'm looking forward to publishing in February. I'm only sorry I won't get to promote it with Robert, which would have been a lot of fun. But I think it will be a useful book for a lot of people.

Glenn Yeffeth: Okay, wonderful. Well, Mike, thank you so much for making the time. It's really been a pleasure to talk to you.

Mike Shatzkin: My pleasure, Glenn.

Glenn Yeffeth: Thank you for listening to the Building Books Podcast. If you enjoyed it, please leave a review on iTunes or wherever you happen to listen to it, or share it on social media. If you're an author who wants to submit a proposal or pitch to BenBella Books, please go to benbellabooks.com, click on the "For Perspective Authors" button, and it'll lead you through a little form that makes it real easy to submit to us. Thank you.