Sunday, August 19, 2012

Smashwords' Tasty Upper Crust?

Recently,'s founder, Mark Coker, wrote and posted two releases to the Smashwords blog that target the library-lending markets (see "New Library Direct Enables Libraries to Acquire Large Opening Collections of Smashwords Ebooks" and "Smashwords Pricing Manager Tool Enables Custom Library Pricing." Smashwords' Library Direct offering allows libraries and library organizations to purchase a large quantity of ebooks from Smashwords. The second innovation gives authors the ability to set pricing for libraries differently, if desired, than retail pricing.

These innovations expose a departure from Smashwords' precedent-setting platform. When Smashwords came online and alive in 2008, it provided a neutral, level playing field where indie authors and publishers could publish all types of ebooks. Authors, retailers, and readers could coexist within the Smashwords environment. The ingenuity of Smashwords' Meatgrinder and relationships with retail partners crushed the gate-keeping practices of traditional publishing within 2 years of Smashwords going online. In 4 years, Smashwords has become the dominating force in indie publishing.

There is a shift underfoot as Smashwords matures. Today, libraries, and the buying power of their organizations and aggregators have become the bedfellows in the quest for incremental revenue. Realizing the future potential from gaining access to libraries and their patrons, startups like Bilbary and Jellybooks aspire to capture market share, but Smashwords clearly demonstrates the strongest position in the marketplace.

Within the gooey center of the Smashwords pie, 45,000 authors elbow and jostle each other as they vie for very few reader dollars. This heart of Smashwords has already become generic and rather plain-tasting as over 100,000 titles crowd the ebook shelves. The once-vital heart wallows between bland layers of muck and mediocre marketing. Instead of focusing on improving the quality of their ebooks, many authors practice screwing over each other by price slashing. Every once in a while, an author's bubble of creativity quietly rises to the top, raising the ire of the rest of the authors struggling within the tar pit.

There is a crust forming atop Smashwords' pie. Tasty, light, and flaky, this addition sounds absolutely scrumptious, but is it?

Those authors that bubble to the top are getting to participate in Smashwords' Library Direct program. My impression is that, although slow out the gate, Library Direct will entice libraries and library organizations to place large initial purchases, and do so by cherry-picking from among the most popular ebook titles and authors at Smashwords. Popularity is defined in terms of sales dollars, not reader-reviews and rankings. Although professional reviews may play a role, Mark Coker has remained quiet regarding how the selection criteria are defined.

Where Smashwords' design delivers all approved titles to retail partners, its new Library Direct model, which represents a departure from status-quo neutrality, segregates and rewards high-performing authors with access to library patrons. These additional exposures help these preferred authors build their platforms and increase income. The majority of Smashwords' 45,000 anemically-performing authors, of which I am one, are not, by design, invited to participate in Library Direct, and thus, are denied access to library patrons. Library Direct replicates the traditional library-supplier model that plagues authors today.

As I see it, a light and flaky upper crust is forming at Smashwords. To make the high-performers titles even tastier to libraries and library aggregators, Smashwords created a pricing tool that permits authors to price their ebook titles differently (probably lower) for libraries than what a retail customer will pay for an ebook. This offering benefits only the high-performing author. The strategy is that if a strong author wants to get her/his entire backlist of ebooks into libraries, then s/he should drop the price significantly for each title offered to libraries.

Since the vast majority of Smashwords' authors can't make it past the first hurdle of being a top performer, the library-pricing tool, then, becomes pointless. Having said this, its existence, however, allows promising authors the ability to change their library price on the fly so that libraries will snatch up their rising titles at bargain prices.

Back in March of this year, a blog post I wrote, entitled, "Legacy Publishers Poised to Fight Back: Do Silos Spell the End to Self-Publishing?" generated a lively discussion about the past, present, and future of ebook publishing, including a couple of possible outcomes of Smashwords' success. Smashwords' Library Direct program and its library-pricing tool dovetail nicely with the shared thoughts about Smashwords' evolution.

Quite a few folks commented on the Smashwords' blog regarding Mark Coker's announcements about Library Direct and the library-pricing tool. What I wrote in today's post is my take-away from that thread (to which I posted two comments). Admittedly, I was frustrated that Mark Coker avoided answering my questions; specifically those where I requested information about the detailed criteria for inclusion in the Library Direct program, and the intent behind the design of the library-pricing tool.

What's on the horizon?

Smashwords is following the traditional business lifecycle. Beyond innovation and implementation, it's moving into the maturity phase, where decisions are made to differentiate its products and services from its competitors. My prediction is that Smashwords will soon offer better-than-normal royalty rates (and even possibly tiered rates based upon incremental volume sales) to celebrity and high-profile authors to jump ship from competitors and/or to retain profitable authors and publishers on the Smashwords platform.

I predict that within the next five years, one of the Big 6 or another type of competitor will buy out Mark Coker's controlling share of Smashwords. That's the retirement scenario. Another possibility is that as the ebook market matures, Smashwords will come to a point where it has to decide if it wants to remain the big fish in a diminishing pond, or grow larger to satisfy the needs of the new marketplace. Without deep pockets of its own, Smashwords' management team may decide to take Smashwords public to generate investment capital or to fend off a buy-out threat. All it takes, then, is for an investor to purchase a majority share of Smashwords' stock and the entire landscape changes.

All I know for today is that Smashwords is maturing. I believe that its Library Direct offering and the library-pricing tool represent Smashwords' next salvo in its efforts to establish itself as the new legacy publishing model. In ten-or-so years, who will be the young visionary who leads the revolution that knocks Smashwords from its conceivable gatekeeper and patriarchal roles? The business cycle dictates this will be the outcome.

Nervy times we live in, but I'm sure enjoying being in the thick of the publishing revolution!

Take care,

1 comment:

  1. Si I back tracked, commented on the old post and now forgot what I wanted to say here... senility is setting in!


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