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REVOLUTION
By Don Cooper
Hereford Brand Managing Editor
Tuesday, June 18, 2002
Another revolution is under way in the publishing industry and this one won’t take as long as the last one, according to one participant.
David Spiselman is chief executive officer of CyclopsMedia.com, a publisher of electronic books. The company creates and operates e-book stores for print publishers and for portal websites. Portal websites are sites, such as Yahoo.com or Oxygen.com, that compile information for distribution among their subscribers.
In a brochure, the company is described as a "new strategic alliance among literary agents, authors and print publishers."
Although several publications have contended the e-book industry has not lived up to early expectations, Spiselman said electronic publishing is merely in its infancy.
"There are two different components to the issue of e-books and their status in the publishing industry," Spiselman said. "The first is we’re in the very early days, so it’s as if in the 1400s after Gutenberg invented the printing press and then less than 10 years later someone interviewed Gutenberg and asked him, ‘So how come print books haven’t taken off?’
"It’s taken print publishing 500 years to get to be a $25-billion industry. It’s taken e-books about 15 years ... to get to be a $1.3 billion industry," he said. "Granted, that’s only 5 percent of the type publishing industry, but follow the growth of the two industries.
"Print publishing has been $25 billion this year, last year and the year before — no growth at all," Spiselman said. "In fact, I believe that it actually grew negatively a tiny bit last year. E-books have gone from $100 million to $560 million to $1.3 billion over the last three years. At this rate, e-books probably will be a significant portion of the publishing industry within about three more years."
Spiselman scoffed at the reports about the failure of the e-book industry.
"What’s happening is the print media are saying e-books are a failure because they aren’t as big as the print publishing industry after only three years," he said. "And every time they say that, e-book publishers crack open another bottle of champagne because they’re leaving the field free to us to grow. My company just this year has had a fivefold increase ... over last year — and that’s in five months."
One of the complaints that some authors have expressed about e-publishing has involved collection of royalties on sales of their works. However, Spiselman said there is no problem and said he believes e-publishing is better for authors.
"With print publishing when you sign a contract, you get an advance," he said. "That advance has to be earned out over a period of time before you get another time. You will get about $2.50 on a $25 hardcover and about 50 cents on an $8.95 paperback. You’ll typically be between 12 months and 24 months out of pocket because of return policies that the print publishers have and audit issues."
However, he said if the author has an agreement with his company, either through a print publisher or a literary agent, and the company sells an book — at the standard price of $5.95 — via e-mail, the payment is with a credit card, so there is payment on delivery and there are no returns.
"At the end of the month, we close the books and the next month we make our royalty payments. Royalties are about 50 percent for a literary agent and an author and just about two-thirds for a print publisher," he said. "If you have a deal with a print publisher and we’re selling e-books on their behalf, your deal with them is what will constitute your cash flow."
Although anyone who purchases an e-book can print out a hard copy, Spiselman said he believes most readers would prefer to read it on a personal computer, a laptop, pocket PC or a palm.
"We have about 50 e-books in our catalog, a number that will grow to about 200-300 by the end of this year as we open e-book stores for print publishers and their catalogs will be merged into ours as we start doing for them what we’re doing for ourselves," he said.
Spiselman said the major customers of e-book companies are "the people who got a PC when nobody else knew what a PC was. They’re the people who had a cell phone when nobody else knew what a cell phone was — who embrace technology."
He said most of these customers are affluent and well-educated. Of the people who frequent the Internet, he said about "two-thirds of them, two-thirds of 250 million people have read an e-book."
The number of people who have read e-books was helped by author Stephen King’s decision to publish one of his recent novels in electronic form.
"Stephen King was a godsend," Spiselman said. "What he did was put the fear of God into print publishers and it was a wakeup call for the customers.
"There were lessons to be learned from it," he said. "The first lesson is price appropriately. If you sell something that doesn’t need printing, distribution, warehousing, having accounts receivable and returns, price it much lower than something that has those issues — $5.95 is the upper limit and that’s where we are; the lower limit is about $3.95.
"At those prices, you sell a lot. At prices above $5.95, you don’t sell much at all and if you go to almost every print publishers’ e-book site, they want $25 for an e-book," he said.
"The second lesson is don’t treat your customer like a thief," he said. "So we don’t protect our e-book from copying. One of our authors said, ‘If someone ripped off one of books and put it up on the Internet and a million people read it for free, I’d be the happiest man on Earth.’
"Third, customer service is king," he said. "We post our phone numbers, our fax numbers, our e-mail addresses. My job is to make sure that customer service works — customer service reports directly to me. We’ve had three customer service complaints that we weren’t able to rectify except by giving a refund and that’s in 2½ years."
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