Publisher or Retailer?
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Publisher or Retailer, Part 2

Date: Thu, 20 Jan 2000 21:06:45 -0800
From: "Tim O'Reilly" <>
Organization: O'Reilly & Associates, Inc.
To: Computer Book Publishing
Subject: Re: ePublishing Issues (was Re: eMatter by O'Reilly)

Chris MacAskill wrote:

Our vision for eMatter is to introduce a new and complementary distribution channel, primarily focused at stuff that's longer than magazine articles and shorter than books.


There has been no economic venue this century for mid-length pieces--essays, white papers, short stories... All publishers reject them. Gone are the days when Charles Dickens could make A Christmas Carol popular. It simply doesn't fit the economic models of magazine or book publishers. But I believe the Internet makes distribution of these titles possible. Customers download and print PDF files by the millions today. Why can't we charge for them if the content is good, we protect the content against illegal copying, and we pay the publisher or author a royalty?

Just to complete the circle (and not just to maintain good relations between Fatbrain and O'Reilly :-), let me say that I think that this is a very worthy goal, and one that I support. In fact, it's a dream of mine as well. Many of my original books were "too short" for normal publishers. I've also launched several journals (The X Journal, The W3C Journal, and now The Journal of Linux Technology) as well as a whole bunch of technology web sites, because I'm aware that not everything fits into the price and packaging of books. Our whole focus in the O'Reilly Network (a network of ad-supported websites like,, etc.) is to generate revenue from material that isn't yet ready for the book covers. I'd love to find more outlets for short material.

My biggest issue with eMatter is around the marketing language that has framed it in your appeal to authors, and some of the ambiguities you've introduced as a result. Here are some of the things that bother me:

  • By saying that you "pay a 50% royalty" you are implying that the relationship you have with your authors is not the relationship of a distributor/retailer to a publisher, but the relationship of a publisher to an author. If you said "you set the price, and we keep a 50% commission" or "you set the retail price, and sell it to us at a 50% discount", you'd be making clear that you aren't performing the functions of a publisher, and that, far from being a far more advantageous deal than that offered by traditional publishers, you are in fact offering much the same deal on ebooks that you have worked out with publishers in print. Instead, you used language that implied that traditional publishers were taking advantage of their authors, and that this new medium was a great opportunity to redress that inequity.

    This may seem like hairsplitting, but the words we use shape the way we think, and the wrong choice of words can set in place the wrong business model, with ramifications that can take us years to untangle.

  • As we discussed on the phone when you first briefed me about eMatter, the fact that it's a proprietary format also creates ambiguity about whether you are a publisher or a reseller. I'd ideally like to see you commit firmly to being a reseller, not a publisher, and one great way to do that would be to make the eMatter tools and software available (perhaps as open source) to anyone who wanted to use them. That would really allow authors to be online "self-publishers", to sell the eMatter from their own website if they liked, or via a variety of competitors. You won't own all the pie, but you'll own a piece of a bigger pie than if you set up a format for which you are the only outlet.

Ultimately, I think that eMatter (as currently positioned) won't work, not because there isn't a market for shorter pieces, but because you've set yourself up as the only source for material in this format. At the end of the day, we need something that is an industry standard. And I have a hard time seeing how that can come from any one of the online resellers, because anything put forth as proprietary by one is not likely to be adopted by the others. (I suppose it could eventually be pushed through in a version of the Betamax/VHS wars, by strategic alliances among a group of resellers who banded together against some other group, and who were able to make some high value content plays, but I'm not sure where that fits in your business plan.)

One of the things that works best in the publishing industry is the loose coupling between the various layers in the industry. Anyone can self-publish a book by going to their local print shop. They can hawk it on the streetcorner, or via any one of a universe of intermediaries. The very indirection and inefficiency of the market is what gives it its elasticity and low barriers to entry.

If eMatter is to succeed, you need either to become a true publisher (and thus work to find other outlets for the material on behalf of the author), or else commit to being a retailer, and let the author or intermediary publisher resell the same material, in the same format, through other outlets.

As to the issue of the 50% we pay versus the lower rates publishers pay... If I were a book author and I had a book-length manuscript to publish, I would expect to make more money by signing with O'Reilly and getting a lower royalty than I would by self-publishing eMatter. Why? Because O'Reilly's brand will give it credibility, and O'Reilly will add value through marketing and editorial contributions. They will make sure it sells through bookstores and they'll promote it at trade shows.

We pay 50% precisely because we don't offer what publishers do, so authors expect more. Besides, the self-publishing programs at Amazon and made the royalty structure a forgone conclusion.

As noted above, my problem isn't really with the amount, but with the characterization in your marketing. When I met with your product manager, Dan Rush, the other day, he asked why what you were doing was dissimilar from a publisher selling books from their own web site. Isn't that also blurring the boundaries between publishing and distribution, he asked? Why is it OK for the publisher to act as a retailer but not OK for a retailer to act as a publisher?

My answer is simple: when publishers sell books from their web sites, they don't do so using the following marketing message: "Why give 50% of the cost of your books to a retailer? Why not buy direct from the publisher at half price and save all the distribution costs?"

Your eMatter self-publishing pitch might be expected from someone who thought of themselves as a competitor to professional publishers, but it doesn't sit well from someone who expects to derive the bulk of his revenues from those self-same publishers.

Does eMatter compete with books? I don't believe so. The movie studios were beside themselves over videotapes when they first came out. But people still went to the theaters as Blockbuster expanded. The studios sold more movies. New distribution channels nearly always turn out to be additive.

Counterexamples abound. TV did compete with radio. The internet does compete with TV. And in my observations, widely available free online information does compete with books. (It competes even more with magazines, as the demise of many a computer trade journal will testify.) Does an ematter version of a book diminish the sales potential for a print version of a book? Probably not, if the two are coordinated, as, for example, hardback and paperback books are coordinated. (You don't publish the mass market paperback at the same time as the trade hardcover, for instance.)

I don't think we know yet what the "right" coordination mechanisms are for online and print information. I'm hopeful that we can find them, and can continue to make the provision of high quality information a profitable endeavor for everyone participating on this list.

Is Fatbrain a publisher? We don't want to be. We want to be eBay, connecting buyers and sellers.

Yes, and eBay takes a commission. It doesn't pay a royalty :-) (But I'm beating that one over the head.) eBay is actually a pretty good model for you guys, but if it's the model, I'd argue that you're taking too big of a commission :-) eBay wouldn't get very far if they charged 50 cents on the dollar for each sale.

(Playing devil's advocate: You might grow the market more quickly if you had eBay-like commissions and let publishers and authors get closer to their current margins with a price that was substantially below the list price for print books. (In your current model, you ask the author/publisher to supply any discount from the retail price of an equivalent print product, and take your 50% commission from that price, when it would make more sense for you to either take a smaller commission or to do discounting on your side, out of your commission.))

Anyway, I hope there are no hard feelings over this. We're inventing a new industry, and the more we argue about things, the better chance that we'll air some good ideas that will get us all moving in the right direction.

Thanks for taking my lambasting so well, in the spirit of a substantial argument, and not turning this into a flame war!

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