Normally I try to refrain from making a lot of political entries in this blog. Yes, many of the times where I point out things which are wrong with various industries could be considered political, but they are really meant to point out a problem and a solution. In this particular instance, I don’t have much of a solution, other than nationalization, and we’ve all seen just how well the government has run any enterprise it ever tried to operate.

Recently we had an election which had the overwhelming theme of “Change”. Now we seem to all be victims of the ancient Chinese curse “Be careful what you wish for.” Granted, the policies of the Clinton administration painted us into this corner. We had the Internet Ponzi scam which resulted in the DOT-BOMB flame out. We had the restraints taken off of the mortgage industry, which will ultimately be found responsible for the mortgage melt down. The short term high returns resulting from both of those policies caused other companies to try coming up with ways to manufacture such returns, or even better returns. Anybody disputing that statement obviously hasn’t watched the news stories about Bernie Madoff or Allen Standford.

Just prior to the election we had an administration desperately trying to put a Band-aid on the financial industry to avoid a complete collapse during the election. There was a justifiable fear that voters would be so busy trying to get their money out of the few remaining banks on election day they wouldn’t take time to vote. The old adage “ Haste Makes Waste” could have never been truer. In a blind panic they created TARP and stories of its abuse seem rather far reaching.

Now, the tax payer is being asked to bend over and take it again by Citigroup. They want us to convert the roughly $45 billion we sunk into prefered stock into a 40% stake of common stock. This is quite possibly the most blatant abuse we have seen yet. Were the prefered stock to be converted at current market value it would end up being 80% of the company, not 40%. As a country, we have only two options:

1. Liquidate Citigroup in its entirety.

2. Nationalize Citigroup and pull its banking business back to mortgage, savings, and retirement accounts.

Either way, we cannot allow even the tiniest shred of the existing management structure to remain in place. Everyone from the board of directors down to the most junior of Vice Presidents must be canned with only two weeks severance and their Cobra coverage.

We had an election for change, but it looks like the only change we got was changing the constitution from “one nation, under Halliburton” to “one nation under Citigroup”.

I must confess. Back in the days when I was forced to use that God forsaken Windows platform, I fell in love with the Lotus SmartSuite. When I migrated to OS/2, SmartSuite was right there with me. Yes, I had to run WordPerfect in the Windows 3.1 emulation thing for some work I did, not because WordPro couldn’t do it, but because people wanted to use WordPerfect. Sadly, IBM didn’t migrate the SmartSuite product to 64-bit Ubuntu or any other Linux. People are only willing to deal with that Wine contraption for so long.

Having been in love with Lotus WordPro for so long, I amassed a lot of LWP documents. I probably should have converted them with that obscure Windows XP partition I have, but I only boot that partition about twice per year to play “Lords of the Realm” or “Starcraft”. The rest of the year, it is just consuming disk space which could be better utilized.

I tried a lot of things and posted a lot of questions over the years. This week I found something close to an answer. IBM has come very late to the “ free word processor” market. They have released IBM Symphony.

http://symphony.lotus.com/software/lotus/symphony/home.nsf/home

This product is no Lotus SmartSuite. The word processor can’t hold a candle to Lotus WordPro, then again, neither can anything else currently on the market. Every office suite on the planet is still trying to catch up to SmartSuite 98. Besides the watered down word processor, you will find they also didn’t bother to include Lotus Approach.

Despite everything which is missing, this product service one critical purpose for those used SmartSuite 98. You can directly open an LWP file and save it in Open Document Format. The search for a conversion tool is over.

I’ve been reading a lot of articles and comments lately about the future of publishing. Just today I spent some bathroom time reading another of these articles in “Book Business” magazine. (Does anyone who doesn’t frequent doctor’s offices read a magazine anywhere else?) Apparently, this prognosticator owned a lot of stock in POD companies. While I do believe they had a few things correct, I don’t believe POD will end up as anything more than another 8-track tape player story.

During some recent conversations with people from Sony about an exclusive deal for my new book, they asked where I saw the book business in five years. (I don’t know if they were asking as a stalling tactic or as a result of the feedback they were getting from those who read my book.) I might as well share the answer with you.

1. Every major book publisher will fail.

2. All large distributors will cease to exist.

3. Printed books will be the last form of the written word, not the first form created.

4. While some retail locations will have a POD device in store, they will not be in every location and there will be fewer retail locations than there are today.

5. Paperbacks will be non-existent.

6. The number of books published will increase, but only a handful will be printed. A “low volume” print run will be at least 100,000 copies.

Sounds shocking? Sounds horrible? Sounds like whatever I’ve been smoking wasn’t exactly what it should have been? Well, it is true, and thanks to the global recession, should happen in well under 10 years.

Understanding why this is going to happen requires two things:

1. A good understanding of what technology is, and more importantly, is not.

2. The ability to “read a room”.

What happens today?

A major publisher employs a lot of friends and family who ride the gravy train choosing books to print and market. They look to publish exactly the same book they published last time because they can sell that without any effort. Both variety and creativity dies while they sit there turning the crank on the commission machine. Authors starve to death due to the pathetic royalty percentage handed out to them and the one year plus lag time between sale and payment. Book stores stock a big pile of the same book they sold last time, only to find out, most of last times buyers wanted a different book to read this time. The forklifts and lowly paid stock hands reek havoc on the inventory that gets shipped back to the publisher who then has to dispose of it.

What is wrong today?

Plane and simple, the business model doesn’t work. It was always poorly thought out, but people ate what they were fed because there was a culture based upon kings and queens knowing more than the commoner. Of course the publishing houses were more than willing to declare themselves kings and queens, regardless of how much they actually knew.

Until recently, there wasn’t a viable means of choosing which books deserved to consume paper. Until recently, this industry was bent on consuming as much paper as physically possible. That has changed.

The Zero Dollar 100,000 Copy Model

This will basically be the model which allows the industry to thrive. Those who adopt it will be profitable, and those who don’t will go out of business. The old established model is no longer economically viable. Boiled down to its barest definition, all general “trade” books will be published in electronic format only until sales reach 100,000 units. At that point in time, they will either be mass printed in a large print run or set up as an on-demand hard copy at the retail location. The deciding factor will be the speed at which the 100,000 copy threshold was reached.

A good many who are trapped within the dying infrastructure will try to dismiss this as the rantings of a madman. Please pity them, for they have no choice. They don’t understand the least little bit about technology. You know that whenever they send you a Word document to look at. Professionals haven’t used Microsoft products in over a decade.

Why is this the success model? Today, there are at most 15 people in a major publishing house that decide what to print. Usually, the number of people who actually have the authority to make the decision is far smaller. I don’t care how many people they claim to listen to from inside the company, the actual decision to print is made by an incredibly tiny subset of the population. They put so many hours into their business that they have absolutely no idea what is going on in the real world or what actually interests the person who just surfed to the Barnes & Noble Web site.

Once the shell for a database driven eBook retail site is up and running, adding a title to it is simply a matter of adding a record to the database and a file in a directory. I’ve done business software development for over 20 years. Properly designed, this really is the complete amount of effort required to add a book to a retail site. The author still has to write the book. Unlike the old model, the author will be required to contract out the editing/proof reading themselves, but very little has to happen in the way of formatting or interior design. Ebooks simply don’t support such fancy looks on those screens. Now that we finally have two primary standards (LRF and ePub), creating the eBook only takes a little bit of the author’s time. The author can simply download the Calibre software package and create both versions directly from their OpenOffice document. http://calibre.kovidgoyal.net/

Sony is currently in the process of getting their Publisher Portal up and running to make getting your new release up on their site an automated thing. http://ebookstore.sony.com/publishers/

Barnes & Noble, having been burned early on in the eBook world hasn’t inked a deal to sell eBooks yet, but Borders inked with Sony. I expect B&N will ink something with either Apple or Sony before the end of 2009…assuming B&N doesn’t end up acquiring Borders by then. Another eBook site gaining a lot of traction is http://www.bookhabit.com. This site allows authors to post for free and starts books out at $2.50 per copy. The price of the book goes up as it increases in popularity. There are an increasing number of eBook retail sites out there. The problem isn’t finding one, but deciding which sites you wish to do business with. Some provide DRM and some don’t. Each author needs to make their own decision about DRM.

Not counting people who have downloaded free software from Sony and others which allow them to read LRF and ePub formatted files on their computer, there are reported to be over 2 million Sony readers and around 8 million iPhones currently in the hands of users. Other devices from other vendors allow a consumer to read one or more of these formats. What this model does is expand the print decision makers from a pool of less than 15 to a pool of more than 10 million and only 100,000 of them have to agree.

Another aspect of this situation one has to take into account is the lifespan of a tree hugger movement. Today we call it “going green”, and prior movements were called many other things. These movements tend to have a lot of false starts, but eventually one gets a lot of traction. Once they have traction there is a slow ramp up, a long peak, and a wind down. As a general rule a “go green” type movement has a 10 year run once it gains enough traction to have spots on the nightly news more than once per week. By my count, we have about six years left on this one. At the end of each of these movements, the financially viable ideas survive and the rest end up with tiny little niche markets or in the “whatever happened to” category.

Given the momentum behind the current “go green” world wide initiative and the global recession, the current model of : large publisher printing, shipping to distributor, distributor to retail warehouse, retail warehouse to chain location, idle on shelf until time to pay for them, return to warehouse, return to distributor, return to publisher, sent for destruction; is both economically and socially unmaintainable. Many who are trapped in the mindset of the 1700s are looking to POD to solve this model. It cannot. Even with the massive improvements in POD over the years it still puts out a product that looks and feels like a product made by prison labor and sold at Walmart. I haven’t correlated any numbers, but I am willing to bet the increase in returns is due more to the increase in POD use than the downturn in the economy. Consumers aren’t generally willing to return something they cherish, but they have no problem returning cheap sh*t to Walmart after using it.

It won’t take book sellers like Borders and BN long to figure out the only books with real selling power are the ones which established an reader base prior to being printed. Given the increasing number of publishers put off by Amazon business practices and Amazon’s recent move to support only their own eBook formats, Amazon will cease to be a player in the book retail market.

The ePub specification will eventually become robust enough to be the only format anybody left in business uses. Even Sony has quietly admitted this. Now, when you submit files to Sony, they ask for the ePub file to create the LRF from. Some day, they will even sell the ePub format directly from their eBook store.

Kindle will become the new BetaMax.