I saw a grandmother reading her Kindle this morning.

A seismic shift is occurring in the publishing industry, and before all is done a great deal of corporate blood will be shed.  Nimble organizations will survive and perhaps thrive. Old institutions will die.  The very nature of content is forever changed, and as always, marketing people are both over and under reacting.

Electronic book reading devices (e-readers herein) are getting very successful.  Some reports have e-book sales at 20% of the market, shaving a few years off industry predictions.  One interesting tangent to this is that e-book readers buy more books than people who thumb-through dead trees (and will phrases like ‘thumb-through’ exit our vocabulary?).  This is in part due to the retail price of digital books being about half that of paper, and thus there may ignite impulse purchases, such as is the case with single MP3 files as opposed to buying an entire CD in a jewel case.  Or it may be that people who bought Kindles, Nooks and iWhatevers were voracious bibliophiles to begin with.

The fundamental change in market mechanics is that a bunch of middlemen were obsoleted.  In the old days, an author hired an agent (15% commission) who sold rights to a publisher, who sold books to distributors, who sold books to book stores, who then sold them to you.  Now you can write a book and sell it directly to readers and cough-up as little as 30% to a single mediator (Amazon, Barnes & Noble, Apple and Google).  In effect two middlemen are now standing in the unemployment line with your brother-in-law.  And frankly you can’t even compare shopping at Amazon with shopping at Border’s Books, mainly because Border’s is locking their doors.

Digital publishing has changed the industry more radically than the recently dead Osama bin Laden (praise Allah for a clean kill) changed 21^st century geopolitics.  In the bad old days, a writer would earn 15% or less of the cover price for his books, the rest being divided between everybody in the value chain.  Today the writer, if he self-publishes, makes no less than 60%.  However, by cutting out everyone in the value chain, the entrepreneurial author has to be her own PR, marketing, advertising and social media agency.

Most writers can barely write, much less do real work.

Everybody in the business is trying to adjust, from Simon and Schuster to the neo-beatnik you see tapping his laptop at Starbucks every morning.  The good news is that the value chain disappeared in part to the brutal and beautiful efficiency of digital distribution.  With e-books, there are no warehouses, store shelves, or dust gathering on unsold books that will be returned to the wholesaler.  The cost of product for e-books nears zero and thus the cover price is half of the old variety.  Similar market mechanics apply to magazines, which are scrambling to go digital.

iPads and Android slabs may even save newspapers.

Marketers face problems in this model.  Many traditional means for promoting new books are bombing.  Only 60-70 U.S. newspapers do their own book reviews.  With book stores closing faster than a Jewish deli in Kabul, book signing events are becoming scarcer and moving to more fragmented venues.  Even Oprah has depreciated her book pimping.  Most publisher marketing mavens are looking to social media as the primarily promotional point, but those paths are still not well understood.  The industry’s old habits are dying as hard as the industry (though not nearly as hard as Bubba bin Laden).

Book stores are toast.  Large publishing houses will be margin constrained.  Small press will thrive.  Book marketing people will be confused.

The backhanded marketing lesson herein is that if you want to own an industry, kick the legs out from everyone else.  Circuit City, in their prime, engineered-out everything everyone hated about shopping for consumer electronics, and at that time they were the darlings of Wall Street.  Amazon eradicated the publishing industry value chain, reduced delays in the publishing cycle (upwards of a year from contract to book sales) and caused the old venues for promotion to evaporate.  If in doubt look for what makes your industry weak or inefficient, then use that to change the rules.