In her new role heading an e-book startup, Jane Friedman still has the corner office. But it's nothing like the one she had during her decade as chief executive of HarperCollins Publishers Worldwide.
In place of orchids and sleek modern furniture, there are bare walls and an unpainted cement floor in a prewar building on Varick Street. Family photos are stuck to a bulletin board. And the conference table and chairs where Ms. Friedman sits for an interview could have been lifted from an American Legion hall.
Two years after losing her old job following a dustup with her boss Rupert Murdoch, the 64-year-old Ms. Friedman has reinvented herself as co-founder of Open Road Integrated Media. She launched the digital-only publishing and marketing venture last October in response to the revolutionary changes taking place across the book industry.
“The world is changing, and publishing has to change with it,” says the new chief executive.
In fact, the industry is being shaken to its core in ways no executive has ever seen. Since the launch of Amazon's Kindle e-reader in 2007, the traditionally slow-moving book industry has gone into hyper-drive—racing head-on into the digital disruption that has already decimated major record labels and newspaper companies.

Final nail in coffin

Publishing veteran Jane Friedman is dipping into backlists for her e-book venture.
Apple's iPad, Barnes & Noble's Nook and new iterations of the Kindle have accelerated the e-book revolution, which is undermining traditional publishing's economics with lower prices than those for hardcover books. It's also threatening the foundation of the business: the humble brick-and-mortar bookstore.
Several weeks ago, Barnes & Noble, the largest bookstore chain, did the unthinkable and put itself up for sale. Independent bookstores, whose ranks have diminished by about half since 2000, continue to close.
The end of bookstores could be the final nail in the coffin for traditional publishing. The big trade houses rely on acres of shelves to sell their wide-ranging titles, from literary and commercial fiction to nonfiction that doesn't have a news hook or a celebrity's name on the cover.
And the end could come sooner than many people think. E-book sales have tripled in the past year, and now make up 8.5% of publishers' revenue. They'll hit 50% by 2015, according to Mike Shatzkin, chief executive of The Idea Logical Co.
At that point, the few stores left standing will sell just a quarter of all physical books, down from around three-quarters today, and big publishers will “come under threat,” he says. “Their value is based on delivering distribution.”
Publishers of all stripes are grappling with these issues. But they also insist that reports of their death have been greatly exaggerated.
“We are not an endangered species, though I'm completely aware we need to evolve further,” says David Young, chief executive of the Hachette Book Group.
The 59-year-old transplanted Londoner presides over the most consistently successful of the six major publishing houses, so his optimism is understandable. Helped by blockbuster authors like James Patterson, Stephenie Meyer and The New Yorker's Malcolm Gladwell, Hachette had U.S. sales of $740 million in 2009, according to Publishers Weekly, marking its third year in a row of double-digit growth.
Mr. Young insists that the industry's changes won't be putting him out of business any time soon. Sitting in an office where shiny new hardcovers lie in long rows behind him, he notes that book sales, unlike music sales, have not been devastated by piracy. Consumers are paying for e-books, even if publishers make less money from them than from hardcovers.
Though there are cost savings on production and distribution with e-books, the biggest expense for most titles—print or digital—is the author's advance.
Mr. Young also argues that bookstores—both the chains and the independents—serve as centers of their communities, and will not go the way of Tower Records. “The book is a much more robust and institutional object than the CD,” he adds.
But like every other publisher, Mr. Young acknowledges that e-books' lower prices could bring industry restructurings and consolidation down the road, and he is investing millions of Hachette's dollars in a digital publishing program.
“It would be foolish to think that every publisher can deliver the same bottom line when the physical bookstore shrinks,” he says. “I very much hope that won't happen fast, and I don't think it will, but it's part of our job to figure out how to continue to be a commercial enterprise.”
Publishing insiders say that a number of houses are already feeling the pain.
Whether it's because of the economy, reader fatigue or the surge in e-book sales for commercial titles, hardcover sales have been falling steadily for many blockbuster novelists.
Through May, overall net sales for hardcover books totaled $713 million—a bump over last year's numbers but a decline of 19% from the same period in 2007, according to the Association of American Publishers.
“The hope is that e-book sales will balance out the decline in physical book sales,” says Jack Perry, a former Random House sales chief who consults on digital issues for publishers. “That hasn't happened yet.”
The pressure on publishers is making them less inclined to take risks. Agents and publishing executives complain that houses are focused more than ever on acquiring the biggest, safest, most easily promotable titles.
“The recession and the digital transformation have just accelerated what's been happening in the business for the past 15 years, which is that publishers are feeling that a book has to be a big book or it's not worth publishing,” says Brian DeFiore, who heads his own literary agency.
Even more troubling is the prospect of a book universe with no mechanisms for developing new authors. There's a long list of major writers who started small, from classic authors like Herman Melville and Joseph Conrad to contemporaries like Jonathan Franzen and Cormac McCarthy and commercial heavyweights like Mr. Patterson.
Topical books and those in niche categories like fitness, business and health do well with online marketing. But authors who need nurturing depend on bookstores.
Independent bookstores in particular have acted as curators and showcases of new titles, even as their numbers have dwindled. The American Booksellers Association, the indies' trade group, currently has 1,409 members, compared with 2,861 in 2000.
“You find things here you won't see anywhere else,” says Bob Contant, co-owner of the St. Mark's Bookshop, one of the oldest indies left in Manhattan.
Mr. Contant, who has run St. Mark's since 1977, remembers the days when sales grew 40% a year and the store—at a smaller location than its current one—would be so crowded on a Saturday night that patrons had to wait outside until there was room to come in.
The economy, gentrification of the East Village, and now e-books have put an end to growth. This year, sales are down 3%, and Mr. Contant says they never fully recovered from the downturn at the end of 2008.
But he and the store's longtime manager, Michael Russo, say that St. Mark's remains influential. They cite the British author of postmodern novels David Mitchell, whose books they've been championing since his 1999 debut, and whose latest, The Thousand Autumns of Jacob de Zoet, is currently among their top sellers.
The author recently visited the store to sign copies of the book, which is his fifth novel and the first to make it onto The New York Times' best-seller list. He has come there for every one of his last four books.
“Websites and chain stores can make big pyramids of books, but to make an enduring book of quality, nobody has found a way to replace independent booksellers,” Mr. Russo says.

Beating the trends

Mr. Contant says he hopes to hold on by continuing to provide “an alternative to mass culture” with a selection that's rich in both major publisher releases and obscure small press titles. He points to vinyl record stores and the nearby indie Other Music as examples of retailers who've beaten the trends.
He's hardly the only bookseller hoping to defy the odds. Barnes & Noble Chairman Len Riggio says that he's exploring a sale of the company because its stock price is undervalued in the current climate. Both Mr. Riggio and Chief Executive William Lynch say that the chain will benefit from brick-and-mortar bookstore consolidation.
At the same time, Barnes & Noble is betting on digital growth and the company's ability to use the stores to market the Nook—and bring Nook owners back with enticements like free coffee and exclusive e-content. Though still a distant second to Amazon, the e-bookstore has grown its market share into the mid-to high teens, according to several big publishers.
But as the digital explosion blows up the traditional publishing model, observers say that nobody knows where the pieces will land. Mr. Young may end up running a much bigger company—or find himself out of a job. First-time writers may be publishing themselves, or signing on with startups struggling to create or tap into online communities.
What's certain is that the industry will continue its reinvention, piece by piece.
In September, acclaimed novelist Dale Peck, 43, will launch a literary imprint with the year-old startup OR Books, which sells digital and print-on-demand editions directly to consumers, cutting out the retailer.
He and a group of writer friends will put out six books a year, starting with authors they believe are well-known enough to attract attention online and achieve sales of 5,000 to 15,000 copies—subpar by trade house standards, but a good showing for a literary title. The first book, due in November, will be The Autobiography of Jenny X, by Lisa Dierbeck.
The imprint, Mischief and Mayhem, will also launch a monthly web-zine in September. “Literary fiction is just increasingly difficult for anyone to make money at,” Mr. Peck says. Since OR offers a profit split, he adds, writers should come out ahead of where they'd be with a major house.
Meanwhile, Ms. Friedman is using her high profile and reputation as a hard-charging marketer to build a list of celebrated titles by famous authors—albeit those published prior to 1994, when e-book rights clauses became standard in contracts. In less than a year, she's brought on works by William Styron, Iris Murdoch and Pat Conroy.

Seeking out the new 50%

E-BOOK sales are expected to account for half of all book sales by 2015
Their books are coming out in what Ms. Friedman calls “enriched editions” that make use of the production savvy of Open Road's other co-founder, movie producer Jeffrey Sharp. Among the added features are archival photos and video interviews viewable on an iPad.
Ms. Friedman is betting that enough consumers will pay $10 to $14 for titles like Mr. Styron's Lie Down in Darkness to cover the costs of marketing and production. But she says she doesn't need to sell huge numbers.
As a digital publisher, Open Road doesn't have bookstores returning unsold copies. And though it offers a profit split, it doesn't pay advances.
What's more, Open Road has become the online marketer for other publishers, including Kensington Books, which will give the company close to 1,000 titles in all to start with, including a small group of e-originals. The company gets a piece of the sale of each one.
Open Road's full online marketing powers will be unleashed in the fall, Ms. Friedman says. From her small corner of the publishing world, she says the opportunities are huge.
“We have world rights to [some of] these titles, and I've had many international visitors in this office,” she says, noting that 50 million tablet devices are expected to be sold internationally by 2014. “I'm betting on a very successful future.”
*from an article on Crain's. To read more go to: