Episode 1: Publishers Are in a Moneyball Situation

In this episode, Joshua discusses how he sees some similarities between the state of the publishing industry and the story of the Oakland A’s baseball team as told in the movie Moneyball. Competition is fierce, and solid data practices can be the key factor between success and failure.

Transcript

Hello, and welcome to the BookSmarts podcast where we talk about publishing data and technologies, and send you away with some insights that will help you sell more books. I’m your host, Joshua Tallent.

So in today’s podcast episode, I want to talk about the Moneyball situation that I see publishers in right now. For those of you who may or may not know, there’s a movie from the—I think the mid-2000s, maybe about 2010—that was based on the story of Billy Beane, who was the general manager of the Oakland A’s baseball team. This movie, Moneyball, talked about how Billy changed the Oakland A’s baseball team into a successful team using data. So, the situation was that the A’s really couldn’t compete with the biggest and richest baseball teams—the New York Yankees or the Boston Red Sox, or something—because the A’s budget was minuscule compared to those other teams, so they couldn’t hire the top dollar players. As a matter of fact, at the end of the season, they lost some of their best players to these other teams that could pay more money for them. So, they were stuck in the situation of having to replace really good players with other players that were not as good but were cheaper.

So, most teams at the time chose players based on how they looked—whether they were thought to be a good player based on how scouts would size them up, and that came with a bunch of very subjective information. Peter Brand, who was Billy’s assistant manager in the movie, tossed out all of that normal assessment process, and said, “We need to deal with this from a data perspective.” He used a system called sabermetrics, which in real life was created by a guy named Bill James, who was a statistician and a baseball fan. The whole concept of sabermetrics was to select players based on what they could do to help the team get a higher on-base percentage. How can you get more players on base more often, because that leads to more runs in the end.

So, after Billy and Peter started implementing this new data-based strategy, the Oakland A’s in the movie went on to have a 20-game winning streak, and were able to make it to the playoffs while competing against those much larger and better-funded teams. So, I highly recommend the movie, even if you’re not a baseball fan. It’s really a heartfelt story, and it includes some really great scenes between Billy and his daughter.

But why do I say the publishers are in a Moneyball situation? Well, the biggest publishers are getting bigger, and they continue to take on a larger slice of the pie. Meanwhile, at the same time, everyone else has to compete side-by-side against those big publishers in the marketplace. Penguin and Random House merged in October 2012, and now Simon & Schuster is set to be purchased by Bertelsmann, which is the owner of Penguin Random House, for, from what I hear, $2.157 billion. That will bring, if it actually happens, the number of large U.S. publishers down to four, from five—and it was six. That consolidation is a big deal because with Simon & Schuster included in its portfolio, Bertelsmann in the US, their market share would jump to around 34% of the market. And just for comparison, the second-largest publisher HarperCollins, accounts for around 11%.

Now, don’t misunderstand me, I’m not saying that big publishers are too big. I actually don’t think this is a “David vs. Goliath” kind of story. Those companies have a lot to offer, and their success is something that we should be praising and emulating. But there’s more to the story than just that, right? And also consider that those big publishers are competing with themselves in many ways. So while having to compete against the big publishers can be difficult for smaller companies. The competition’s not actually really that one sided. Every publisher has to compete in the marketplace, especially in the online marketplace, not just the little guys against the big guys. And some of these publishers are also setting it up so that they’re competing internally with each other, you know different editorial teams, or acquisitions editors working to, to get, you know, to get access to the right books. So what it comes down to is that every publisher is competing side by side with everyone else, from independent authors all the way up to the Big Five or the Big Four.

Sure the Big Five have much more money behind their ventures, but that doesn’t mean that the little guys are unable to compete. There are lots of examples of successful independent authors even: Mark Dawson; John Locke, who was the first independent author to sell over a million ebooks on Amazon; Darcy Chan; Amanda Hocking, just to name a few. It also doesn’t mean that the Big Five don’t compete with each other, of course. The market is the market, the book market is still a market, and everyone is vying for eyeballs and clicks.

Now, a big reason for the competition right now is that the online marketplace is changing how we sell books. And a lot of that is because backlist titles are becoming more and more valuable. So if you look back, NPD’s data show that the percentage of title sales that come from backlist titles rose from 57% in 2015, to 63% in 2019. So, a six point gain over the course of about four years. And then that percentage rose four more points in 2020 alone, just in 2020, up to 67%. Now, that increase could be driven in part by backlist titles that were about social justice and things like that that kind of gained steam during the early part of last year, but from what I’ve seen, that doesn’t account for all or even most of the increase. The increase comes from a lot of other things. And I think the reason for the increase is because of the increase in online sales—as online sales have increased, so has the increase in in backlist title percentages.

NPD has a Checkout Service that measures receipts across a wide range of retailers, and that service shows that online sales rose 43%, just in 2020 alone. That’s not just book sales that’s across a lot of different retailers. But that’s a big deal, right, you see an increase in online sales because of shutdowns and everything else. Obviously, you’re going to see, at the same time, an increase in backlist sales. Because online sales are not impacted as much by the limitations of shelf space, that really tend to restrict physical bookstores to focusing on newer titles and perennial bestsellers.

What it leads to is a democratization of sales, in a sense—the titles that sell are the titles that can get the visibility and meet meet the demand best, not the ones that happen to be on the shelves. And that’s the big deal, right? In essence, every publisher and every independent author is competing for the same online shelf space. And that makes it a different kind of approach than you have in print. So in essence, every publisher is doing this. And as with Moneyball, the question that a publisher has to ask, regardless of their size, is how can we get more out of what we’re able to afford? How do we approach this online market that has a broader approach to sales? How do we get more out of that without having to put more into it, right? How do we compete in the marketplace for the least amount that we can put into it?

So what can we do? What’s the solution? How do publishers handle their Moneyball situation? I think in the same way that Billy Beane did, so let’s take a moment and listen to what the character Peter Brand in the movie Moneyball says about the problem that baseball had at that time.

There is an epidemic failure within the game to understand what is really happening. And this leads people who run major league baseball teams to misjudge their players and mismanage their teams. Okay, people who run ball clubs, they think in terms of buying players. Your goal shouldn’t be to buy players, your goal should be to buy wins. And in order to buy wins, you need to buy runs.

So using this equation in the upper left, right here, I’m projecting that we need to win least 99 games in order to make it to the post-season. We need to score at least 814 runs in order to win those games and allow no more than 645 runs. This is the code that I’ve written for a year-to-year projections. This is building in all the intelligence that we have to project players. It’s about getting things down to one number. Using stats, the way we read them we’ll find value in players that nobody else can see.

So, Peter’s main point here becomes really clear when he says “Your goal shouldn’t be to buy players, it should be to buy wins.” In another important scene in the movie, Billy and Peter are debating with the scouts about who they should sign up to be on the team. Billy brings up every player he wants to sign, writes their name down, and throws it up on the board, and the scouts all rattle off reasons why that player won’t work. But Billy comes back to the same thing over and over and over again. He says, “I don’t care if he’s too old or too big or has some other defect that you think will keep him from being a good player. I care only about one thing: He gets on base.”

As a matter of fact, one of those players Scott Hatteburg was signed up and put into the first base position, even though he had no idea how to play first base. He was a pitcher, who had some problems with his arm and lost the ability to pitch. Billy didn’t need him to be a pitcher, Billy needed him to be on first base so that he could be in the batting lineup, because you can only actually bat if you’re actually playing. He was needed on the team because his core abilities were not necessarily his ability to do first base (although he did become a really good first baseman), it’s because he was a sharp, analytical player who was disciplined enough to know when to hit the ball, and when to when to let that ball fly by. In other words, he was able to get on base, and his on-base percentage was really high.

So for some publishing companies, I think the key to success in the year tends to be seen as having one or two bestsellers—”big players”—that make up for the losses that other titles that don’t do as well really should be doing. That model works well for some publishers, and it’s especially pretty good when you look at some of the biggest titles in the last few decades. But I don’t think that’s where the difference will be for the biggest number of publishers. I think that we’re in a situation where publishers really should be focusing on other things, it’s not the best way to win. So in Peter Brand’s parlance, the goal of publishing companies should be to get more players on-base—to increase the success of more titles, enough that they positively impact the overall success of the company.

Now Peter in the movie did this through data. He did it by analyzing players, looking for players with the potential to get on base more, because getting on base means having more opportunities to get around to Home and make a point. In addition to analyzing the players before they were signed, though, Peter watched what they were doing during the season, and he helped Billy coach them on how to get on base more.

So if you watch the movie, one of the things you might miss the first time through, that I think is actually fairly important is this little short montage that shows Billy and Peter talking to the team members over the course of a few months in the early part of the season. After they started the process and they had these players, they realized that it wasn’t just a one-and-done situation, you know, look at the data and hire the right players. That’s not the technique. It was an iterative process of watching the players in each game, seeing what was working and what wasn’t, and helping those players get better over time with the skills that they would need to make the team as a whole more successful. Watching for the right times to swing at the ball, and watching for the right ways to handle that.

So the point is that baseball had a data problem. Teams were overvaluing some players and undervaluing others, and mostly those valuations were based on who the scouts and managers thought “looked good.” More importantly, for us, Billy Beane, understood that the Oakland A’s could use data to win more games. And that’s the key, right? Because finding the right players, and helping all of the players get on base more was the key to making this whole thing successful.

So publishing, I think also has the same data problem. As sales tilt toward those online retailers, and backlist titles continue to sell more than frontlist titles, publishers are faced with very real data problems. First, publishers don’t always have a data-driven process for acquisitions. And don’t get me wrong, I have a deep appreciation for the very difficult work that acquisitions editors do, and I do think that they are doing a great job. And I don’t think the data is a cure-all of some kind for the problem of books that don’t sell through. The the issue, though, is that we need to have some sort of process early on in our acquisitions to assess the data, assess what will actually make a difference. I think it’s beneficial for publishers to consider those issues and look at the data as much as you can.

The second area where we have data problems are not having enough good quality metadata that drives visibility and drives sales of products online.

And the third area I think, is not knowing where your titles are, what they’re doing in the marketplace, how well they’re doing, not being able to see and react to trends and issues and opportunities.

So back on that second point, though, book data really does have a direct relationship to visibility and sales. Nielsen has done multiple studies over the years that show the direct relationship between high quality metadata and book sales. The last study they did in the US back in 2016—before Nielsen Book was purchased by NPD—that study showed the titles carrying the full complement of basic data elements and a cover image see average sales per ISBN 75% higher than those that don’t have that complete data. They also showed that titles holding all three descriptive elements, which would be the book description, the author bio, and reviews saw average sales 72% higher than those with no descriptive data.

Just this past October, Nielsen in the UK released another study of the UK book market, covering sales in 2019. So this study showed similar results to the US study. First, the data revealed that in 2019 17.7% of book buyers cited the book description as a reason behind their purchase behavior. That’s bigger than the books front cover (11.5%), whether the book had won an award (2%), whether the book had appeared in the bestseller chart (7%), and even whether it was priced low, or had an offer (14.1%). So most book buyers—or a larger number of book buyers—look at the book description as the reason for buying the book. The study also found that books in the top 100,000 based on sales units that had keyword records sold more than two times as many units on average. Also, only around 57% of the top 100,000 best-selling titles actually included keywords in their metadata. So those titles were selling a lot more—more than two times, on average, the number of sales. So keywords are obviously very important. And we’ll talk about that I’m sure in future podcasts.

They also found that books with complete author biography information sold double those without. Books with reviews in their metadata had sales 83% higher on average than books without, and books that had all five descriptive metadata elements—keywords, short description, long description, reviews, and author biographies—had 316% higher average sales than those that didn’t have any of those elements.

So it really matters, right? The presence and the quality of your metadata really does matter. And we’ll talk about this in future episodes. But I think it’s very important for every publisher to have a solid approach to metadata cleanup and creation—watching your data, making sure that you’re actually updating data on a regular basis, because your metadata really is a big deal.

The other problem that I mentioned—the third data problem I mentioned is not knowing what your titles are doing in the marketplace—knowing what’s going on. Most publishers are so focused on the publication of new books that they really don’t have a plan in place for watching their current books. As we saw earlier, backlist titles are selling more than frontlist titles. 67% of all sales are backlist. So keeping an eye on your titles is imperative if you want to increase your sales. This is really very similar to the situation that the that Peter and Billy were dealing with in Moneyball, right? What were they doing as the season went on? They were watching what was happening with the players, and they were making sure that they were tweaking the approach of each player to better assist that player to get on base more. So, it’s the same thing with your books, right?

Making sure you’re watching your books, looking for data issues, looking for opportunities, catching swings in your sales rank, watching for third party sellers taking over the Buy Box, looking for issues with your pricing, and all these other issues. Looking for the opportunities that you can take advantage of to make more sales—to get on base more. So, the Moneyball problem in publishing—I don’t think it is insurmountable. I think some publishers have already taken the leap to learning from their data and tackling their metadata challenges, and they’re seeing a ton of success with that. I hope to have some of those publishers on the podcast in the future, to tell their stories and help you see how they’ve done it.

So let’s talk about a few things to sum up. First, the key to succeeding despite the Moneyball situation, I think, is to focus on the data. I like to say that a publisher’s metadata is their most important non-people resource. So, we have to pay close attention to that data, and we have to treat it well if we want to ensure the longevity of our companies, just like we treat our employees well and focus on them, as well.

Second, updating and optimizing your metadata—even, or possibly especially, the metadata for your backlist—can help drive visibility and sales. All the research we’ve seen shows that more metadata, better metadata, does have an impact on sales.

And third, watching your products in the marketplace is the most effective way for you to catch issues and opportunities with your titles quickly. Remember the process Billy and Peter followed in the movie: they watched players in every game and they helped them adapt to become better at getting on base. That process works the same way with your books—monitoring your titles in the marketplace, looking for issues and opportunities to get more sales. It’s one of the most important paths for your success. And I’ve had the opportunity to see a lot of publishers take more control of this aspect of their sales strategy using Firebrand’s Eloquence on Alert title performance monitoring tool, and I would love to bring some of those publishers on to talk more about how they’ve been watching and monitoring their titles.

So I hope that this metadata problem—this whole idea of the Moneyball situation in publishing—is enlightening to you, and I hope you walk away from here with a couple of ideas for how you can approach these issues. As always, if you have ideas or suggestions, if you have some feedback for me about this topic, I’d love to hear from you! Please feel free to reach out to me. You can email me at joshua@firebrandtech.com. If you have a suggestion for a future episode, if you think we should talk about a certain topic or something, please let me know.

So thanks for joining me for the BookSmarts podcast and for getting smarter about your books.


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