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Publisher’s Weekly reported today:

E-book sales rose 167% in June, to $80.2 million, at the 15 houses that reported figures to AAP’s monthly sales report and closed the first half of the year with sales up 161%, to $473.8 million.

But the biggest news in e-book publishing is that the inventor of the e-book, Michael S. Hart, passed away this past week on September 6, 2011.

What follows is an excerpt from the obituary for Mr. Hart written by Dr. Gregory B. Newby for Project Gutenberg.

Michael Stern Hart was born in Tacoma, Washington on March 8, 1947. He died on September 6, 2011 in his home in Urbana, Illinois, at the age of 64. He is survived by his mother, Alice, and brother, Bennett. Michael was an Eagle Scout (Urbana Troop 6 and Explorer Post 12), and served in the Army in Korea during the Vietnam era.

Hart was best known for his 1971 invention of electronic books, or eBooks. He founded Project Gutenberg, which is recognized as one of the earliest and longest-lasting online literary projects. He often told this story of how he had the idea for eBooks. He had been granted access to significant computing power at the University of Illinois at Urbana-Champaign. On July 4, 1971, after being inspired by a free printed copy of the U.S. Declaration of Independence, he decided to type the text into a computer, and to transmit it to other users on the computer network. From this beginning, the digitization and distribution of literature was to be Hart’s life’s work, spanning over 40 years.

Hart was an ardent technologist and futurist. A lifetime tinkerer, he acquired hands-on expertise with the technologies of the day: radio, hi-fi stereo, video equipment, and of course computers. He constantly looked into the future, to anticipate technological advances. One of his favorite speculations was that someday, everyone would be able to have their own copy of the Project Gutenberg collection or whatever subset desired. This vision came true, thanks to the advent of large inexpensive computer disk drives, and to the ubiquity of portable mobile devices, such as cell phones.

Hart also predicted the enhancement of automatic translation, which would provide all of the world’s literature in over a hundred languages. While this goal has not yet been reached, by the time of his death Project Gutenberg hosted eBooks in 60 different languages, and was frequently highlighted as one of the best Internet-based resources.

A lifetime intellectual, Hart was inspired by his parents, both professors at the University of Illinois, to seek truth and to question authority. One of his favorite recent quotes, credited to George Bernard Shaw, is characteristic of his approach to life: “Reasonable people adapt themselves to the world. Unreasonable people attempt to adapt the world to themselves. All progress, therefore, depends on unreasonable people.”

Michael prided himself on being unreasonable, and only in the later years of life did he mellow sufficiently to occasionally refrain from debate. Yet, his passion for life, and all the things in it, never abated.

Frugal to a fault, Michael glided through life with many possessions and friends, but very few expenses. He used home remedies rather than seeing doctors. He fixed his own house and car. He built many computers, stereos, and other gear, often from discarded components.

Michael S. Hart left a major mark on the world. The invention of eBooks was not simply a technological innovation or precursor to the modern information environment. A more correct understanding is that eBooks are an efficient and effective way of unlimited free distribution of literature. Access to eBooks can thus provide opportunity for increased literacy. Literacy, and the ideas contained in literature, creates opportunity.

In July 2011, Michael wrote these words, which summarize his goals and his lasting legacy: “One thing about eBooks that most people haven’t thought much is that eBooks are the very first thing that we’re all able to have as much as we want other than air. Think about that for a moment and you realize we are in the right job.”

He had this advice for those seeking to make literature available to all people, especially children: “Learning is its own reward. Nothing I can say is better than that.”

Michael is remembered as a dear friend, who sacrificed personal luxury to fight for literacy, and for preservation of public domain rights and resources, towards the greater good.

What makes for a successful retailer? More revenue than expenses, of course, but not just a simple profit and loss reckoning, but profitability within a biz model that includes a positive monthly cash flow. Healthy cash flow is achieved through healthy inventory turns. What are turns? For a bookstore that mean ordering copies of a title on payment terms (often 60- and more often 90-days to pay) and then hopefully selling those copies and getting money for them at the cash register before writing a check to the publisher.

How likely is that to happen if you are stocking 200 thousand inventory items in a big box national chain? Not likely. But hot selling titles will hopefully push overall performance numbers up. But what happens if there’s no new Harry Potter or vampire title to average in with the laggers (and even help them move more briskly because of increased consumer traffic) on the aggregate? What if you are a retailer and your inventory piles up to the point that you don’t have the funds to buy new books (referred to as ‘open to buy dollars’)? Simple. You return slow-moving titles, of course.

Store buyers place their orders with publishers (and/or distributors) based on projections of how many copies of a book his or her stores will sell in the first four to six weeks. How does the buyer come up with those projections? He listens to the publisher’s sales rep give the key selling points, comparable titles, and publicity plans. He then combines the sales rep’s projections with what his reports on the comps and his own gut tells him, and then places his order a couple weeks or months later. With the large chains the buyer will get a personal report card based on how well his titles met those projections. He has the further accountability of a finite dollar number in his corporate check book. Once that number nears zero without being replenished, his ‘open to buy dollars’ are done. So not only will he return books if they are not coming close to meeting forecasts, but he may be forced to return some borderline performing titles in order to have more dollars available to purchase a hot-selling title. To the publisher this feels like the retailer is paying his bills with returns.

The preceding paragraph sums up what is in a book retailer’s best interests – and what their challenges are. What about the publisher?

A publisher feels like she will do well on a single title when she adds up pre-press expenses (cover and interior design and editing), manufacturing expenses, direct marketing expense, overhead, a return reserve (usually an aggregate percentage applied to each title that assumes not every copy printed will actually sell and will have to be disposed of as an overstock or remainer), and royalty expenses (including advance against royalties), and then subtracts that number from sales projections – usually three-month, six-month, and 12-month projections. How does she come up with those projections? She reviews the performance of comparable titles and considers the author’s ability to help promote sales of the title to come up with her own number. She then shares her thinking with sales and marketing teams who will listen and agree or disagree in some measure and come up with their own projections. Different companies settle those differences in different ways. The publisher will do well on a single title in reality when the retail buyer brings in the number of titles projected (sell-in) and consumers buy enough copies of that title off the shelf (sell-through) to generate reorders. The publisher will get her report card on the basis of meeting or exceeding the original projections. She will do particularly well when overall sales pay off any advance against royalties and re-orders are frequent enough to keep inventory levels down (books sitting in a warehouse are like bananas – they can go bad overnite!).

The common success denominator for retailers and publishers is managing inventory levels. The retailer tries not to over order in the first place and is quick to return laggers. Both dynamics hurt the publisher who saves money on higher press runs and gets killed by returns. When publisher and retailer both get too conservative in order to combat this, another negative occurs. Stock outs. What happens when a customer comes to the store and the book he is looking for isn’t there? He forgets about it – or if he is persistent, he orders it online and waits for it. That kills brick and mortar retailers. Another less obvious impact of conservative buying patterns is the lack of merchandising. There was a day when you would walk into a bookstore and there would be numerous titles stacked high to capture attention and send the message that this was a book that just had to be purchased. With a few notable exceptions, like the afore-mentioned Harry Potter example, title emphasis is more subtle – and much easier to miss (or ignore).

Two relatively recent technological developments that are helping publishers more than brick and mortar retailers are print-on-demand and the e-book. Print-on-demand vendors provide a pretty high quality book (and the print quality is getting better all the time) – though without bells and whistles like foil and embossing – overnight and at a reasonable price. Not as good a price as printing 100 thousand books on an offset press, but a good enough price that beats the heck out of an excess inventory fall bonfire! An e-book is never out of print. Add those two dynamics together and any book is technically available within 24-hours to a retailer or individual consumer without the risk of large print runs.

But back to the publisher-retailer relationship. Even print-on-demand can’t totally mitigate the damage to performance numbers that occurs because the two parties have conflicting interests when it comes to inventory management.
Is there a solution? If you follow the financial reports of major publishers and retailers, neither side of the equation is doing well enough to give much in the give and take of business.

The solution for the author who wonders why his or her book isn’t selling like it should is to look in the mirror and ask him or herself what he or she can do to build demand. The book publishing and selling environment isn’t currently emulating the Fields of Dreams. Just because you wrote it doesn’t mean it will sell.