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SPIEGEL ONLINE

08/04/2010 12:28 PM

Random House CEO on the E-Book Age

'The Printed Book Will Still Dominate for a Long Time to Come'

In a SPIEGEL interview, Random House CEO Markus Dohle, 42, discusses the world's biggest publisher's plans for the e-book age, his company's tough negotiations with Apple and why the printed book will continue to dominate publishing.

SPIEGEL: Mr. Dohle, your rise to the top post in the world's largest book publishing company two years ago was met with disdain in the literary community, especially in New York, where Random House is headquartered. You were seen as an outsider who had made a career at Random House's parent company Bertelsmann in Germany, in the book printing and logistics business. Did you receive a correspondingly icy reception?

Markus Dohle: Let's put it this way: The creative community was very surprised. And so was I, by the way. There were a few question marks at first, even within our company, which is why I immediately spoke with as many people as possible. After that, the first shock within the intellectual Manhattan establishment quickly disappeared.

SPIEGEL: Did you work your way through the literary canon in preparation?

Dohle: There was no time for that. I was set up in the United States within a few days. It went very quickly. And when I started the new position, I was in the process of reading the Random House book "You're in Charge -- Now What?" It was certainly appropriate reading material.

SPIEGEL: Aren't you worried about embarrassing yourself while making small talk about literature with authors and agents?

Dohle: I do happen to have 15 Frankfurt Book Fairs under my belt and have spent my entire professional life in the book business at Bertelsmann. I've met plenty of major authors and publishers in the process. The book industry is a very creative environment. Ultimately, however, it's about making money with books.

SPIEGEL: As publisher, which of your authors did you meet first?

Dohle: Dan Brown …

SPIEGEL: … the bestselling author who is one of your most important sources of profits worldwide.

Dohle: That was on my first day at work in New York. I was in the office at 8 a.m. Dan Brown knocked on my door at 10. He was in the city and had taken the opportunity to come and meet me. In other words, the author was welcoming the new head of Random House. I appreciated that, and it resulted in a good personal relationship.

SPIEGEL: At the time, Random House had already been waiting for Brown's latest book, "The Lost Symbol," for some time.

Dohle: That's why I saw his visit as a good omen. In other words, it was telling me that it surely wouldn't take much longer. And that's exactly how it happened. "The Lost Symbol" came out in 2009 and was very successful.

SPIEGEL: Do you see yourself now as a publisher, and not just as a manager?

Dohle: I see myself as someone who has to strike a balance between creativity and profitability. Of course, I read a lot more today, which is also because I always have my books with me, not always in printed form, but on my electronic reading devices. I read whenever I have a few minutes to spare.

SPIEGEL: When you see people reading on the train, who do you like better, the reader with the iPad or the one with the book?

Dohle: I like both…

SPIEGEL: …because you make money with both.

Dohle: But that's precisely our opportunity. I'm pleased to see a reader who's reading on his iPad or Kindle. Without these devices, perhaps we wouldn't be able to reach that person at that very moment, because he might have left his book at home. But we always have him on the electronic reader. That minute of reading is a gift.

SPIEGEL: You sound really enthusiastic.

Dohle: Yes. I grew up with printed paper, but I have to admit that I'm surprised at how quickly the digital business is growing, especially in the United States. Nevertheless, the printed book will still dominate for a long time to come.

SPIEGEL: How much of your turnover comes from e-books?

Dohle: It's around 8 percent in the US right now, which represents a huge increase. I can imagine that we'll end up above 10 percent next year.

'It's Far from Clear Which Vendors and Reading Devices Will Prevail'

SPIEGEL: The online retailer Amazon has announced that in June it sold 180 digital titles for every 100 hardcover books in the United States. Analysts estimate that in 10 years' time only a quarter of all books will go to readers in printed form. Do you think that's realistic?

Dohle: I don't agree with that prognosis. I think it's too aggressive, too much hype. The market share for electronic books, even in the United States, will more likely be between 25 and 50 percent by 2015. But this development still represents a huge opportunity for us. It creates new growth. I meet people in America who say: I started reading again because of my e-reader -- and so did my children.

SPIEGEL: Your euphoria must have its limits, though. When Apple introduced its iPad in January, five of the six biggest US publishers were partners in Apple's online iBookstore. But Random House, the biggest one, is still not part of the effort in the US. Why are you hesitating?

Dohle: In the English-language market, unlike Germany, there is no such thing as a fixed book price agreement. The bookseller sets the retail price. In Apple's iBookstore, it's up to the publishers to set prices for the reader. Apple stays out of it and gets a commission. We have to examine this very closely to determine whether we are willing to make this drastic change to our business model.

SPIEGEL: What's so bad about being able to set your own prices?

Dohle: In markets where there are no fixed book price agreements, it means that the publishers are entering into a pricing competition that was previously conducted by the booksellers. The question, however, is whether publishers have the ability to find the right retail price in order to reach as many readers as possible. This wasn't our business until now.

SPIEGEL: In other words, you don't want to release Apple from the business risk that was previously taken by booksellers, and that's also taken by Amazon?

Dohle: That's right, it's also a question of the distribution of risk. Until now, we have sold content, developed and marketed talent and calculated our prices accordingly. In the United States, the book trade has structured retail prices in keeping with individual market conditions. It needs to be determined whether publishers really can, and should, do both things in the future.

SPIEGEL: Do you really believe you can do without Apple?

Dohle: The digital shift is more likely to take five to seven years, so 100 days in the iBookstore are not going to determine whether something is a success or a failure. Of course we want to have a presence in every digital bookstore. And you mustn't forget that our readers in the United States can also read our books on the iPad, using many different apps, even if we're not part of the iBookstore there. I don't think that we'll miss out on too much in the long run. In fact, we believe that we have to proceed in a very thought-out way, in order to find a sensible business model that will hold up in the coming years.

SPIEGEL: In addition to Amazon, Apple and Barnes & Noble, Google is also entering the young market as another vendor of e-books…

Dohle: There's a lot going on, which is why it's far from clear as to which vendors and reading devices will prevail in the market in the long term.

SPIEGEL: So you expect that Apple will in the end decide that it doesn't want to do without major authors like Dan Brown, and give in?

Dohle: Naturally, we have interesting content, which is why we are self-confident and can negotiate as equals. We don't want to destroy our business model, which has to last for the coming years, with a couple of wrong steps. But we essentially have the same interests.

SPIEGEL: The same interests? A few years ago, Steve Jobs said that he didn't believe in the future of the book. Apple makes money in a lot of ways, and Jobs probably couldn't care less whether the book survives. But you do.

Dohle: The digital world of books is undoubtedly more important to us than to Apple. In Germany, however, our books are already in the iBookstore, because there is a fixed book price agreement here, which we expressly support, and because it is easier to reach deals on this basis. In other words, there is no fundamental problem between Apple and us.

SPIEGEL: Until now, the online platform Amazon was the dominant vendor in the e-book business. The company tends to charge only $9.99 (about €7.70) for bestsellers in the United States. Is the book turning into a bargain-basement item?

Dohle: It isn't as if pricing pressure only arose as a result of digital books. It's just as prevalent in the print world. Many countries don't have fixed book prices, and there we, as a publisher, have no influence on retail prices. Whether Barnes & Noble sells our bestseller "The Lost Symbol" by Dan Brown for $18.99 or $14.99 is a decision they've always made themselves. Of course, we don't like to see a retailer in England charge only 5.99 pounds (€7.22 or $9.55), because we don't feel that this reflects the appropriate value of an absolute bestseller.

SPIEGEL: You can't possibly be pleased to see an e-book cost so little that it harms the value of the book.

Dohle: That's true, but it isn't always true that digital books are always cheaper than printed ones. Sometimes printed books are sold for less at Wal-Mart, for example, than the digital version in an e-book store. In other words, there is no reason to claim that the digital business alone is ratcheting up pricing pressure in the book industry.

'The Book as a Medium Is Changing'

SPIEGEL: On the iPad, however, the book is getting all kinds of new, direct competition from games, videos and other forms of entertainment media. Can it even keep up?

Dohle: But the book as a medium is also changing. There are cookbooks that explain to you what to do in a video, or that dictate recipes out loud to you. You don't even have to touch the iPad in the process. Still, no one knows whether this is something people really want and if they are prepared to pay a premium for it.

SPIEGEL: Until now, however, most publishers have seen themselves mainly as providers of good quality books, and not as multimedia professionals.

Dohle: Certainly, the industry can only keep up if the publishers change. And that only works if they invest in digital competencies and don't have a technology department on one side doing the e-books and the staff that runs the traditional business on the other, with a long hallway in between.

SPIEGEL: You also face new competition in your core business. Amazon stopped being just an online bookseller a long time ago, and now it acts as a publisher itself. Stephen Covey, the American bestselling author of non-fiction books such as "The Seven Habits of Highly Effective People," turned his back on his publisher, Simon & Schuster, and sold the digital rights to his next books to Amazon. Who even needs publishing companies anymore?

Dohle: There is, of course, the risk that publishers will go under, but we are very self-confident in that regard. We are convinced that the joint marketing of print and digital rights will be the most successful approach for our authors in the future. And publishing houses are the ones that are best equipped to make sure this happens.

SPIEGEL: It's also a question of how you can ensure that authors remain loyal to your company.

Dohle: Trust plays a very important role. And being patient is also part of it. I don't know whether booksellers have the patience and ability to develop a new talent and pay advances. After all, bestsellers aren't written on an assembly line. As a publisher, you have to know the cycles of the business and be supportive when there are creative gaps, and sometimes you simply have to be able to keep the pressure away from the creatives.

SPIEGEL: But Amazon sometimes pays authors a 70 percent share of sales, while classic publishing houses often pay only 10 percent. Do you have to up the ante to keep your authors from leaving?

Dohle: Of course, that's an issue we address in talks with authors and agents. But when you reach an exclusive deal with a vendor, you have to grant extensive rights without knowing how important they'll be in the coming years.

SPIEGEL: Do you believe that you'll survive digitization more effectively than the music industry?

Dohle: We're just at a point that the music industry has already passed and that newspapers and magazines will still face. It's where the cornerstones are laid for the future and business models are developed. It's our job to transfer the print business model into the digital world, with a fair share for authors, agents, publishers and retailers.

SPIEGEL: As far as the music industry goes, if consumers had had their way, they wouldn't have paid anything at all anymore.

Dohle: Piracy is a threat, but we are operating on a good basis, unlike the music industry a few years ago. Piracy was already a major factor in the market when they tried to introduce payment models. In our case, readers are accustomed and prepared to pay for content. We just have to be careful not to let piracy in. That's an important requirement for the future of the publishing industry.

SPIEGEL: Mr. Dohle, thank you for this interview.

Interview conducted by Markus Brauck and Isabell Hülsen

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