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By Susan Lulgjuraj

Smashwords rolled out preorders for its e-books this week, giving authors a new tool to work within its distribution network. You can read more about that here from Teleread’s Joanna Cabot.

When Smashwords was first created, it was a place writers could sell their e-books. But the site quickly changed from retailer to distributor, getting books onto Barnes & Noble, Kobo, Sony and Apple iBooks among a number of other outlets.

TeleRead had a chance to interview Smashwords CEO Mark Coker about the company’s distribution network, and the changing publishing landscape.

TeleRead: When did it seem that Smashwords was becoming more of a distributor than a retailer? Or was that the plan from the beginning of the company?

Mark Coker: When we launched Smashwords in early 2008, our platform made it easy to publish and sell an ebook in our own store. We never planned to become a distributor. In early 2009, however, I had an epiphany. Our small store was an island. Readers were going to bookstores to find their next read, so we needed to get our books into the major online ebook stores. I studied the landscape and was impressed by the example of Ingram, which was the leading distributor of print books to retailers. By efficiently managing the distribution and fulfillment logistics for print books, they were offering an incredibly valuable service to publishers, retailers and readers alike. So I got the crazy idea to make Smashwords the Ingram of self-published ebooks. It was clear at the time that self-published ebook authors were unable to reach the major retailers. Only Amazon had a viable platform for indies. By the end of 2009, we signed our first distribution deals with Barnes & Noble, Sony and Kobo. In early 2010, we became one of Apple’s first authorized aggregators.

Today, over 90% of our sales come from our distribution network, and it’s where we’ve placed 95% of our development effort over the last four years.

TR: In the end of the year blog post for 2012, you wrote that 80 percent of the authors use Smashwords as a distributor. When did you start to see the number skew in this direction? What is the number now?

MC: Nearly 100% of our authors use us to distribute to one or more retailers in our network. We give our authors the ability to opt out of any retailer channel, and some do. Even though all our authors have the ability to upload direct to most of the retailers we serve, the vast majority choose to reach the retailers via Smashwords. I think the primary reason is that we make it fast and convenient for an author to centrally manage their books and metadata across multiple retailers. They can upload a single book file, formatted to our Style Guide instructions, and it’ll satisfy all the retailers. They can update the price or cover once at Smashwords, and that change propagates out to the retailers. We provide consolidated payments, sales reporting and end-of-year tax reporting, which are huge time savers. We provide preorders and merchandising support.

Bottom line, I think the authors who use Smashwords recognize that we make global ebook distribution fast and easy, and we help them spend more time writing and less time fussing with multiple platforms.

TR: With Smashwords as a distributor of e-books, how do you think that has changed the publishing industry?

MC: We were the first to open up Barnes & Noble and Sony to indie ebooks. On day one of Apple’s iBookstore launch, 2,200 of those books were from Smashwords. I think our greatest contribution to date is that we created simple publishing and distribution tools, and offered these tools for free to writers around the world. Core to our philosophy is that we sincerely believe that every aspiring author deserves a chance to publish, and readers deserve the freedom to decide what they want to read.

I knew that if we could create simple publishing tools, we could help unlock the brilliance locked between the minds and fingertips of writers around the world. I think most people in the publishing industry thought we were insane to believe in indie authors as we did. One well-known publishing industry veteran told me I was delusional when I told him he was underestimating the impact indies would have on the publishing industry. Look around. Today, indie authors are climbing all the most respected bestseller charts. Indies are taking reader eyeballs away from New York by wowing readers with high-quality, low-cost ebooks. The revolution has only just begun, and publishers have yet to experience the full impact to come.

TR: How much further do you expect the distribution network to grow?

MC: In the next six months you’ll see us expand our distribution with new retailers, new library aggregators, and new and innovative models of distribution. Our job is to put our books closer to readers, wherever they may be.

TR: What were some of the bumps you’ve dealt with along the way from retailers when you approached them about distributing e-books to their stores?

MC: Our first discussion in 2009 was with Barnes & Noble. Prior to the discussion, I mistakenly assumed that they and others would feel reticent to take our books. From the first discussion, Barnes & Noble wanted all our books. Sony and Kobo wanted all our books. All the major ebook retailers deserve massive kudos for their support of indie authors from day one. These retailers recognize that their customers appreciate choice. By moving bookselling onto virtual online shelves, it became cost-effective for the retailers to stock the widest variety of books, even books that might not sell.

TR: With the retailers creating their own self-publishing platforms, what does Smashwords have to do to stay competitive?

MC: We’re in an odd situation where our biggest partners are also our biggest competitors. It would be an understatement for me to say I was disappointed to see B&N and Kobo launch direct publishing platforms after we started working with them. Our business is—and always has been—oriented toward helping our retailers become as successful as possible, because their success creates success for our authors. Suddenly they created new groups within their companies designed to take our authors. I think the millions of dollars they invested to create these platforms, and the millions necessary to operate them, would have been much better invested focusing on the retail experience of the customers, and the development of their e-reading devices. That’s how they compete against Amazon. When you consider the cost to build and operate a platform, it’s cheaper for a retailer to source titles from Smashwords than to reinvent the wheel with their own platform.

Even despite this competition, we remain committed to helping our retailer partners build profitable businesses with our books. I think the fact that most of our authors continue to distribute with us, even though they have the option to go direct, speaks the value-add from the author’s perspective of working with a distributor. Going forward, our challenge is to continue pushing the envelope so that authors who work with us have an advantage over those who don’t. I think if we continue improving the speed and reliability of our distributions and the speed of sales reporting, and we continue to give our authors more control over their books and metadata, and we continue to innovate with new capabilities such as our new preorder feature, I think authors will continue to partner with Smashwords. Even though we’ve been doing this now for five years, I still feel like we’ve only scratched the surface of what we can do for our authors.

T: How does Smashwords plan to open up more distribution outlets globally? 

MC: Our books are in great demand because we give a retailer the ability the quickly and efficiently ingest over 200,000 titles, including titles from most of the world’s best-selling indie authors. It’s not difficult for us to sign new retail partners. The challenge for us is to be selective, and invest our efforts wisely. We want to choose reliable partners who will help our authors reach new readers.

At the same time, we want to continue reinvesting in our existing partners. Even though our staff has grown considerably, we have limited hours in every day, so we’re always asking ourselves what can we do today that will provide the greatest number of our authors the greatest aggregate benefit. Often, the answer is to invest more time in our existing partners. We’ve done some amazing things with Apple over the last year, for example. Nevertheless, stay tuned. We have new distribution partners to announce in the months ahead!

T: How does adding pre-orders to the distribution network help authors?

MC: Preorders offer authors an incredibly powerful new merchandising and discovery tool. Preorders allow authors to accumulate orders in advance of the official “onsale” date, and when the onsale date hits those orders credit all at once. This can cause a title to spike in the bestseller lists, since most bestseller lists heavily weight unit sales over the preceding 24 hours. By spiking in the bestseller lists, the books become more visible to more readers, which then sets off a virtuous self-reinforcing cycle of more discovery and more sales, which then kicks off the retailer’s “also bought” algorithms. Bottom line, preorders are a catalyst for improved discovery and sales. I expect preorders will eventually be seen as a best practice for book launches. Authors will build preorder runway into their release schedules. We’re doing preorders to Apple, Barnes & Noble and Kobo.

T: What do you see in the future for Smashwords?

MC: We’ve grown significantly over the last few years, but I think our best days are still ahead of us. Today we’re the world’s largest distributor of self-published ebooks. Over the next few years, you’ll see us continue to innovate and improve upon every aspect of our business. We want to make it faster, easier and more effective for writers to reach readers via Smashwords distribution than any other means. If we help our authors achieve greater success with us than without us, then we’ll be continue to be successful.