The business of print publishing — producing physical books and shipping them here and there — has taken two more serious blows in the last month.

H.B. Fenn, Canada’s largest book distributor, filed for bankruptcy on Feb 3, leaving major publishers like Macmillan in the lurch.

Borders, the second largest book chain in the US, filed for bankruptcy on Feb 16. Though the company hopes to restructure and emerge with a pulse, it has set about closing more than 200 of its current locations.

These announcements are simply two in a long string from the past year, including the dissolution of Canadian publisher Key Porter and the closure of indie bookstore after indie bookstore.

The economics of moving print books across the country and around the world are becoming increasingly untenable. It’s relatively expensive to create, ship and store physical books, and with already razor-thin margins, traditional publishers, distributors, and booksellers are feeling the pinch.

But what does it all mean for you as a self-published author?

Physical space for selling books is decreasing
Sobering fact: Your book has less than a 1% chance of being stocked in an average bookstore. With shelf space dwindling, competition for what’s left is fierce. You think it’s hard getting your self-published book into a bookstore now? Expect it to get even harder. The thing is, while mainstream bookstore distribution is great if you can get it, for a lot of business authors, it’s not the only game in town.

Exploit other channels
You’ve got all kinds of other sales channels available to you, such as back-of-room sales at speaking engagements, bulk sales to special interest groups, direct sales to your client base, and online sales through Amazon. Use them.

Lock in your digital strategy
Yes, a print book still confers the most cachet, which is important for the freebies you give as gifts to clients and contacts. But don’t neglect the e-book market — it’s booming and will only continue to grow. At the very least, make sure your print book is available on all the major e-reading platforms. It’s not hard to do.

And start to think about ways you can establish your e-book as the premium gift. How about giving top prospects an e-book reader skinned with your book cover and a link to a free download of your book?

The print book market will be around for quite a while yet, but it will get increasingly harder for self-published authors to get distribution through mainstream channels. Pursue that distribution if you like, but don’t let it be your only or even primary strategy. Multiple channels for reaching readers are your best insurance.

A key economic concept is that of spirals — trends that self-perpetuate. A spiral can happen, for example, when a product moves from early adoption amongst a select few to general adoption amongst a wider audience. At first a few people purchase a cell phone, then more and more; finally a great wave of people purchase one and the product becomes ubiquitous (except for the few Luddite holdouts).

The same thing happens with pricing. When only a few cell phones are sold, each one is very expensive. The higher price limits the number of people who will buy one. But once there are more sales, the production process can enter what is called an economy of scale. There are cost savings from producing many cell phones at once. These cost savings are passed on to buyers in the form of cheaper prices (plus some retained profits for the manufacturers). A lovely cycle is created where the more a company produces, the more cheaply it can sell the product and still make great margins – as long as market share keeps growing. This is an upward spiral.

However, if the market starts to slow, the great momentum of the spiral turns down. Fewer cell phones being sold (like Nokia is experiencing right now) means production costs go up, which leads to prices needing to go up. Higher prices make it less likely for people to purchase the product. At some point, the downward spiral ends in a predictably bad place for the company that now makes a product that’s too expensive for the market.

With the incredible surge in the e-book market (greater than any predictions), we’re starting to see a corresponding decline in p-book sales. Gradually, there will be fewer copies of each paper book produced. At first this won’t create a big difference in the economies of scale and therefore price of a book. But over time, as print runs become smaller, the price of p-books will have to go up.

Over time, higher book prices will lead to fewer copies sold, which will lead to more expensive production costs, which will necessitate higher prices, which will lead to fewer copies sold, and so on. The downward spiral of p-book publishing will accelerate. And the 3-format book future will come about – fast.

P.S. Thanks to Mike Shatzkin and Eoin Purcell for reminding me of my economics background.

UPDATE – July 13, 2010 - Well, it’s happened already. Sony just broke the $100 e-reader barrier. Looks like there will be e-readers for everyone this holiday season! – R.S.

May 1st was a big day for the e-reader market. That’s when the Kobo, at $149, became the cheapest and most stripped down e-reader you could buy. Soon after, Borders started selling a competitive but cheaper reader, the Aluratek Libre for only $119.99. Now Barnes & Noble has a version of the Nook at $149, and Amazon Kindle promptly slashed its price to $189. Sony, not to be left out of the fun, has also dropped their prices. What’s really going on here? Is it simply competitive pricing, or something more?

Let’s look to the printer and toner pricing structure for a possible answer. Each day, printers are sold with more features, and at lower prices. The catch is the toner: It continues to be ridiculously expensive. I break out in hives when I have to buy toner cartridges for my colour printer. I even purchased a new printer once because it was cheaper than buying the toner! Don’t worry, I found the old one a new home at a recycling charity. Seems e-books are the new toner, and e-readers the new printers.

The first e-readers were expensive ($359 for the first Kindle), and e-books were cheap (typically about $9.99 per book). The publishers didn’t like it, but they had to live within a model where the retailer set the price. When Apple’s iPad launched this spring they forced a change that swept the industry, and now retailers have less discount wiggle room. Not surprisingly, e-books prices have shot up to the $12 range today.

The only lever left to support the rapid rise of digital book sales (and save the publishing industry) is for e-reader prices to continue to drop. Cheaper means much more accessible, and the number of people who own an e-reader will explode. Back to my printer and toner analogy, almost anyone can buy a colour printer these days, but the toner is a whole other story. We need to keep an eye on e-book pricing, and take bets on which e-readers will survive the price wars (the iRex has already filed for bankruptcy protection in the USA), and which ones will go down with last year’s colour printer models.

As Bette Davis/Margo Channing said in the movie, All About Eve, “Fasten your seatbelts. It’s going to be a bumpy night!”

If you’re an author or publisher and still aren’t sure if the whole Twitter thing is for you, a couple of new resources may help demonstrate the value it can deliver.

Last week I was interviewed by Kirk Biglione, a digital publisher and new media consultant, about Twitter and the book trade people who are using it. You can listen to a recording of that interview.

Kirk has also put together a short video presentation that explains how Twitter is like the best cocktail party you’ve ever attended, and how authors and publishers can use it to their advantage.

If you’ve been a hold-out, now is the time to join the Twitter party. It’s probably different — and better — than you think. Look me up at @jennifertribe and say hello. Let’s start a conversation.

Amazon has extended the reaches of its empire once again.

Late yesterday afternoon, news broke that Amazon had acquired Lexcycle, makers of Stanza, a popular e-reader application for the iPhone. Within minutes of the announcement being picked up in the New York Times, the Twittersphere was buzzing with speculation.

So far, what’s known is that Amazon has acquired Lexcycle. And … well, that’s all that’s known for sure right now. No word on the purchase price. More importantly, there remain a lot of unanswered questions as to what this acquisition will mean for the emerging e-book market.

Stanza is one of the most popular e-reader applications for the iPhone and iPod Touch. With a user base of more than 1.3 million, the app outstrips Amazon’s Kindle in market penetration. Last month, Amazon launched a Kindle app for the iPhone, allowing Kindle owners to also read books on their mobile device. However, like the Kindle itself, the app was only available in the United States. Now, with the acquisition of Stanza, Amazon has instant access to a worldwide mobile user base.

The sticky question is what Amazon will do with the Stanza software. To date, Stanza has offered support for open e-book formats. The application reads ePub files (the book format that the publishing industry has been to trying to standardize around) and files not protected with DRM technology.

Amazon, on the other hand, has been building a supply chain around its own proprietary Kindle format. Kindle books can only be read on a Kindle device or with the iPhone Kindle app. So it seems unlikely Amazon will allow Stanza’s continued support of open formats.

Here’s a summary of some of the commentary now circulating:

• Michael Cairns points out that now is the time for the publishing industry to get behind a common e-book standard. If publishers don’t act now while the e-book market is still in its infancy, they will become increasingly powerless against retail behemoths like Amazon.
• Mike Cane provides some compelling analysis on why the acquisition is bad, bad news for the industry.
• Paul Biba shares some thoughts on the acquisition’s negative implications for the “little guy.”
• Karen Templar summarizes some of the big questions the industry now faces.

Literary agent Nathan Bradford recently shared some intriguing ideas about the state of publishing. In his words:

In essence, it’s the best of times and the worst of times. If you’re an enterprising author there is a world of opportunity out there. Never before have we had a book publishing world where truly anyone could publish and potentially find their readers. Before there was a fundamental obstacle: distribution. That’s going away. Anyone can publish. It’s a massive, groundbreaking shift! I suspect soon there will be even more opportunities for collectives and online communities to boost sales, build brands, and become real players in publishing. Out of chaos comes order.

Note that last sentence. It’s true that chaos appears to reign in the halls of traditional publishing these days. The old order is being shaken to its very core. But equally true is that after this period of turmoil, a new order will emerge. It always does. It’s just that none of us are 100% clear yet on what that order might look like.

In the meantime, the future of publishing is being vigorously discussed, debated, and shaped at events such as TOC and BookCamp, in online communities such as Twitter, and on blogs all over the web.

And I agree with Nathan. It’s never been a better time to be an author. With the industry in flux, there are a wealth of opportunities for those with the acumen to recognize them and the moxie to do something about them.