The purpose of the hearing was to set schedules, review witness lists and go over last-minute evidence objections ahead of the trial. Cote proposed that each side should be given 22 hours over a four day period plus a final day for closing arguments; the federal government said it would need at least 30 hours to make its case, and Apple requested the same, meaning the total trial would last 12 days. Cote said she will decide in the near future.

The parties also reviewed the witness list, who include prominent publishing CEOs like Macmillan’s John Sargent and Apple executive Eddy Cue. Today’s hearing also raised the possibility that News Corp CEO James Murdoch, who exchanged a series of emails with Apple’s Steve Jobs, could take the stand for cross-examination; the federal government will decide in coming days, on the basis of an evidence issue, whether this will be necessary.

Much of the trial, however, is unlikely to feature dramatic CEO testimony. Instead, the core of the trial is likely to slog through recondite economic arguments and civil evidence issues; part of today’s hearing focused on expert witness opinion about the competitive effects of agency pricing and whether it coincided with Apple’s economic self-interest.

Today’s hearing also focused on an ongoing dispute in which Apple is attempting to force its competitors, especially Amazon, to unseal evidence they have submitted as part of the proceedings.

At the outset of the hearing, in a courtroom that rises 15 stories above lower Manhattan with a view of the Brooklyn Bridge, Cote stressed that the case represented an enormous amount or work, and told the parties to call her “day or night” if they decided to settle.

Nearly four years and 3,000 titles later (with an additional 1,000 titles under contract), the company is still focused around acquiring and marketing backlist titles. Open Road has raised $15 million so far, from Kohlberg Ventures, Golden Seeds and Azure. (The company would not disclose revenues or whether it is profitable.) It still does not pay advances and still splits revenues 50-50 (after recouping some digitization costs) with authors, but it has also expanded its focus. It is publishing print books, expanding to new verticals like romance and the Vietnam War, signing up a limited number of original manuscripts, and handling digital distribution and marketing for both U.S. and international publishers.

These changes reflect Open Road’s adaptability to a changing market, but are also evidence of the fact that, in 2013, it faces more competition from other publishers than it did four years ago. The backlist — which covers books that have been out for a least a year and that in some cases are decades old — is estimated to make up around 40 percent of the trade book market, and many publishers are seeking to mine those rights. HarperCollins is currently suing Open Road over the digital rights to Jean Craighead George’s Julie of the Wolves; the case hasn’t yet gone to trial. Amazon has bought up the backlists of several small publishers and plans to release those titles as ebooks for the first time.

Arthur Klebanoff is the CEO of RosettaBooks, which led the way in 2001 as a company focused on marketing the backlist in digital formats. Rosetta and Open Road are often described as competitors, and they are, but, Klebanoff noted, “I think any ebook-only publisher really has to say its primary competition is each of the print publishers of any size. Those print publishers, for the better part of 10 years, have been trying to license back the digital rights to everything in their backlist.” One reason they don’t always succeed — allowing publishers like Rosetta and Open Road to get the rights instead — is that they almost always still only offer a 25 percent royalty (rather than a cut of the sales) and they are more focused on new titles than on the backlist.

In those areas and others, Open Road hopes to stay ahead. Here are some of the things it’s doing.

Always be marketing

Open Road has always been centered around marketing. The company has over 40 in-house employees, and more than half hold marketing roles.

Open Road describes its marketing strategy — a combination of publicity, promotion, online merchandising and social media — as proprietary technology. Chief marketing officer Rachel Chou told me that it is a custom-built software platform that lets “all parts of the company look at the same material at the same time” and integrates product management, asset management and campaign management into one system — whereas at a traditional publisher, editorial departments and marketing departments might all work on different platforms for the same book.

Open Road develops a marketing plan for each book, each quarter. If a particular campaign doesn’t work, Open Road tries a different one. That separates it from traditional publishers, which have to “cut their losses” a few months after a book hits the market, cofounder and CEO Friedman said. She tells agents and authors that “the first quarter means nothing…if in that first quarter a significant milestone related to that title hasn’t happened, then it’s the second quarter where it might happen, and where everything starts to grow. We’re selling more of our authors’ works year-in and year-out.”

Forget selling direct…at least for now

Conventional wisdom says that publishers have to start selling books directly to customers. Open Road disagrees. “We’re not going to have a storefront,” Friedman said. Instead, the company relies on retailers to sell its books, and offers them campaign ideas for promotions.

“I have always been very supportive of the retailer,” Friedman said. “The retailers are doing a very good job, and I don’t think we can do better.”

One caveat is that Open Road wants to run special sales involving promotional codes — to give a reader 10 percent off a title, for instance. Friedman said that with the exception of Sony, the retailers don’t support these yet, and so Open Road might run a limited number of promotions itself in the future.

Video doesn’t mean book trailers

Video is a key component of Open Road’s marketing initiatives. Luke Parker Bowles, the executive director of production, oversees creation of video content and describes video as Open Road’s “special sauce” — but said the videos shouldn’t be confused with book trailers. “The author is the brand. The title is not the brand.” Open Road aims to sit down and film video with each of its authors, or with the estate or family members if an author has died. The company has a chief researcher, Galen Blaze, who spends every day doing research to find out new things to ask the company’s authors.

The unique content is key because Open Road doesn’t consider its own site a destination for video content. Rather, the company pushes the content out to sites like the Huffington Post, Daily Beast and Fox News. A click-to-buy button appears at the end of each video so that users can buy either a single book or a number of books from different authors on one theme, and Open Road tracks how the videos convert to sales.

Change it up

At the beginning, Open Road was focused on literary fiction, but it has since expanded into genres like mystery, romance and science fiction — the areas that are “just exploding in e,” publisher Tina Pohlman said. The company is also publishing around 12 new titles a year. This fall, for instance, it will release The Salinger Contract by Adam Langer, who was previously published by Riverhead and Spiegel & Grau.

“Our acquiring of content has become more scientific, for lack of a better word,” Friedman said, because it is now purposely harnessing areas that are seeing the greatest digital growth.

Sometimes you need print…

While most of Open Road’s titles are still only available as ebooks, the company does make a sliver of its titles available through print-on-demand (90 titles so far) or through short traditional print runs (70 titles so far).

“There are certain books that really need to be in a physical bookstore,” Chou said at the Making Information Pay conference recently. “They deserve that table up front.” Open Road starts print runs at 500 copies, and the largest print run they have done is 15,000 copies. “If we’ve done a print run and we find that it’s really taking awhile to get through the inventory,” Chou said, “we can switch it back” to POD.

…and sometimes you just need to get lucky

One title that Open Road will be making available in print is a never-published, forty-year-old manuscript by the author Pearl Buck. Buck wrote The Eternal Wonder shortly before her death in 1973, and it remained unseen until a woman in Texas came across it in a storage locker that she found at auction. The woman got in touch with Pearl Buck’s son through the Pearl Buck International foundation, and he bought it from her for a small fee. He then got in touch with Open Road, which had published Buck’s other titles as ebooks. The company will publish The Eternal Wonder as an ebook and a paperback this October.

The discovery of The Eternal Wonder is a reminder that, even in a data-driven age, a publisher needs luck. So far, one of Open Road’s greatest assets has been timing. The fact that Friedman built her company before ebooks had really taken off helped it get its footing and get ahold of digital rights that big publishers hadn’t yet focused on. Nearly four years in, it can build from that base.

“The speed of what’s happened has been staggering,” Friedman said. “I think this isn’t about the Big Six at all. We’re living in a very exciting time for publishing, for independent publishing, for new kinds of publishing. This is the golden age…It’s not about the giants. It’s about the small guys.”

Photos by Rani Molla

Rachel Chou, the chief marketing officer at Open Road Media, noted that the company only publishes between twelve and fifteen front-list (new) titles per year; everything else is back-list. Most of the titles are available only as ebooks, but Open Road makes some available through print-on-demand (POD), and will do short print runs if a book is really taking off. “There are certain books that really need to be in a [physical] bookstore,” she told moderator Phil Olila, chief content officer at Ingram Content Group. “They deserve that table up front, they have that reader that really wants to hand out a gift.” Open Road starts print runs at 500 copies, and the largest print run they have done is 15,000 copies. “If we’ve done a print run and we find that it’s really taking awhile to get through the inventory,” she said, “we can switch it back” to POD.

Chou also noted that advertising has changed: “I think we’ve done three print ads in three years. The budgets have definitely gone toward digital and online and social advertising.”

Dan Weiss, publisher at large at Macmillan’s St. Martin’s Press, has overseen digital-only series like the Sweet Valley Twins e-singles. He noted that the cheap paperback mass market is shrinking, and said, “We think it’s gradually being replaced by digital-first.”

“We’ve done serials, we’ve done e-first, e-only, we’ve scooped up online writers like [Amanda] Hocking. We’ve done prequels, sequels, interstitials,” Weiss said. The company hasn’t done a print-only deal — like bestselling self-published author Hugh Howey’s print-only deal with Simon and Schuster for Wool — yet. “We feel it’s important as a full-service publisher to have all rights,” Weiss said. “That may change.”

While Weiss said that St. Martin’s doesn’t like to give away content for free, he has occasionally had difficulty convincing others at the company of the need to price digital content cheaply (a challenge that he said is not limited to Macmillan). “As the serial format continues to grow, getting publishers and getting my colleagues to understand that pricing is crucial has been really challenging,” he said. “We have to argue that this is the minor leagues, and we’re trying to build sluggers for the major leagues, that we can take into print.”

Photo courtesy of Shutterstock/Vladimir Melnikov 

According to a court filing released on Tuesday, CEOs of the same publishing houses that once rejected the price-fixing theory will now offer evidence to suggest they colluded with Apple in order to increase ebook prices. The case involves allegations that Apple and its late CEO Steve Jobs organized a conspiracy with the Big Six publishers to introduce a commission-style pricing system in order to wrest pricing power from Amazon.

The new filing, posted below, says that the CEOs of Macmillan, Hachette, Harper Collins, Simon & Schuster and Random House will testify about various aspects of Apple’s role in the alleged conspiracy. All of these companies with the exception of Random House were also named in the antitrust lawsuit brought by the Department of Justice and agreed to settle the case last year.

The government’s new filing says Macmillan CEO John Sargent is expected to testify that:

“[T]he deal that 5 of us did with Apple meant someone was gonna have to do it. Just luck of the draw that it was me. . . . The optics make it look like I stood alone, but in the end I had no doubt that the others would eventually follow.”

Such evidence could prove damaging to Apple, which is also expected to confront testimony from Amazon executives. Apple will also be forced explain a growing list of possibly incriminating comments and emails. One of these, cited by the government to show Apple played an active role in the price changes, describes SVP of internet software and services Eddy Cue telling Jobs:

“In the end, they want us and see the opportunity we give them but they’re scared to commit! It [has] less to do with the terms and more about the dramatic business change for them. . . . They just have to get some balls.”

The new filing also includes the views of other prominent executives, including News Corp’s Rupert Murdoch. According to Harper Collins CEO Brian Murray, Murdoch was “pissed at Amazon” and wanted to “screw Amazon.”

In its own filings, Apple maintains its long-held position that it is not a “ringmaster” of a conspiracy, as the government alleges, but that it simply offered the same pricing system, which is based on a 30 percent commission, that it offers to any company that sells through its iTunes store. Apple also maintains that it helped to create competition at a time when Amazon dominated the ebook market.

The next important step of the proceedings will take place on May 23, when the parties meet before U.S. District Judge Denise Cote for a pre-trial conference.

Here’s the filing (all 156 pages of it!) with some of the key points underlined:

DOJ Motion of Facts and Law

New ebooks will be available to libraries at the same time as the print edition. For new ebooks, Hachette is charging libraries three times the price of the “primary” print book. One year after publication, the price of an ebook will drop to 1.5 times the price of the print book. Hachette defines “primary” book price as “the highest-price edition then in print. The ebooks can be checked out an unlimited number of times (with each ebook only available to one patron at a time), and the library does not have to buy a new copy after a year. The publisher says it will review its pricing policy annually.

Hachette is working with all three major library distributors: Overdrive, Baker & Taylor and 3M. Because Hachette is working with Overdrive, this means that the ebooks will be available for Kindle.

The last couple of months have brought many changes to Big 6 publishers’ ebook lending policies, with Penguin and Simon & Schuster both announcing changes to their programs. Penguin announced in March that it would begin making new ebooks available to libraries again, a year after it had pulled them, though it is still only working with a limited number of libraries in a pilot program. Simon & Schuster is making its ebooks available to New York City public libraries in a trial.Random House makes all of its ebooks available to libraries, but at prices as much as three times higher than the retail price. HarperCollins allows its ebooks to be checked out 26 times before the library has to buy a new copy. Macmillan is running a two-year trial that makes 1,200 older ebooks available to libraries.

Gumroad was founded by former Pinterest designer Sahil Lavingia in 2012 and aims to let anybody sell anything — whether it’s a song, a PDF, a video or a T-shirt — without having to set up their own store. The company has raised $8.1 million from Kleiner Perkins and Crunchfund, among others.

Readmill offers a clean, easy-to-use e-reading interface through its iPhone and iPad apps. Gumroad will let users selling ebooks on its platform add a “Send to Readmill” button that lets buyers send the ebook directly to their iOS device. (32 independent digital bookstores have also enabled “Send to Readmill.”)

“Reading should be an open and shared experience, for both authors and readers,” Gumroad’s Lavingia said in a statement. “Readmill and Gumroad will help authors make money doing what they love — writing — selling directly to their readership — so they can continue doing what they love: writing more.”

Separately, Readmill has partnered with Faber Factory, a U.K. based platform for independent publishers that is a joint venture between U.K. publisher Faber and Faber, U.S. publisher Perseus Books Group and Firsty Group, a U.K. company that helps publishers and authors sell ebooks directly. Readmill said these partnerships are part of its effort to “help independent publishers and retailers gain further traction and sell more books,” and says it is hoping to offer authors and publishers statistics on users’ reading data later this year.

But how exactly ebook publishers reach that audience and how the industry tracks who’s interested in reading what is less clear. A series of ebook publishers who spoke at our PaidContent Live conference in New York on Wednesday talked about the critical importance of gathering data on readership and consumption, and using it to transform the industry:

“The old eveolution of the book publishers used to be very allergic to data. And what you just heard is a very different approach from that. For us it’s about metadata and surfacing. And then rinse and repeat,” said Dominique Raccah, the publisher and CEO of Sourcebooks. “Metadata is a new term in our industry, but it really is the key.”

Raccah pointed out that unless publishers know who is reading the content, it’s hard to craft specific marketing messages or know what people respond to:

“It’s really important to know that book publishers know a lot about what touches readers,” she said. “So it’s important to help craft those messages in interesting ways.”

Rachel Chou, the CMO for Open Road Integrated Media, said they’ve seen a lot of success working with Twitter, as well as sponsored stories in Facebook, to drive traffic and understand where customers are coming from.

“Then after a while, you start understanding what the best partners are,” she said.

Evan Ratliff, founder and CEO of Atavist, said they have a small team but because they’re especially focused on finding customers by building up the Atavist brand, understanding data on the company’s products is important.

“We’re also on a very small level, we’re experiment with different ways of reaching people and social media,” he said.

Check out the rest of our paidContent Live 2013 coverage here, and a video embed of the session follows below:

A transcription of the video follows on the next page

Go to page 2 (of 2) on paidContent .

Simon & Schuster had been the only remaining Big Six publisher that did not make its ebooks available to libraries at all.

According to the release:

“The participating libraries can acquire any Simon & Schuster ebook title at any time during the pilot’s one-year term, with each title usable for one year from the date of purchase. Each library can offer an unlimited number of checkouts during the one-year term for which it has purchased a copy; each copy may only be checked out by one user at a time. All of Simon & Schuster’s frontlist and backlist titles that are available as ebooks are eligible for the program, with new titles being made available simultaneous with their publication.”

“In making our full list available we think we will get a better sense of lending patterns and patron behavior,” Simon & Schuster CEO Carolyn Reidy said in a statement, “and I am particularly eager to start seeing the actual data so that we can better understand this still-new phenomenon.”

During the pilot, the libraries will also sell Simon & Schuster titles through their online portals, so that a patron who doesn’t want to wait on the hold list for a particular title can purchase it instead. The library gets a cut each time an ebook is sold through its platform.

Simon & Schuster would not comment on how much it will charge libraries for ebooks. (Random House, for instance, charges three times more than the retail price in some cases.)

Digital library distributor 3M is handling the trial for the New York and Brooklyn Public Libraries, with BiblioCommons powering the purchase option. Distributor Baker & Taylor is handling the trial and purchase option for the Queens Library.

With Simon & Schuster’s announcement, all of the Big Six publishers are making at least some ebooks available to libraries, with various restrictions. Random House makes all of its ebooks available to libraries, but, as noted above, at prices as much as three times higher than the retail price. HarperCollins allows its ebooks to be checked out 26 times before the library has to buy a new copy. Hachette only makes new ebooks available to some libraries in a pilot program, and charges more than retail price. Macmillan is running a two-year trial that makes 1,200 older ebooks available to libraries.

As I wrote in October, Ganxy already lets publishers create digital “showcases” for books that include their cover, description, video and other marketing materials, and purchase options. Authors and publishers can sell books directly through the showcase or simply provide links to retailers, and they can track where their sales are coming from. The company added bundling options in December.

Ganxy co-founder Josh Cohen told me that until now, there hasn’t been a good way for publishers to control promotions by giving away ebooks only to a select group of readers and then track how they are accessing that content. With Ganxy’s tool, publishers pay $0.25 per content redemption — $0.05 up front and $0.20 when a user actually redeems his or her free ebook (if that never happens, publishers won’t pay that $0.20).

Glenn Beck’s imprint, Mercury Ink, used Ganxy’s new promotional tools to launch its “Wrath and Righteousness” series. The publisher gave away 45,000 copies of the first ebook in the series to a select group of people.

Ganxy is not the only company to offer some of these services. NetGalley lets readers — usually professional reviewers — request early access to publishers’ upcoming titles; if approved, they can receive a digital galley as an EPUB or Kindle file. Ganxy’s tool is designed to run promotions after books are published, however, and it works for any type of digital content, not just ebooks — though the company is focusing on ebooks and publishers for now.

Revenues for the total U.S. trade book industry — in which the AAP includes religious publishing — were $7.1 billion in 2012, up 6.2 percent from the previous year. Of that, $1.54 billion came from ebooks: $1.25 billion from adult fiction and nonfiction, $232.8 million from children’s/young adult and $57 million from religious books.

This data comes from the AAP’s monthly StatShot reports, which survey around 1,200 publishers on category and format sales. It’s different from the data provided by BookStats, an annual survey from the AAP and the Book Industry Study Group that aims to estimate the full size of the book publishing industry in the U.S. BookStats data for 2012 will be available in May.

Photo courtesy of Shutterstock / Borys Shevchuk