Saturday, April 30, 2011

Don't Follow Me. I'm Lost Too.

I would like to follow up, if I might, from James Scott Bell’s excellent contribution of Sunday last titled “What Will Book Publishing Look Like In Six Months?” I started to write a comment to that essay but it soon became long enough for a post of my own, so here it is, for what it is worth. I will tell you ahead of time that I have NO idea what book publishing will be like in six months, other than it’s going to be more chaotic than it is now. Herewith, however, are a couple of factors that are influencing things now that no one seems to want to talk about.

I read an article recently in the Wall Street Journal concerning the fact that publishers are noticing that self-published e-books offered at a two to three dollar price point are getting an increasing share of the market. Now, traditional publishers will tell you that they simply cannot offer e-books in that price range. For one thing (they say) it only costs three to four dollars per unit to physically publish a book. That may well be. There is an additional problem that traditional publishers face, however, an expense which is also factored into that publisher‘s list price. That problem is the very expensive cost of the Manhattan real estate upon which those who toil on the publishers’ behalf hang their hats each morning. The Konraths and the Crouchs and the Lockes and the Wynnes and yes, the Eislers who are doing quite well on their own are already paying for their own office space. It’s called home. The publishers, on the other hand, have to pick up their fixed cost (those expenses that remain the same whether they sell a million books or don’t sell any) somewhere, and they do it somewhere in the remaining twenty-two bucks of that hardcover you used to buy at Borders. Not all of that remaining money goes to the landlord for the lights and carpet and walls, but some of it does. And authors such James Patterson sell enough books to keep the candles burning. Those e-book prices accordingly aren’t going to be coming down any time soon (but read on).

Trad publishers also have another problem. They have to keep the gnomes of Zurich happy. The gnomes in this case are the parent companies like NewsCorp, Sony, Bertelsmann and the like who are looking at the balance sheets and figuring out how they are going to explain to their stockholders that the reason that the dividend checks aren’t as big this year because this or that publishing company did not perform to expectation. The money for those declared dividends comes out of that unit price as well. With the gents I mentioned earlier, their stockholders are their families. If an independent e-book authors take their families out for an extra nice meal, and the bills all get paid on time, they’re happy. That’s their stockholder report. But the traditional publishers have a constituency that is not so easily satisfied.

One might think, after considering the above, that the traditional publishers are accordingly stuck at a twelve dollar price point for an e-book. I mean, they have fixed costs, stockholders, and, of course, the author needs to be paid too. Actually, however, they are not stuck. At least theoretically. There is a school of thought --- one that I happen to subscribe to --- that says that at a (much) lower price point the traditional publishers could sell enough e-books to make up the difference in what they lose in selling at a higher price. It is my humble opinion that at some point, sooner rather than later, one of the traditional publishers is going to bite the bullet and price a book by one of their A list authors at three to five dollars, and then sit back with a bottle of Maalox in one hand and a .38 Special in the other, waiting to see if the sales numbers jump high enough to make up for the decrease in sales price per unit. In other words, if I’m selling one thousand books at ten dollars apiece, and I drop the price to five dollars, I have to sell two thousand books to make the same money. I think they can do it. If they do, they’ll put the Maalox to their head. If not…It will be interesting to see which publishing house will walk that plank first, and which author will be holding hands with it. And those offices in mid-town? They are the real estate equivalent of a dead man walking. I know of one gentleman who is running a very successful independent music label imprint out of a hotel lobby. He has a smartphone, a laptop, a pair of ear buds, and access to a nearby Kinkos. He farms out his publicity, promotion, booking, and marketing and he stores his artists’ music on an external hard drive that’s the size of a spiral notebook. He’s making good money. And no one even knows he’s running a business. He is the future.

As we look at the landscape, what I just described could be called the hills. What about the trees? To get a description of that we have to ask a tough question which is also being asked, and answered, by CPA bean counters in boardrooms, even as I write and you read: at what point does the percentage of e-book sales in relation to physical book sales reach the point where the manufacture and sale of physical books --- either by genre, or for the industry as a whole --- becomes a losing proposition? I have seen opinions that set that point as the moment when e-book sales constitute twenty percent of total books sales. Some genres have reached, and exceeded, that point already. My understanding is that, for the industry as a whole, e-book sales constitute thirteen percent of sales. It may well be somewhat more than that; I doubt that it is less. Whether the point has already been reached, however, or is reached six months or six years from now, it raises some tough questions. Will publishers gradually phase out physical books for all but their perennial best sellers? Will physical books be published in sharply limited qualities, marketed for collectors? There are some genre publishers that have survived quite nicely for years publishing limited editions (Subterranean Press and Cemetery Dance come to mind). But those limited editions come with expensive price tags.

I hate the thought of a world where a physical book is a luxury which can ill be afforded. But we have to consider that scenario as possible, too. The market, and the unseen hand that guides it, does not always come to rest upon a happy medium. At least for some.

19 comments:

  1. Great post, Joe. It is coming, and the market will become more and more chaotic for a while as things shake out. I think for most published authors it would be worth a cut to have the editing and the other things publishers can offer. I see a lot of ebook publishers coming in to do for the ebook only what the houses have done for paper.

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  2. Excellent, thought-provoking points, Joe. For me, I love my Kindle. I love the fact that I can self-publish my next book if I desire. As a matter of fact, my co-author and I are already discussing it as an option. The advantages of e-books—portability, instant access, pricing, convenience, etc.—are undeniable. And there’s no doubt that the effect they’re having on legacy publishing is dramatic. I hope things keep going in the direction they are. Competition creates a healthy marketplace. Those that adapt will survive.

    Having said that, here is my logic for why traditional paper-printed books will always be with us. The reason is format. Like so many examples of technology down through the years, the format on which media is preserved determines the device on which it can be played. If a proper device is not available or has not been archived along with the media, at some point the media becomes obsolete and useless.

    Let’s say I have an impressive collection of BetaMax video tapes. If I don’t have a BetaMax video player, the cassettes are nothing more than celluloid ribbon covered in oxide and encased in a plastic container. I cannot access the information on the tape. Let’s say I have an impressive collection of 8-track audio tapes or 78rpm records or photographic slides. If I don’t have an 8-track player or turntable that rotates at 78rpm (with a needle) or a slide projector, I’m out of luck.

    Not all e-books are compatible with all e-readers because there are multiple formats, just like for example there were originally multiple HD video formats. So if you don’t have the correct player, you don’t read your book or view your DVD. Because technology is moving at warp speed, formats change and reader or player devices get discarded or become obsolete. Someday, Kindles and Nooks and such will be part of landfills. Something else will take their place. And then something will take that device’s place as the cycle goes on. And the format will change again and again because clever people will invent new formats and find new ways of selling access devices to make money.

    Books require no reader device. The format is ink on paper. If you can read Latin for instance, you can read a book that was printed 1000 years old. And in 1000 years, that book can still be read. Books will never become obsolete because the format won’t and there’s no device needed to access the content. When the media is separate from the media access device (electronic digital file and e-book reader), there is always going to be eventual obsolescence. A book’s content and its media access device are one and the same.

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  3. "I hate the thought of a world where a physical book is a luxury which can ill be afforded."

    That day is pretty much already here, limited editions or not.

    BK

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  4. It occurs to me that all eBooks are first editions.

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  5. Thought provoking post, Joe. Like BK said, I can't imagine a world without print books. But at the core of this whole industry is the written word and people communicating ideas, whether through fiction or nonfiction.

    I love the options for authors right now. And I love the competition and the creation of niche market service companies. At some point, I can see Amazon offering different royalty percentages, but the obsolence of their device and with competition on the hardware, as Joe M pointed out, that might keep Amazon in check.

    It's an interesting dynamic, but I like having options.

    I love my ereader. As a reader, I'm a bit concerned that without industry professionals to help define quality, we may become inundated with anyone's writing efforts. This may help define price points though. We'll see.

    So I also agree with Miller that it would be nice if publishers would offer a competitive option, if they'd be more realistic on what they offer. But in the mean time, i'm carefully considering my options too.

    Thanks, Joe.

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  6. When I was a kid, nobody read hard covers. They were the purview of the wealthy. The paperback deal was the holy grail back then--the license for an author to print money. Then, in the 90s, the paperback distribution system collapsed, and mass market became a ghetto.

    In five years (maybe sooner), I see the e Book taking over for the mmpb, and the trade paperback--the only surviving print format will thrive at a $20-ish price point.

    (I typed this on my iPhone, so forgive the typos)

    John Gilstrap
    www.johngilstrap.com

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  7. For the past several years I have been interested in how technology is forcing dramatic changes in various industries. Your description of how small organizations can bring books to the market in electronic versions cheaper than traditional publishers can due to the publisher's need to cover their vast overhead is interesting. I think this trend is not just an issue for book publishers. It is a finger pointing to the future for many industries. The old economies of scale are vanishing, thus creating a new era of entrepreneurship.

    Shallie Bey
    Smarter Small Business Blog

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  8. Print will be with us for a very long time, but it will have to share the market with digital distribution. I think e-books will expand the total market for books, while somewhat reducing print's share of the pie.

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  9. Those are great points. As an author, it is increasingly frustrating to wait months, or even years, for a reply to a submission...if we get one at all. Then to wait another year for publication if the book gets accepted. With ebooks, you're onboard within weeks or months. Nor are the traditional pubs willing to take chances on mixed genre stories these day. They have to be highly selective, considering the limited slots they have open. So what's an author to do who's looking for an alternative? Either go with an epub, or self-publish. The advantage of the epub is that you get cover design, editing, some reviews and the publisher website and loops. But you may be one upon dozens of other writers all looking to get noticed online. In that case, is it better to go the route of self-pubbing, where distribution and reviews might be lessened? These are tough choices we face but at least we're facing them together and sharing resources. I think publishers have more to fear from authors banding together into self-pub co-ops or reaching out to readers ourselves than anything else.

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  10. Joe, I recently signed up with a POD to print my own books. With those costs, the lowest I can price my small trade paperback is $12.99. I found that discouraging because I wanted to charge less, but it's impossible. (My e-books at $2.99, however, are moving along nicely.) I can see how traditional pubs are shackled with expenses. I will applaud the brave house that will inevetiably try your approach at a lower price while gambling for higher sales numbers. I'll support that house just for trying!

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  11. Kathleen--The Print on Demand books are high priced because of their fixed overhead, like Joe was saying. Imagine that instead of printing 40,000-100,000 units to sit in a warehouse as inventory or for sales distribution, they only print out the occasional book ordered online. There's economies of scale for this type of thing, no matter how much we'd love to have our books available for our readers. Yeah, it's frustrating, but overhead is business cost that must be recouped in the product produced.

    PODs make the most sense for anyone (authors and publishers) not wanting to carry inventory or the infrastructure to support it, but those higher costs are put in the book price to the consumer, sad to say.

    As much as I read, I have no doubt that I will earn back the money on my e-reader ten-fold with discounted book prices or free books. I read more now than I ever have. And with larger font available at a click, what is not to like of this eco-friendly product? I never thought I'd say this, but I'm a believer. Big time.

    I will still want to see my books in print. Maybe ebook revenues will help cash flow so I can indulge in the time it takes to create and get a proposal approved through a traditional house.

    I wonder if publishers will still pony up millions for another Snookie book. That always flips my switch.

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  12. I was listening to a documentary yesterday with my kids related to the development of writing in the ancient middle east. Apparently there is a relatively large amount of 4000-6000 year old documentation from civilizations that have been gone that long. Those docs are written either in clay or stone tablets and preserved practically forever. After that period though, when the Egyptians invented paper, there are significantly fewer sources of day to day documents and business correspondence and there less information about daily life among common people of many different cultures in many regards, because the documents vanished, drying out and turning to dust over the years. A great example of that loss is the burning of the Library of Alexandria, where untold stores of priceless paper documents were irrevocable lost forever along with the irreplaceable information they contained.

    Granted we still have a lot of old books and scrolls around, Dead Sea Scrolls is a great example of a lucky bunch of bits of parchment, but I think that may not always be so.

    In the ancient days of pre-Celtic Ireland there was no writing at all, at least none we have record of. Everything was told orally or via some technology of which we have no clue. Therefore little is known but a handful of legends regarding that ancient race. Likewise, our modern reliance on technology for writing may well signal the future disappearance of our society from the minds of distant generations. Leaving us in a league with the ancient Formorians of Ireland, and the peoples who formed the basis of the legends of the Aquarians. I was going to add the Hittite Empire to that list, but after two millenia of doubt as to their existence their library of stone and clay tablet proved their existence and thriving Empire beyond any shadow of doubt once it was discovered.

    A couple thousand years in the future people may well be saying "America? That's just a fairy tale. Let's talk about real history okay?"

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  13. Great comments, each and all, which I greatly appreciate. I often feel like the grad student here who is privileged to sit quietly among the professors as I learn so much each day from all of you. Thanks!

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  14. Thanks for the excellent post. I too love my Kindle and find that many books available for Kindle are cheaper to buy than if I bought them in print format at my local bookstore which of course makes it even more appealing. For example, I just bought a very popular novel for my Kindle for $4.17. If I had bought the trade paperback at a bookstore I'd be paying $14.99. Quite a difference. On the other hand, I truly hope that print books do not disappear. I do still buy print books as well. And of course as a writer currently on submissions I hope to achieve my lifelong fantasy of seeing my book IN PRINT--physically in print. But there is always a nagging question in the back of my mind which may sound morbid and bizarre but it goes something like this: what if print books were non-existent and then we had a major natural disaster where we were without electricity, where "the grid" was basically destroyed? Then we wouldn't be able to read books because they would cease to exist. I mean I love my Kindle but without electricity to continually charge it, I couldn't read it. Sometimes I revert to reading print books for just this reason because they don't need to be charged up! I know that probably sounds post-apocalyptic and ridiculous (or maybe not after what has happened in Japan and in the South so far this year!) but it does cross my mind.

    Anyway I am very interested to see what becomes of all this and I think you're right that one of these publishers will eventually walk the plank and lower their prices to try to compete with self e-pubbers.

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  15. Like Joe H., I, too, feel much like a student, though I'd say I'm more on the elementary level. I enjoy hearing what all of you "professors" have to say in regards to the future of publishing but I must admit, as a new & unpublished writer, I'm terrified that the age of traditional publishing & print is about to pass me by before I have a real chance to enter it.

    Do you think the future will be brighter for writers like me who are just starting to write or is my future in traditional publication doomed?

    While I may consider self or e-publishing someday, I aspire to the validation traditional publishing provides.

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  16. Nancy, it's really tough to say. On the one hand, publishers are in a constant hunt to find something new and fresh and different that will sell. On the other hand, editors don't get in trouble for who they DON'T sign, they get in trouble for who they DO sign. They are better off to miss ten potential DA VINCI CODE books than to sign and publish a book that tanks. It's a balancing act. Hopefully you will find an editor who believes you and is ready to walk the walk.

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  17. Nancy--As Joe said, publishers are conservative when it comes to new writers. They want that sure thing, whatever that means to them. But I see self publishing as just another opportunity to get noticed. You could keep your book length projects for proposals for print, but build a readership for smaller quick writing endeavors while you're waiting on responses.

    Although this environment seems scary, you actually have more options. And any marketing you would set up to publicize your novellas would only put you ahead of the game. You'd be a hotter commodity for NYC with a readership and a marketing infrastructure already going.

    You have potential and options, Nancy.

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  18. The problem the digital divisions of publishers face is internal political pressure from print divisions not to undercut print prices. That's why we're seeing ebook-only releases from brand authors now - that allows the digital division to set a realistic price.

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  19. >>>That's why we're seeing ebook-only releases from brand authors now - that allows the digital division to set a realistic price.>>>>

    From my experience with the publishers I work with, I'm not seeing a more realistic take on ebooks offers or unit prices for new authors, Dave. Maybe smaller houses are more nimble. It would be interesting to compare the details of those deals to what an author could do on their own.

    Many larger houses have ebook only divisions now, but the details behind the deals they are offering aren't much better than the basic 25% royalty. I could go on and on about these deals--the untimely reporting of sales, poor cash flow, tiered royalty rates, the loss of control for the author over unit pricing, the tie up of rights, contract clauses that should change yet haven't, etc.

    Bottom line, the publishing industry is still in denial that they can continue to operate status quo. They're only throwing in a bone or two of concessions, but they are still concerned with recouping their ginormous overhead. Prices are still set too high. If anything, they are hoping ebooks can save them, without making any real changes to how they've always operated.

    Presently, they aren't offering anything interesting for their bundled approach for services to authors. It would be nice if they would. Maybe that's down the road.

    As of now, an author would be much better off retaining their rights and venturing into self-pubbing to learn the ropes. With the larger houses not offering anything better, this is giving rise to niche service providers that all publishers will have to contend with.

    Either way, I see this as an opportunity to new authors as well as established ones.

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