publishing

I’ve talked before about self-publishing, how it’s been a huge boon to my writing career, but also how authors should temper their expectations: realize that writing, editing, designing a cover for, formatting and converting, and marketing a self-published book is a lot of hard work, and is less likely than the lottery to make you rich. (For that matter, traditional publishing is hardly a high-percentage method for getting rich, or even making a decent living.)

Of course, just like with the lottery, there are a few unvarnished success stories that provide something for independent authors to aspire to. The two most exceptional are independent authors John Locke and Amanda Hocking. This week, Amazon announced that Hocking joined Locke (along with 12 traditionally-published authors) in the “Kindle Million Club,” by selling over a million copies of their books in the Amazon Kindle Store. (Twilight author Stephanie Meyer attained that lofty mark this week as well.)

Hocking began as a self-published, independent author, and her runaway success led to her accepting a four-book deal with St. Martin’s Press (a subsidiary of Macmillan) worth over $2 million.

The most interesting thing to me about Amazon’s press release was this note:

In addition to the more than 2 million books sold by John Locke and Amanda Hocking, 12 KDP authors have sold more than 200,000 books and 30 KDP authors have sold more than 100,000 books.

(KDP stands for “Kindle Direct Publishing.” It’s the method by which self-published authors may upload their own works to be sold in the Kindle Store.)

So, how likely are you to strike it rich by self-publishing? There are now over 1,000,000 titles in the Kindle Store, and probably at least 100,000 self-published authors selling their books through KDP. E-books on Amazon are sold for a minimum of 99 cents per title (netting the author $0.35), while many independently-published e-books (including my own) are sold for $2.99 (netting the author about $2.05). So, if we assume 100,000 self-published authors, of that number:

  • 2 authors (0.002%) have sold 1,000,000 books, earning at least $350,000
  • 12 authors (0.012%) have sold 200,000 books, earning at least $70,000 (and possibly $410,000)
  • 30 authors (0.03%) have sold 100,000 books, earning at least $35,000 (and possibly $205,000)

Of course, those dollar amounts are before taxes (yes, Amazon sends a 1099-MISC, so you have to pay income taxes) and any expenses for agents, editing, cover design, e-book conversion, advertising, web hosting, etc. And I think it’s fair to assume that the majority (probably the vast majority) of these high-selling titles were sold at 99 cents — I know almost all of John Lock’s titles were sold at $0.99 and most of Hocking’s were as well. So, 44 indie authors in the world have managed to make $35,000+ (before taxes and expenses) through selling e-books on Amazon — and we’re assuming each author may have written about 10 books, which would take several years, if not a decade or more. (Hocking has 11 books on Amazon, and Locke has 12.)

I’m not writing this to either convince you or dissuade you from writing a book, or trying to sell it on Amazon. I’ve long maintained that if you want to write a book, my best advice to you is to write it for yourself, because you enjoy the writing process and have a story to tell — assume you won’t make any money from it, and if you still yearn to write, then go for it. After that, you can decide if the potential monetary payoff is enough to offset the time, effort, and money you’ll spend, and the inevitable criticism you’ll receive by self-publishing. (For what it’s worth, even though I’m not yet one of the 44, I am glad of my decision to self-publish.) But I wanted to include the numbers above, which were the first I’ve seen that really specifically give us a clue as to how common these success stories are. They prove that it certainly is possible to “strike it rich” as an independent author, but it takes a lot of work, and the odds of you even making a living (let alone getting rich) are still quite low.

So, you’ve written a book — congratulations! What now?

Unless you just want your book to sit on your hard drive or print it out to share with a few friends, you have two main choices: (1) write query letters to traditional publishers in the hopes they decide to publish you, or (2) self-publish, releasing your book on your own. This article focuses on the self-publishing option, and specifically self-publishing your work as an e-book through Smashwords (check here for tips on print self-publishing).

Once you upload your e-book (as a Microsoft Word document) to Smashwords, they will convert it for you into multiple formats, and then will not only sell it from their own site, but will distribute it to a growing list of e-book retailers, including Barnes & Noble, Kobo, Sony, Apple, and Diesel. The best part about this is that Smashwords doesn’t charge any up-front fees for conversion or distribution (they even give you a free ISBN, which is required to distribute through Apple), they instead keep 15% of the royalties you earn through sales. This allows you to get started with no out-of-pocket expense, and you can remove your books from distribution (or elect only certain channels) at any time. It is up to you to decide whether it is worth a 15% cut for Smashwords to convert your book for you, distribute it to multiple retailers, and consolidate your sales and payment reports in one place.

How to Get Started

The first thing you’ll need is a novel (or short story) in electronic format, probably in Microsoft Word. For purposes of creating an e-book, you generally want to strip out all the fancy formatting you might use in a printed book: get rid of fancy fonts (just put everything in Times New Roman), strange indents or block quotes, and weird symbols. You can keep bold and italics, and smart quotes and em dashes should translate properly, although they sometimes cause problems. It’s generally better to use first-line paragraph indents in Word (instead of hitting the tab key — and never use spaces to indent paragraphs). Do not leave blank lines between paragraphs, since some e-book readers add them and you’ll end up with triple spacing! The basic rule is: the simpler, the better. Various e-book readers will display your text in different ways, and users can adjust font sizes at will, so just forget about the idea of controlling every aspect of how the text will look and where pages within a chapter break (like you would in a printed book), and keep the formatting clean and simple. Do not use multiple line breaks, those look terrible on the screen — use a blank line and a row of asterisks to indicate chapter or section breaks instead.

The second thing you’ll need is a front cover, which should be in 2:3 ratio. It should be at least 800 pixels tall, although you’ll be using the same image (along with a spine and back cover) if you make a paperback, and that requires at least 300 dpi, so it’s best to make it high-resolution to begin with (1800×2700 pixels for a 6×9 paperback). Any interior art (like an “about the author” photo) should be black and white and at least 150 dpi. The less interior art, the simpler it will be.

Smashwords Formatting

Smashwords has an excellent free Style Guide that will help you prepare your Microsoft Word document for upload. It basically explains how to do what I said above: simplify and clean up your Word document, remove line breaks and extraneous formatting that translates poorly to e-books, etc. You can then upload your Word file and Smashwords will convert that file to all the e-book formats you need, including MOBI and ePub.

Like I said above, it definitely helps to keep your formatting simple, and follow the instructions in the Style Guide. E-book formatting can be an arduous process when you’re first learning, and it’s easier to follow the Style Guide instead of fighting it.

For a little more detail on a weird e-book formatting problem I had (which prevented my books from passing the dreaded ePubCheck), check out this post: Formatting for Smashwords and ePubCheck.

Conclusion

The simplest way to get your e-book distributed as widely as possible and looking pretty good is to: (1) read and follow the Smashwords Style Guide, (2) create a Word document with simple, clean formatting, (3) upload that Word document to Smashwords and let them convert it for you, and (4) enter your book’s information, description, price, etc. at Smashwords, and (5) opt in to all the distribution channels you want. You should end up with a nice-looking e-book, and it will be available on B&N, Kobo, Apple, Sony, and other e-book sellers. (At this time, Smashwords doesn’t distribute to Amazon or Google, although they have been working on Amazon distribution for a while. You can distribute directly to Amazon through their KDP platform.)

I do recommend the Smashwords service, and use it to distribute my own novels. Check them out on Smashwords here!

Mar 222011

New York Times-bestselling author Barry Eisler recently turned down a $500,000 advance from “Big 6″ traditional (or “legacy”) publisher St. Martin’s Press for a two-book deal. Now, it’s one thing for indie authors to turn their noses up at large publishers, and it’s even another thing for best-selling indie authors to spurn mid-list book deals (J. A. Konrath comes to mind), but we’re talking about turning down half a million dollars. This is pretty big news.

If I were a legacy publisher, I imagine this would feel like hearing the lookout yell, “Iceberg, dead ahead!” Or possibly like one of the more degenerate Roman emperors realizing the Visigoths had breached the city gates for the first time in 800 years. Maybe they feel like the railroad companies when the Interstate Highway System was announced, or like buggy-whip makers watching the first car drive down the road. Or maybe the more apt analogy is Marie “Let Them Eat Cake” Antoinette wondering what all those peasants with pitchforks were doing outside. I could do this all day.

Anyway, it’s a pretty monumental event. And I don’t think Eisler is insane, or just wants to stick it to “the man.” In fact, by all accounts, “the man” has been generally good to him and he has lots of nice things to say about publishers (albeit with plenty of complaints as well). For him, it was mostly a financial decision: he thinks he will earn more than $500,000 self-publishing these two books. He might even be right; he’s already made $1,600 in a few weeks (and is on pace to make $30,000 this year) on a short story he self-published and released electronically. He clearly has fans, and he’s listened to Konrath’s advice to price his works attractively (under $5). He believes that, in the long term, he can’t see giving up e-book rights to a legacy print publisher forever (which, even if they earn out that hefty advance, would only net him 14.9% on additional e-book sales); he believes the print distribution advantages that publisher would give him will be short-lived and outweighed by the greater e-book royalties (70%) and control (especially over pricing) that he’ll have by going it on his own. Several times, he mentioned that he just didn’t feel right signing away e-book rights to a company that he believes is trying to delay the ascendence of e-books as long as possible, by fighting instead of embracing them.

And I can certainly understand many of those same feelings and concerns … but it is half a million dollars. Of course, I don’t know Mr. Eisler or his financial situation, and I don’t know exactly how well his books sell (obviously pretty well). And I’d imagine, whatever offer the publisher gave, the rights are worth more than that, especially when maximized effectively with proper pricing and customer-friendly policies. But, it’s another salvo in the “It’s easy to get rich e-publishing” meme gaining traction online, which I think is dangerously seductive to aspiring authors the same way the lottery is seductive to people who can’t afford buying tickets and the NBA is seductive to kids who should probably spend more time studying trigonometry instead of the triangle offense.

In any event, this move is a pretty big deal, and has to be a big blow to the legacy publishing industry. I’ve said for a while that best-selling authors will start migrating away from traditional publishers and going it alone (what can a big publisher offer Stephen King at this point that he can’t do on his own?), and Eisler appears to be the first big domino to fall. Sometimes these types of paradigm shifts happen “gradually, then suddenly,” so we’ll see if Eisler is merely an aberration or the start of a trend. Either way, legacy publishers can’t be happy with this news.

For the record, no, I’ve never been offered a $500,000 advance, and yes, I would take it in a hot second. Then I’d live off that money and write a whole bunch more books that I’d probably self-publish. ;-)

Mar 222011

I really do think I've heard every one of these.

Author John Scalzi posted this most excellent “Electronic Publishing Bingo” scorecard over on his blog, and, while it’s hilarious in its own right, I think it’s also worth a bit of closer discussion. (As with most humor, it has more than a grain of truth in it.)

While the scorecard includes some funny misconceptions and inconsistencies (“Stop Being Greedy and Also Where’s My Sequel?” is gold), it also includes several references to unbridled e-book success: “Everyone Will be as Successful as these Outliers;” “Amanda Hocking” and “J.A. Konrath” (the aforementioned outliers); “All You Need is 100,000 Readers;” “Anyone Will Read Anything if it’s 99 Cents;” and my favorite, “Publicity? Just Go Viral!” A number of squares also reference how easy it is to be a successful writer or publisher: “Crowd Source the Backend,” “Cover Art? You Can Just Photoshop That,” and “Spellcheck is Really Advanced These Days.”

I am certainly excited about the future (and the present!) of electronic publishing, and have written glowingly of it many times. I’ve even tried to help fellow authors on their path to self-publishing in both electronic and printed formats. And I do believe that authors today (whether first-time novelists or mega-bestsellers) should seriously consider self-publishing as an option — and that, in some cases, it may make more sense than publishing with a legacy publisher who is fighting instead of adopting electronic publishing.

But I’ve never promised easy riches or fame. I’ve never even promised very difficult riches or fame. At the end of the day, there are still way better ways to earn money, and even way better ways to take a gamble and strike it rich (practicing your jump shot or playing the lottery come to mind). Writing has never been a profession of easy riches (just of a very very tiny minority who make a lot of money, a fair number of authors who struggle to make a living, and countless authors who earn nothing or even lose money), and self-publishing is, in many ways, even tougher: part of self-publishing means that you have to do everything yourself (or pay to have it done). That means not only writing, but editing, proofreading, cover design, jacket blurb, author bio, print formatting, e-book formatting, marketing, social media, maintaining a website and blog, sales tracking, income taxes and expenses, etc.

As I’ve mentioned, there are more and more self-publishing authors who are doing well, some even very well, financially by self-publishing. But “more and more” is a relative term: there were exactly 0 people making good money in 2009 self-publishing, 1 or 2 in 2010, and maybe half a dozen so far in 2011. There are probably another few dozen making some kind of living at it. And this is out of about 1,000,000 books that were published last year, about 3/4 of them self-published. I’ve heard stats that claim the average self-pubbed title sells only 200 books. Considering it takes around a year to write and prepare a book, and might cost several hundred dollars or more for cover art, editing, and formatting, most books either lose money, break even, or earn their authors literally pennies per hour. I’m closing in on 10,000 sales, but I’m probably closing in on 10,000 hours spent (between writing 3 novels, all the other tasks I mentioned above, never-ending marketing, and all the research and blog posts I read and write on the publishing industry). So pennies an hour about covers it, and I’ve done better than most.

Even for the success stories, there’s no guarantee that their current sales trends will continue. I’ve seen my own books fluctuate from a few sales a day to 1,500 a month, and back down again. Same books, same covers, same hard work, same everything. I’m glad I wasn’t relying on the income to pay the rent. The electronic publishing future could change pretty drastically: publishers might get on board with low prices, Amazon might lower royalty rates or stop allowing self-publishing altogether, or there might be so many books out there that no one finds yours.

I say all this just to help temper expectations: as the Bingo board above illustrates, the Internet is alive with people touting self-publishing as a get-rich-quick scheme, an easy money-maker, and something you just have to get in on. Many of those shouting the loudest are companies looking to make money in publishing the same way it’s been made for decades: by preying on the dreams of aspiring authors and charging them for questionable editing, marketing, printing, or distribution services. Others are well-intentioned people or aspiring authors themselves who sincerely believe we’re in the midst of a “gold rush.” It is not my intention to throw cold water on anyone’s dreams, but I also don’t want to mislead anyone, and the reality isn’t necessarily as rosy as some would like to hope.

Even J.A. Konrath (arguably the first self-published author to start making good money) will tell you, over and over, that a whole lot of publishing (including self-publishing and electronic publishing) comes down to luck. Let’s face it, the big publishers, with 100 years’ experience and big marketing budgets, can’t predict what the next huge bestseller is — forget about home runs, they can’t even always hit singles, with about 80% of their releases losing money. Sometimes, things get hot, and go “viral” for no discernible reason; it’s just the right thing at the right time that was picked up by the right group of people.

That’s not to say that you can’t increase your odds by writing a good book, editing it until it shines, having a professional-looking cover, doing a good job with formatting, writing a compelling blurb, and pricing your work competitively (under $5, usually $0.99 or $2.99). But even doing all that, the odds of making a living at writing — let alone becoming rich or famous at it — are stacked firmly against you. Yes, electronic publishing offers some exciting new opportunities, and I’ve obviously taken on the challenge for myself. But the advice I’ve given authors all my life — and I still stand behind today — is to write a book only if you want to write it for yourself, and look at any future sales or income only as a secondary bonus, not a sure thing.

UPDATE: Some interesting specific numbers from Amazon here, showing just how few authors “strike it rich” self-publishing.

Mar 032011

One result of the agency model

A couple of days ago, Random House became the last of the “Big 6″ legacy publishers to switch over to the agency model. The agency model (described in full detail here) forces e-book retailers (like Amazon and B&N) to sell e-books at the prices that the publishers choose, with no discounting allowed. The retailers receive 30% of the purchase price.

Switching to the agency model usually results in higher e-book prices (for example, bestsellers rising from $9.99 to $12.99 or more once Amazon is no longer allowed to discount them), and should ensure that prices are the same at any e-book retailer. (On the plus side, that means there’s usually little point in shopping around for e-books; on the minus side, that means you’ll rarely find a sale or good deal, everything will be “full price.”)

Part of the reason (perhaps the main reason) Random House succumbed, 11 months later, is to get their e-books on Apple’s iBookstore, which requires an agency model contract (the timing of the announcement coming on the heels of the iPad 2 introduction can’t be a coincidence). And some Random House titles are starting to show up in the iBookstore. But, with the iBookstore struggling, was this a smart move for Random House? After all, before the switch, Random House was the only large publisher still using the retail model (the same model used for printed books), where Random House received 50% of the “list price,” which was often the same as the hardcover price, and Amazon could discount the e-book as much as they wanted without cutting into the royalty. So, instead of Amazon selling bestsellers for $9.99 and giving Random House $13 or so, now they’ll sell them for $12.99 and give Random House $9.09 (70%). (Click here for more on the cost breakdowns of e-books and printed books.)

Will iBookstore sales make up for selling fewer books and earning less on each sale through Amazon and B&N? Consider me skeptical. I thought it was more likely that the other large publishers would switch away from the agency model when their original 1-year terms end next month. Do they know what they’re doing, or is this just another example of large publishers hastening their own extinction? Feel free to share your thoughts in the comments below….

Feb 132011

It may surprise you to know that when you buy an e-book from Amazon, B&N, or pretty much any other e-book retailer, you’re not really buying the e-book in the same sense that you’d buy a printed book or, say, a tomato. You’re actually paying for a license to do certain things with the e-book, such as download it to a certain device, read it, lend it one time for 14 days, perhaps listen to it with text-to-speech (or perhaps not), etc. But it’s quite confusing for a couple of reasons: first, it feels like a sale (not a license) because you pay money, then download the e-book, then it sits on your e-reader or computer and it certainly seems like you own it. Second, neither the publishers nor the retailers have really gone out of their way to explain or market these transactions as mere licenses instead of sales, since they know people are unwilling to pay as much for a license as for full ownership of something (note that the button on Amazon says “Buy Now,” not “Rent Now” or “Lease Now” or “Click Here to Enter into a Complicated Licensing Arrangement”).

But this ambiguity leads to certain problems and misunderstandings. For example, the infamous case of Amazon removing the book 1984 from people’s Kindles — which was actually pretty reasonable when you understand that those e-books were licensed, and not sold. (You know those 50 pages of legal crap you skip over when you create an Amazon account or update your iTunes or iPhone software? It’s in there somewhere … I think — I didn’t read it.) Since Amazon was merely licensing those e-books to you, under their own license from a publisher (who only licensed the right to distribute the book — and did not buy the copyright — from the author), once Amazon realized that one of those licenses was invalid (in this case, the publisher did not properly license the right to distribute the work), the subsequent licenses down the chain became invalid. And since it was a license, not a sale, you never legally owned that copy of 1984, so Amazon did what they thought was right at the time, and removed it.

In the physical book world, you’ve probably heard about the “first sale doctrine.” That means that, once you lawfully purchase or acquire a printed book, you can then lend or re-sell it as you see fit. (You can not make additional copies, but you can sell the one copy you have.) But this is where the confusion comes in — people understand they have those rights with a physical book, even if they’ve never heard of the first sale doctrine. They still know they can lend the book to their sister. And they expect the same with an e-book, because they assume they bought the e-book and didn’t just rent or license it. Of course, to be reasonable, lending or selling a physical book means you lose access to it, and the same is not true of a digital file (which you can keep and email to a friend), so perhaps it’s not fair for the same rules to apply.

Where it gets confusing is that, while no one is going out of their way to point out that you just plunked down $12.99 to only license that new e-book, Amazon is going out of their way to assure customers that they will never remove purchased e-books from customers’ Kindles again. When you buy an e-book from Amazon, you can download it to your Kindle, and it will stay there, whether you’re connected to Amazon or not, whether Amazon even continues to exist or not. You don’t have to log in or authenticate or anything to keep reading it. You can even download a copy of the e-book to your computer and back it up with the rest of your computer data. And if Amazon disappeared tomorrow, you’d keep right on reading whatever e-books you had already downloaded. In short, it sure feels like you bought and own the e-book.

Even those of us who understand that e-books we buy are actually licensed are generally OK with the situation, because of all the safeguards I’ve described above. I own the file, it sits on my Kindle, on my computer, and backed up on an external hard drive, and there’s no way for Amazon to reach into my computer and remove it or stop it from working. I can turn my Kindle’s wireless off and they can’t touch that either. So I’m OK with paying for an e-book under the current system. But I don’t think readers will accept full-on e-book licenses — not without certain guarantees that make those “licenses” act more like traditional sales. For the same reasons, I don’t think customers will accept reading “in the cloud” — e-books you read only while connected to the Internet and don’t download anywhere — since we understand our access to those titles could be cut off at any time.

I know readers are willing to give up owning a physical object, and I even think they’re willing to give up the traditional “first sale” print rights of lending and resale, so long as the e-book prices are lower than physical. This is a key point: whether it’s called a license or a sale, readers do understand that they don’t get all the rights they get with print books, and don’t think they should pay the full print price (also, of course, we understand e-books cost less to produce). But I don’t think readers are willing to give up ownership of the digital file (at least not now or anytime soon). People want to build digital libraries and own those files forever — they don’t want to re-buy them in some other format for some new e-reader / tablet / smartphone / laptop device 5 years from now, and they don’t want to somehow lose access to them. So, call it a license, call it a sale, call it whatever you want, so long as I can download the file to my computer and back it up and keep reading it even if Amazon disappeared from the face of the Earth or wanted to stop all Kindle operations tomorrow.

Of course, publishers would like nothing more than to sell you an e-book today, and in 5 years, when some new e-book format magically appears, sell you that same e-book again in that new format. After all, it worked for the music and movie industries, which made you buy cassette tapes, then CDs, then MP3s (and VHS tapes, then DVDs, then Blu-Ray DVDs). Will they get away with it? I don’t think so. The file is already digital, and there’s no issue of higher quality or resolution — words are words are words. (Of course, “enhanced” e-books, with video and such, would be a different story if anyone wanted to buy such things.) And, there’s no reason why the Kindle 8 or iPad generation 17 can’t read MOBI or ePub e-book files — and even if they can’t, software will exist to convert them into the new file formats. Of course, this is where DRM comes in, and where things get messy. This is why a lot of people are so strongly against DRM, and where the issue of ownership comes to a head: we understand publishers want to prevent copying, but if I own the e-book file, I should be able to convert it and read it on some new device 5 or 10 years from now. And, if I can’t, if this isn’t an e-book sale, but just a strictly-controlled rental that will expire in a few years, then forget $9.99 — people aren’t going to be willing to pay anywhere near print book prices for e-books, nor should they, if they’ll just have to keep re-buying them every few years. And I think the publishers are intentionally refusing to clarify the issue, because they don’t want customers to think about that possibility. But what I think they overlook is that, if they try to get us to re-purchase the same e-books in a different format, people will start removing the DRM from their legally purchased e-books and wonder why they’re paying for them in the first place. Yes, readers have the ultimate trump card here, so long as we are able to download the files.

So I think we need a little more clarity from the publishers and retailers on the licensing vs. ownership thing. We give them our $9.99, and they can do whatever they want with it. It’s theirs. What do we get in return? What rights do we have? What do we own, if anything? And what can we do with it 5 years from now? And if readers don’t like the answers they get, I don’t think publishers will like the readers’ response.

So, how about a new e-book sale/licensing doctrine, one to replace the first sale doctrine from the print book world? OK, we can give up lending and re-selling, so long as we own the digital files and have the right to convert them into whatever formats we need, now or in the future. No copying, no pirating, just me reading the e-book I bought today 10 years from now. Sound fair?

$0.99 is the new $9.99

I bet the big publishers wish they had been happy with $9.99.

As I mentioned in this post about the agency model, 5 of the “Big 6″ publishers demanded that Amazon stop discounting e-books to $9.99, and insisted on controlling retail prices — immediately raising many new release e-book prices to $12.99 or $14.99.

Amazon argued that the agency model and those high prices were costing publishers sales, and I knew that readers would vote with their wallets, but for a while it appeared that publishers were doing OK with $12.99 e-books (although $14.99 pricing never really caught on). But a look at the current Amazon bestseller list shows that readers are voting with their wallets in a big way, and what they want is inexpensive e-books.

In fact, almost exactly half of the Kindle Top 100 consists of e-books that are $5 or less. (Additionally, there are several selling for about $5.50 that I’m not counting.) In fact, a quarter of the e-books on the bestseller list are $1 or less.

On top of that, the books at the very top of the list are skewed even more towards low-priced e-books than the whole list. Books $5 or less make up:

  • 4 of the Top 5  (80%)
  • 7 of the Top 10 (70%)
  • 12 of the Top 20 (60%)
  • 20 of the Top 40 (50%)
  • 49 of the Top 100 (49%)

And, more than half of those books are very low-priced: $1 or less. Books $1 or less make up:

  • 3 of the Top 20
  • 9 of the Top 40
  • 25 of the Top 100

And this does not include all the free e-books being downloaded on Amazon.

Further exacerbating the publishers’ nightmare, a decent percentage of these e-books are by independent authors, including uber-indie Amanda Hocking, who has 3 e-books in the Top 12 and reached #2 overall in the Kindle store. She sells as many books in a day as I sold last year, and the big publishers didn’t want her. But in 2011, it’s the readers, not the publishers, who have the power.

Maybe, instead of fighting with Amazon over $9.99, publishers should have been happy that Amazon had ingrained $10 as a reasonable price point for e-books. Instead of thinking they could get even more, maybe they should have thanked Amazon for getting customers to pay that much for e-books that have no printing, shipping, or returns costs. Because now readers are demanding more and more low-priced and free e-books, and don’t even feel guilty about it because they feel that publishers tried to take advantage of them with overpriced e-books, delayed releases, poor formatting, blocking lending, blocking text-to-speech, and invasive DRM. And now big publishers are being crowded out of the bestseller lists by independent authors, and are being forced to lower their own big-name titles to $5 just to compete with indie authors at $1 and $3.

I bet $9.99 is looking pretty good to them now.

I spend a lot of time reading forums related to e-books and e-readers, including the official forums at both Amazon and Barnes & Noble. I’ve seen countless posts by readers decrying (a) high e-book prices (the agency model and $14.99 e-books), (b) delayed e-book releases, (c) publishers blocking text-to-speech, (d) annoying DRM attached to e-books (and the incompatibilities that result), and (e) recently, publishers blocking the lending feature (which B&N has had for a while and Amazon just added).

In this new age of digital reading, readers DO have the power to help shape the new rules of the game. Readers control all the money spent on books, and that’s always been the case. Publishers will try to raise prices, window releases (delaying e-books), block text-to-speech, block lending, institute DRM, and their new frontier will be trying to get us all to read online in the “cloud,” which just allows them to lock down the content more effectively by preventing us from downloading a file.

But the thing to remember is that publishers can only get away with what readers allow them to get away with. Not all publishers are on the agency model (5 of the “Big 6″ are, but Random House and smaller publishers are not). If readers refuse to buy books over a certain price, or with certain features blocked, or that do not allow us to download the file we’ve paid for, or whatever, then publishers will have to cave in and give readers what they want. We’ve already seen that readers generally wouldn’t pay $14.99 for new releases, and publishers lowered them to $12.99, which enough people seem to be paying.

Readers DO have choices. There are a million books a year published in the U.S. alone, and most of them don’t go through large publishers. Many books are sold for much lower prices, enable lending and text-to-speech, and don’t have DRM attached. True, you might have to take a chance in finding some new authors and you might not love all the new authors you find, but it is a choice, and the choices that readers make now will shape the way e-books are read for decades to come.

Oct 032010

Barnes & Noble’s PubIt self-publishing platform just went live over the weekend (I don’t know if October 1 still counts as “summer” — maybe here in South Florida it does?) and my e-books are now live on B&N.com. It’s a very exciting development, as B&N now matches Amazon and allows authors to bypass gatekeepers, publishers, and even intermediaries like Smashwords: authors can upload their own e-book files for sale on B&N.com. Since Amazon is the clear #1 e-book seller and B&N is solidly in the #2 position, this allows indie authors to reach the vast majority of the market directly.

How It Works: Authors or copyright holders can upload e-books in various formats, although it’s best to upload in the Nook’s native ePub format, so B&N doesn’t need to do the conversion for you. I believe you can also upload in HTML or text, but your results may vary. You upload your file and a cover image (in JPG format), enter your info (title, author name, book categories, etc.), and enter your book’s description, editorial reviews, and an “about the author” blurb. Once you submit, your title will go live on B&N.com (it took about 12 hours for my title to show up, but 2 days for the cover art to appear).

There are several advantages to uploading directly with B&N (over having your e-books distributed there by Smashwords):

  • More control over the final format: I can improve the quality of the reader’s experience since I can upload the finished ePub file and know it looks perfect, with a working table of contents, etc.
  • More control over the categories the books appear in, their descriptions, etc.
  • Quicker speed of updating: Smashwords would take anywhere from a couple weeks to several months to update prices or an e-book file on B&N; now, if I need to fix a typo or change a price, I can upload it and the new version should be live in a day or two.
  • Higher royalties! :) B&N pays a very respectable 65%.*
  • Instant sales reporting: I can’t tell you how useful this is (to see the results of marketing efforts, etc.) compared to waiting for several months to find out sales data. It’s also great for us obsessive author-types who check sales 10 times a day! ;-)
  • B&N’s “LendMe” feature is enabled, so users can loan the book to friends (once per book, for 14 days).
  • No DRM! I was able to opt-out of DRM (copy protection), which can cause problems for consumers; now users can backup their e-book files on their computer or convert them to a new format if they get a Kindle or whatever.

* Note that Amazon pays 70%; however, Amazon takes off a small fee based on the e-book’s file size and only pays 35% on foreign sales, so the true average rate is closer to 60%.

I’m very excited by this development: it provides a better experience to readers (a better-formatted e-book file, quicker updates and fixes, LendMe, and no DRM), and is better for me as well (instant sales reporting, more control and quicker updates, and higher royalties). I love win-win scenarios like that.

Also in the plus column: my ratings and the great reviews that I was fortunate enough to receive on B&N transferred over to the new versions as well. A HUGE thank you to all my readers who have rated or reviewed the books on either B&N or Amazon: it really does help me out more than you’d probably expect, and I do appreciate it greatly.

The only negative so far is that my sales ranking hasn’t transferred over, and that I now have two versions of my e-books up on B&N. I’ve requested they be removed by Smashwords, but I don’t know how long it will take for them to actually come down from B&N.com (see what I mean about being frustrated by how long it takes to update things?). But the new versions are up and ready to go — you can find them at the B&N links below. Each are in ePub format, costs just $2.99, and can be instantly downloaded to your Nook or B&N Reader app for your computer or iPhone/iPad:

WOW! Before I even finished typing this post, I just checked my B&N sales and see a couple of sales showing up already! To my mystery shopper: THANK YOU, and I hope you enjoy the novels! Please come by and let me know what you think when you’re done!

Sep 292010

Where is your money going?

I was inspired to write this post by a couple of recent articles lamenting how the e-book revolution is making things tougher on authors: a WSJ article about the plight of authors, and a Futurebook description of a panel discussion about the future of books. My first thought was that the e-book revolution has increased my sales and income almost a thousandfold (OK, so it wasn’t very high to begin with!), and that the lower costs of e-books, the worldwide digital distribution they afford me, and the ability to reach readers without going through layers of middlemen (publishers and agents) has allowed me to price my e-books competitively and sell more books in a month than I used to in a decade. How can this be bad?

My second thought was that the two articles I read, and the dire predictions and “woe-is-me” lamenting therein, were mostly coming from those same middlemen: publishers and agents.

Let’s start off with some facts about where your money goes when you purchase a print book or an e-book:

  • Hardcover: These books retail for around $25, yet cost about 1/10th that amount — about $2.50 to print.
  • Trade Paperback: Retail for about $14, cost about $1.
  • Mass-Market Paperback: Retail about $8, cost about $0.75.
  • E-Books: Retail anywhere from $0.99 to $14.99, but most new releases from large publishers are $12.99. No printing costs, although they share the editing, cover design, and other costs of print books, and do have some formatting costs as well.

One interesting thing is that, as customers have clamored for lower e-book prices — rightfully claiming that there are no printing, shipping, or returns costs for publishers to account for — publishers have claimed these costs are only a small fraction of the cost of a print book (about 10%). Now, I think they’ve underestimated the costs of shipping and warehousing books, and the tremendous cost of accepting returns (for full credit) of unsold books by bookstores — sometimes paying for return shipping, sometimes having the books simply destroyed, and other times selling them in bargain bins for a fraction of the cover price. But I’ve seen enough data to convince me that the printing costs of a book are roughly in the ranges I spelled out above, when printed in large offset print runs.

One thing that jumps out at me is that hardcovers only cost a buck or two more than paperbacks, but can sell for $10 or $20 more. When Macmillan’s CEO John Sargent laments that “the value proposition goes ever downward when on screen … the perceived value decreases without a physical object,” I think what he’s really saying is that publishers can’t rip readers off for paper any more. I don’t think most readers understand that the extra $17 they pay for a hardcover is only $2 for the extra cost of the physical object (the paper and cover) and $15 as a “you want it first, you pay way more” tax. In other words, publishers were successfully able to charge triple the cost of a paperback for the hardcover version by combining the “it’s new, so it costs more” and the “look at how much nicer and more durable the hardcover book is” costs — without people realizing that the vast majority of the extra cost was the former, and the nicer paper and stiff cover was only a small fraction. With e-books, such intermingling is impossible, since the format of the book doesn’t change — not only are you getting the same words, but there’s no longer a different physical format to throw you off. And I think customers have said, “OK, I don’t mind paying a few bucks extra when a book is new, but there’s no way I’m paying that much more.”

Since I believe most readers overestimate printing costs, a related effect is that, once readers understand that printing costs of an e-book are zero, publishers can no longer exploit that lack of knowledge. Instead of being able to combine “new book tax” with “nicer, more expensive to print hardcover” costs, readers now understand there are no print costs with e-books, and can see the new book tax for what it is. Unfortunately for publishers, their industry had evolved to the point that the huge profits of hardcovers were what had kept them afloat.

So, let’s break down where your money goes a little more closely, shall we?

Cost breakdowns for print books vs. e-books

Your typical hardcover book costs around $25. The retailer (Barnes & Noble or Borders) typically pays the publisher about half the list price, so the publisher gets $12.50 (assuming the book sells, otherwise the bookstore sends it back!). Of that $12.50, it costs $2.50 to actually print the book, and the author gets a 15% royalty, which is $3.75. That leaves $6.25 to the publisher, from which they have to pay for their editors, proofreaders, cover designers, print layout people, CEOs, lawyers, advertising, and rent for big offices in New York City. Whatever is left over, is profit.

The typical trade paperback sells for about $13 (maybe a bit more, but this price will line up nicely with e-book pricing), costs about $1 to make, and provides an 8% royalty to the author ($1.04). Subtract the 50% retailer cut ($6.50), and the publisher profit is $4.46.

The numbers for a mass-market paperback book that sells for $8 would include about 75 cents for printing, an 8% royalty to the author (64 cents), and the same 50% ($4) to the retailer. That means the publisher is left with $2.61 for all their costs and profit.

E-Books used to be sold under a similar model: publishers priced them the same as hardcovers (!!!), retailers paid 50% of that price to the publishers, and then sold them for whatever they wished (list price, or some discount from list price, like how Amazon sold e-books at a loss for $9.99). Publishers insisted on the agency model, where the publishers set the sales price (not the retail price), and get 70% of the proceeds. Under this model, a $13 e-book garners 30% to the retailer (like Amazon or B&N.com), 70% ($9.10) to the publisher, and an author royalty of 25% of the publisher’s net proceeds (instead of the cover price), which works out to 17.5% of the cover price, or $2.27 in our example. The publisher has no printing costs, but let’s be generous and include 10 cents or so to account for e-book file creation (which is a one-time cost divided by the number of e-books sold). Subtract the $2.27 due to the author from the remaining $9.00, and the publisher is left with $6.73.

To recap, a hardcover nets the publisher $6.25 (or 25% of the cover price), a trade paperback $4.46 (34.3%), a mass-market paperback $2.61 (32.6%), and an e-book $6.73 (51.8%).

Wait, and publishers are complaining about e-books? They just found a way to earn more money on each $13 e-book than they used to make on a $25 hardcover. The percentage of your money they’re ending up with has more than doubled in the e-book world — and that’s the really important number, because don’t you think they can sell a lot more e-books for $13 than hardcovers for double that price?

And what about the author? Well, I may be biased, but it seems to me the author isn’t getting all he deserves here on e-book sales. First of all, publishers justify giving authors only 8-15% royalties in the print world because publishing a novel includes a lot of financial risk: to get those low per-book printing costs requires large print runs, and that involves up-front capital and the risk of paying for a bunch of books that never sell or get returned. There are also costs of storing and shipping all those books (along with the costs of editing and preparing the book), almost all of which occur before the first sale is made — and the publisher doesn’t even get paid for print sales until a month or two later! On the other hand, with e-books, there will be some editing and preparation costs, but there are NO printing costs or other huge up-front outlay of money for shipping or warehousing. There’s no way to lose money by printing more books than you sell, and publishers get paid much quicker on e-books as well. It seems to me that if publishers deserve the lion’s share of the revenue from books because of all their up-front financial risk, then the corollary is also true, and they don’t deserve as much if their financial risk is lower, as it clearly is with e-books. Instead of doing editing and cover design work, printing tens or hundreds of thousands of copies, and using their vast distribution, storage, and shipping network to get their books into thousands of bookstores across the country (and thus earning their share), publishers are now just doing the same editing and cover design work and a relatively-painless e-book conversion and upload process, and are taking 75% of the proceeds.

Now, I’ve done a lot of proofreading and editing, and designed my covers, formatted my e-books, and uploaded them to Amazon and elsewhere. And it takes a good deal of time and effort — but it does NOT take 3x as long as writing the book in the first place! For a large publisher especially, the formatting effort should be minimal — I know my third book took a lot less time to format than my first once I got the hang of it. More importantly, these jobs don’t require huge publishers with lots of money: authors can hire editors and cover designers by the hour or for flat rates, without giving up the majority of their books’ revenue forever!

I find it interesting when literary agent Simon Lipskar chides readers that they “should feel guilty if they buy a Kindle edition versus a hardcover, but not versus a paperback, in terms of what the author gets.” Whoa. Who determines how much the author gets? Right, the publishers. And, besides, even at 17.5% of gross, an author’s e-book take is still better than their hardcover take, let alone the measly 8% they get from paperback sales. (Of course, for an independent author like myself, I get the full 70% of e-book revenue after Amazon takes its 30%, so I have no complaints — I can charge readers much less for an e-book and still make a higher royalty than on a paperback, which is a win-win in my book.)

The bottom line is, e-books not only cost a lot less to produce (no printing costs, shipping, warehousing, or returns), but also require far less up-front investment and risk. Since those are costs and risks borne by publishers in the print world (and they are compensated for it), it only makes sense that removing those costs and risks should reduce the cut publishers are fairly entitled to take. Instead, publishers want the best of both worlds: reduced costs and risks, and they want to keep more of the purchase price for themselves.

Now, I do understand the publishers’ current dilemma: they’re caught between the new economic realities of e-books and their old business models, and 92% of book sales are still print. So, they may need to do a lot of painful downsizing and re-organizing, but they can’t do it all just yet and abandon their print sales model. But what frustrates me is that publishers aren’t telling us this, they’re not saying, “This is a tough transition time and we need to do certain things for the next few years and then here’s how we see things shaking out.” They’re not offering authors 17.5% of e-book royalties for the first 5 years, to increase to double that once e-book sales overtake print, or whatever. They’re not moving forward with their transition plan, they’re just trying to protect the status quo by fighting e-book adoption. And, like lots of businesses, it seems they’re more interested in protecting their own short-term profits and salaries and bonuses than in working on a long-term, sustainable business plan that’s fair to readers, authors, and publishers in the new digital world.

© 2010 David Derrico