Why I Never Trusted The Big Publishers with Ebook Agency Pricing

This subject has become my hobby horse lately. While we’ve got it out, I might as well ride it until I get splinters in my butt.

One of the rationalizations from the Big 5 publishers who are doing agency pricing with the ebook editions of their books was that “they would be able to better respond to the marketplace and adjust prices accordingly.” Macmillan’s John Sargent, he of the opposing side of the infamous Amazon delisting crisis of 2010, made a post to his blog that included this paragraph:

For physical books, the majority of new release hardcovers are published in cheaper paperback versions over time. We will mirror this price reduction in the digital world. It is too early to estimate the timing of the price reductions for those cases in which we do not issue a paperback edition. If we do issue a paperback, we will drop the digital price to $9.99 or lower at publication date (if not before). The price differential between the book and the e-book will become smaller at the lower price points.

That sounds great, if it were actually to be happen. My faith in that was close to zero. One of my takeaways of the whole struggle as someone totally on the outside is that the publishers wanted more control of the retail experience in the case of ebooks, and that this probably was going to end poorly for them. My take was and is that publishers think they understand their customers, but in fact have spent the 20th century isolating themselves from them through the layers of distribution. (For writers, add one step further away from the endpoint of the customer.) Their self-image of an industry is that they understand the customer and have a relationship with them, but in practice they don’t. Here’s an example – suppose Macmillan wanted to get in touch with people who have purchased a Macmillan book in the last year and offer them special deals. Could they do that? No? OK then. Could Amazon or Barnes and Noble? To some extent they could, the latter if you were a B&N club member I’m guessing and the former for books bought through them. The publishers, not so much.

Here’s another concrete example of price policy gone awry, since I’m enjoying presenting these. I’ve been a fan of Max Allan Collins since I was 12 years old and he was writing the Dick Tracy comic strip. His mystery novels are some of my comfort reading – not high art but they don’t have to be. I just enjoy them. I happened to notice that his novel A Killing in Comics is available on Kindle at the price of $11.99. This is a book that was published in 2007. Worse than that, I bought a paper copy in remainders for $2.99 right at two years ago. Whatever it’s reasonable print life might be, that is over enough that the publisher sold it to a book discounter for less than a quarter on the dollar yet at time of this posting the ebook is still priced at $11.99. Now, this book is Penguin so I’m not blaming Sargent or his organization directly as responsible for this particular instance. I am pointing out that agency pricing was sold by the big publishers as A Thing That Will Happen and It Might Smell Like Medicine But Is Good For You, You Fussy Children AKA “our customers.” It doesn’t take too many of these examples where I begin to build a brand contempt for the companies who claim they are ultimately helping me while clearly price gouging me.

I never believed Sargent’s statement because I doubt anyone at these publishing houses 1) cares much about lowering prices 2) is getting paid to lower prices of books or even make sure they are appropriate with the lifecycle of the print version or 3) even have that much control over their catalog. If I hazarded a guess as an uniformed outsider, they splat it out there and then generally leave it for all but the most high profile writers. The midlist writers like Collins probably don’t get a lot of attention in that process.

One of the big debates is “if books are self-published how do I know they aren’t crap?” Well, big publisher books can also be crap and the Kindle version can cost four times what a lot of the self-published books are. Maybe you come out to the good by getting four rolls of the dice for your money. That’s why the sample was invented.

Publishing 2010: The Beginning of the End or the End of the Beginning?

This post is my attempt to distill together many different threads into a common tapestry. There is a lot of turbidity in the publishing, podcasting, music, film, television worlds right now. I have these feeling that every bit of this is all part of a larger whole and I’m going to take a stab at defining it. This post will either be awesome because it succeeds or a miserable failure. There is no middle ground. Off in to it. This will be long, you have been warned.

First, let me inventory the raw materials that got me thinking this way. Recently JC Hutchins posted that he had been dropped as an author by St. Martins Press and that they would not be publishing the 7th Son sequels. The post lives between a gut-check and a crisis of faith from one of the pioneering new media creator/ novelist hybrid guys. He also posted about monetary realities of writers pubishing via ebooks. Not that long before this, I had listened to JC’s Hey Everybody interview with Pablo Defendini and Ami Greko from The New Sleekness blog. It’s a really interesting discussion about the future of book publishing by industry professionals young enough in their careers to be less invested in the status quo and more willing to help a new future emerge. (Side note 1: I met Pablo and Ami at last year’s Dragon*Con in the classic SF con fashion – I wanted to meet them, saw them in a hotel bar, asked if I could sit with them, introduced myself and hung out for an hour. Try it, it works! ) Much in my thinking was informed over the last month by the Amazon/Macmillan ebook pricing wars of far too large a trail to link to anything. In that debate I did first run across Joe Konrath, his fiction and some of his posts with amazingly open and detailed statistics of what he sells and what he makes from digital publishing. (Side note 2: I bought, read and enjoyed his book Whiskey Sour as fallout from the debate).

There are many other bits of thought in the mix, such as my feelings about beginning my own novel during NaNoWriMo and thinking about hiring my friends at Sterling Editing to work on it and what I might choose to do with such a book when)it is finished. That’s enough of a prelude, though. Time to hit it.

JC Hutchins struck a nerve when he basically waved the white flag on his current way of working.

Creating podcast fiction does does not generate direct revenue for me. Based on anecdotal and statistical data, very few people are willing to pay for general podcast content, much less podcast fiction. Since my goal is to make a living wage with my words, the current monetization models — including in-show advertisements — will not deliver this. Dedicating time and effort to my non-fiction podcast projects will deliver equally underwhelming monetary results.

It is also apparent to me that using the Free model to promote a tangible product, such as I did with 7th Son: Descent and Personal Effects: Dark Art, does not deliver sustainable sales results. I have friends — some of whom are my best friends, the most talented people I’ve had the privilege to know and work with – who have absolute faith in this model. I treasure their trailblazing efforts and enthusiasm. My faith, however, has been fundamentally rattled.

Put simply: The new media model viably supports only the most blessed and talented of authors. The time, effort and money I invest in entertaining you for free pulls my attention and talent away from projects that can generate revenue. While podcasting, podcast fiction, and — most importantly — your support and evangelism has positively impacted my life and career in ways I’ll never be able to fully express, I cannot continue to release free audiofiction if I wish to make a living wage with my words.

This is pretty big stuff in the world of podcast fiction. Hutch was one of the pioneers of the form and his getting picked up by St. Martins was considered a watershed and a validation for the medium. So if he can’t make it in this world, what does that say about all the other podcast novelists who are less engaged, have less of a fan base, less sheer horsepower? Does it mean this medium is screwed?

I am positing that Hutch had a terrible misfortune of timing, that he arose as a viable author at exactly the wrong moment in publishing history. As he started down his path it seemed like the end game was to get a book deal with a major publisher. For writers of the last 100 years, this was the reasonable career success path for authors, and practically the only one. In the last few years though a sea change has happened so rapidly and thoroughly to flip that Hutch got his boat capsized in the process and he will be far from the only one. As crazy as it may sound, for a certain kind of author at this point I think a major publishing contract may seem like winning the game but is in fact losing it.

The red flags I got from the JC Hutchins post started here:

Examining the lead up to, and release of, the novel, I cannot see how I could have promoted it any better than I did. I literally went broke promoting this book and Personal Effects: Dark Art (another novel that will not have a sequel; it also underperformed). I conceived numerous brand-new online marketing campaigns that dazzled you and others. I asked you to purchase the novel, and many of you did.

If JC is literally going broke promoting 7th Son and Personal Effects book, I think a reasonable question to ask is “What is St. Martins Press’ role in this?” If JC is willing and able to put so much of his own time and money into the promotion of the books, what value is he getting from the big publisher that is worth giving away 90% of the sale of the book to them? 50 years ago, and 20 years ago and 2 years ago, this made sense. It was pretty much impossible to get a book published and into the hands of the world in any significant way – especially in a way that a writer could make a full-time living – without a major publisher contract, especially one paying advances at a level to be a livable wage. Nowadays, especially due to the markeplace enabled by the Kindle, Nook, Sony Reader et al, that’s a different equation.

Joe Konrath’s post about the money he makes from the Kindle store shows a really clear pattern that he summarizes with:

My five Hyperion ebooks (the sixth one came out in July so no royalties yet) each earn an average of $803 per year on Kindle.

My four self-pubbed Kindle novels each earn an average of $3430 per year.

If I had the rights to all six of my Hyperion books, and sold them on Kindle for $1.99, I’d be making $20,580 per year off of them, total, rather than $4818 a year off of them, total.

So, in other words, because Hyperion has my ebook rights, I’m losing $15,762 per year.

For a writer with an engaged audience, like JA Konrath has and like JC Hutchins has, there may well be more money in their books self-published primarily through the Kindle and other ebook stores. An interesting bit from the Konrath numbers above, that’s from making 35% of the sales price for his direct books. When it changes to 70%, he’ll be making twice as much per book as he posted above for the self-published ones.

Let me say it again: for a writer who is engaged with their audience and reasonably prolific (because you need new books to keep this engine turning), we may be at the turning point where a better living is available through self-publishing than a big New York publisher book deal.

There are certainly authors that this model will not work for. During my preparation for last year’s “Podcasting for Working Writers” panel at Dragon*Con I talked to both James Patrick Kelly and Kelley Eskridge on this topic and they both raised the point that for a number of old school writers, the idea of engaging at the level of podcasting and doing large parts of their own publicity is anathema. A reasonable chunk of authors don’t want to get out in the limelight and picked this career specifically so they don’t have to engage. They write their books, maybe do a few conventions a year, do some bookstore events and that’s it. Back to the keyboard where the serious work happens. That’s fair enough and those writers will always need a publisher to do the parts of this business that would make them unhappy to pursue.

I think of the classic big publisher and big record label model as basically serving the function of the bank or maybe as VC. The manufacturing and distribution of the creative work was too capital intensive for an individual so this company would lend that money to the process, make the books or records show up in the store, do some publicity and keep most of the money. They insulate the creator from the process and from the retailers and fans. What publicity efforts exist, the big media company acts as a semi-permeable membrane to let a little of the public through, but not a lot. Ultimately in this model, the relationship with the fans of the buying public is owned mostly by the retailer and the publisher or label, very little by the writer or musician. For the author that doesn’t want to feed and water that relationship, that’s perfect.

For the other kind of author, a JC Hutchins or Mur Lafferty or Scott Sigler, going with a major publisher outsources to a third party a relationship with their fans that these writers are really really good at maintaining. When Hutch is paying his own money to publicize his books and his his own direct line into his own fanbase, what can the big publishers do for him? They could give him large enough advances to keep his bills paid while future books are written, but obviously they aren’t willing to do that because sales aren’t high enough. JC’s books earn money, but not enough money to keep him in that system. For me, the real question is “Did St. Martins Press do 9 times the work than JC did to get the work promoted?” If not, what did they do to deserve a 90/10 split?

Last November for NaNoWriMo I began a novel that I have literally been thinking about since 1991 when I was 23. While I came nowhere near finishing it that month and am nowhere near finished now, I have a goal to finish this novel in 2010. I’ve already been thinking about what happens when I finish the book. Do I try to find an agent and then try to have them place it with a major publisher? Since I don’t have any plans beyond that one book and thus don’t necessarily have a writing career in mind, how does that affect my decision making? At the moment I’m leaning towards not bothering to place the book with any publisher at all. I’ll pay Nicola and Kelley at Sterling Editing to work with me to get it publishable and hire a book designer and/or artist to hone the final product and then publish it to the Kindle store, Smashwords, the Nook store and whatever else seems reasonable at the time. I’ll probably release it via Podiobooks.com at the the same time, do my publicity via that and the other usual online suspects and let it ride. The key point to me is that the energy I could spend in placing my book at a big publisher could be spent selling the book to readers and I’ll probably make more money that way in the long run. This isn’t the way things worked for the 19th and 20th century and it may not be the way it works in the future, but March 2010 it is the way it looks to me now. The validation of having a “major publisher” decide I’m their sort of writer doesn’t do anything for me. I don’t need the book contract to pay my living, I’d end up doing mostly my own publicity anyway so what the hell does the publisher have to offer me anymore? Rather than have them put out a $15 Kindle book that I see a buck or two from and no one buys with a print version that is on and off the shelves in head-swimming time on a death march to the warehouse remainder store, I’d rather put out a $5.99 ebook version that I see $4 from each one and more people buy. I have a whole rant on how the true function of ebook platforms is to enable impulse buys, but this current post is already too long. That must come later.

When I interviewed Cory Doctorow in 2006, one of the things he said is that the generation coming of age now is the first one to arise “without a stigma attached to self-publication.” Since I’ve been paying attention to the world of science fiction and writers in general, a giant shift has happened. When I joined GEnie in 1992, the notion of self-publishing your work meant that it was unreadable tripe and the very thought of it was risible to any serious author. Nowadays, it might well be the most rational economic choice available. If you aren’t already in the system and earning livable wages from advances on your books, and you are the sort of writer and person with that drive – a JC Hutchins, a Scott Sigler, a Tee Morris, a Mur Lafferty, an Alec Longstreth, someone willing to do more than thrown the manuscript over the wall and wait for finished copies to return – it might be time to take the reins yourself and just do this. The costs are low which means the cost of failing is low. The traditional publishers aren’t paying that much anyway so the opportunity costs are low. Just do it. Lynne Abbey, CJ Cherryh and Jane Fancher did. The writers at Book View Cafe did. I will. Don’t pin your hopes on a big publisher with economic drivers that are different than yours. Just do it yourself, work the people yourself and keep as much of the money as you can.

My Take on Amazon Vs Macmillan

I really honestly didn’t want to write one more consecutive Kindle related post but current events conspired against me with the current dispute between Amazon and Macmillan. I am seeing a lot of analysis from my compatriots in the science fiction tribe, such as Tobias Buckell, Jay Lake, this thread at Making Light. I completely understand all these people being pissed off when their livelihood blips off the map. It sucks but this sort of thing happens when corporate giants clash. It’s the dude who runs the diner by the stadium who is the true victim of a sports strike, and the writers and customers are the victims of the Amazon and Macmillan dispute.

Allow me to lay out a thought experiment I’ve seen nowhere else:

Imagine I am the executive of a large publishing concern. Some proportion of my company’s income flows through ebooks and the majority of that is through the Kindle at the moment. However, I as an executive in my heart of hearts don’t like ebooks. It’s not why I got into publishing, it’s weird and has different market dynamics from what I am used to. Even though I am making some money and the amount is growing, I fear that this is eroding and canibalizing the print sales I consider my real business. What I really wish is that ebooks would go away, but I can’t just pull them from retailers or explicitly state that.

Instead, what I want to do is to find a defensible price to raise end consumer prices that will effectively mean that no one much will buy it. Some hardcore fans will, but the fears about cannibalization will go away because the prices are so close to parity with paper that no one wants the ebook version anymore.

Now, imagine that the retailer won’t play ball with that. They are already willing to eat a loss per unit on sales, and even if I were to raise the wholesale price to them they’d be willing to eat that larger unit loss. What I really want is to change the basis of our business relationship that prevents them from setting the customer’s final price The retailer opposes this, even though this means that instead of taking a small loss they are going to make a $4.50 profit on each of the higher priced ebooks. They know that there will be a customer revolt and the backlash will take a market they’ve spent years nurturing and put a big hurt on it.

Now, suppose after negotiations reach an impasse, the retailer wants to signal seriousness to me, the publishing executing. They could choose to delist my firm’s ebooks as retaliation except that would give me exactly what I want. In this particular thought experiment, if the retailer were to try to apply coercive leverage to me, it would require them to also delist electronic and paper copies of books to have any effect on me, because my real end goal is to get ebooks delisted while keeping my hands completely clean.

::End though experiment::

Most of the commentary of my tribe seems to focus on how uncalled for the delisting of print books was. What I’m trying to present – without any knowledge of motivations of any players involved – a scenario in which Amazon could consider themselves justified in delisting the print books. I don’t want to alienate my friends, but they seem to all see Macmillan as the undisputed good guy and Amazon as the obvious bad guy here and I’m not sure I buy that. Between the two, the company looking out for my particular interests as a customer is Amazon. As RichSPK tweeted earlier today “How does increased competition (Apple’s iBooks to Amazon) result in higher prices to consumers?” That, sir, is an excellent question and one worth thinking about.