Why Writers Need Publishers… Or Do They?

During a recent conference I attended on Publishing Futures, the discussion touched on the global political views of the “abolish copyright” movement. This political lobby group asserts that copyright and the publishers battling to uphold it are getting in the way of a pure flow of creativity from writer to reader on the internet. I heard several worried publishers around me calling out the question “so what is our value as publishers?” Unfortunately the discussion swirled away without these voices being heard or answered.
I have been thinking a lot about the answers. It matters, because I am worried we will lose the publishing mechanism that allowed writers to become a professional group in the first place.
The first publishers were essentially patrons – people who sponsored a writer they liked. They had the money and influence to publish the writer’s work and could discuss it with influential people who might buy a copy of the book for their personal library. Creative people (sculptors, painters, writers) were completely at the mercy of their noble patrons. Being noble, these patrons were not “investing” in a creative person – they were so rich they did not need to generate income. They were simply showing off their superior discernment by surrounding themselves with artists and artwork unique to their house.
Very occasionally a publisher was a printer or other middle-class champion who believed a writer’s work was so valuable it should be published for posterity. They then started a campaign to raise funds to publish a writer’s work (Shakespeare’s works were brought to the world this way – after his death).
Fast forward a few hundred years and we can see the legacy of this patronage model in our publishing industry. Publishing houses pay advances to writing talent identified by their editors or agents. The publisher receives manuscripts, polishes them, designs and prints them as books, and then pours money into advertising and sales promotion to generate maximum sales. Publishers need to generate a profit to be able to invest in new titles, but publishing is a hit or miss business – many titles make a loss, with just a few good ones contributing the majority of income for re-investment.
The curious feature of this legacy investment model is that publishers get the most limited share options seen in the business world. Unlike an angel investor, who will demand voting rights and a significant percentage of shares in the brand being built, a publisher usually obtains just the license to the current work and sometimes a handful of future works. When a writer becomes a bestselling brand, and decides to swap publishing houses or sell direct through Amazon or iTunes, the original publisher who championed the writer is entitled to nothing except the residual income from older works.
Globally, publishers pour billions of dollars every year into the pockets of writers and their agents in the form of advances and royalties. If total royalties make up 10% of a publisher’s costs, then editing, production, marketing and distribution make up the rest. The problem is that when a writer self-publishes, all they see is the percentage of royalty they will make. This might be 70-85% of net sale price via a self-publishing platform – compared to 6-25% for a traditional publisher. However 70% of zero is still zero – and that is close to the number of copies many self-published titles sell. The value of traditional publishers is easy to under-rate. Even if distribution costs become lower as books are distributed digitally, the other costs of editing and promotion do not go away. Nor does a simple comparison of percentages take into account the original investment by publishers.
Given the number of public attacks on the value of publishers (I counted six before breakfast this morning), I find it interesting that so few writers choose to abandon their existing publishers. The big names we do hear about (Stephen King and a handful of others) are notable because they are so rare. I believe the reason lies in a hidden but highly valued service that traditional publishers provide – recognition.
Every writer has a list of “dream publishers” who would provide them with recognition (and status). The majority are forced to set their sights a little lower and are usually delighted to have a niche publisher accept their work. Being published by a small publishing house is kind of cool. Since less than 1 in 200 manuscripts submitted are ever accepted for publication, it is a mark of status to be accepted by any publisher.
The very small percentage of manuscripts accepted for publication leaves a roiling wake of frustrated writers who are adding their voices to the anti-publisher lobby. The good news about the socially networked world into which we are hurtling is that it will become easier to identify talent that might have been overlooked. The frustrated (but excellent) writers who self-publish ebooks are more likely to be discovered by people on social media. Some recent examples are Kerry Wilkinson and the up and coming Anthony Karakai.
A secondary reason for loyalty to publishers (and agents) is the emotional support and feedback that writers need. Writing – although wonderfully fulfilling – can create a confidence crisis in even the chirpiest of souls. Nearly every publisher and agent (and producer who has involved writers) has a story to tell of the extraordinary support they have provided to a writer in crisis. On a daily basis, a writer’s editor or agent may be the only people who care enough to read and respond to a writer’s concerns, thoughts and wild creative ideas.
This provides a partial answer for publishers worried about whether their value proposition is strong enough to survive into the future. Writers really do need the support publishers provide – creatively as much as financially, and a publisher’s brand status is an important source of recognition for writers, especially amongst the community that the writer identifies with.
The key to future success is to ensure your publishing house remains relevant to your community, that you are associated with integrity, open to original thought, and supportive of your writers (awards wouldn’t hurt either).

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The Amazon Empire Strikes Back

Cosplayers in Rebel Alliance outfitsThe Amazon Empire may swallow the entire publishing ecosystem in a series of gulps.  It started by squeezing distributors (IPG is the most recent in a string over the last few years), and it has created a large and rapidly growing publishing business that is wooing writers away from their existing publisher.  Publishing is a $60 billion business globally, it is highly visible, and Amazon has to show growth prospects for its hungry investors – so why not?

The self-publishing companies that sprang up during the early internet era are still making money from frustrated writers, but they too will be swallowed by Amazon as the ebook revolution progresses – because why pay thousands to self-publish, when you can publish an ebook directly onto Amazon for almost nothing and get access to the world’s largest consumer base?

Apple are focussing on ease of ebook creation, but until Apple improves their search capability, they cannot compete with Amazon for consumer preference. They will remain a convenient buying mechanism. Google and Kobo are fighting valiant rearguard actions and working to create open ecosystems but their market share is still tiny.

Before you rush out and seek refuge on a remote planet, I have some news from the headquarters of the publishing rebellion…. We know the location of the Deathstar!

Because  Amazon is now a big lumbering beast.  As the future rolls out greater numbers of ebooks and better print on demand capability, Amazon with its huge warehouses will have fewer advantages. The existing ecosystem of publishers will do a better job of selecting titles in which to invest their marketing dollars. Any publishers still in existence have survived the cull of a ruthless market because they are extremely good at picking winners within their target community.

In the short term, it is not hard for Amazon to pick off bestselling writers and offer them a bigger share of proceeds.  It recently made more than 50 publicly reported rights deals (more than many of the multinational publishing houses). But well over a million new titles are published every year around the world.  Longer term, Amazon is likely to look at its hastily assembled publishing arm and question whether it is delivering the return on investment that its other divisions are providing.

Amazon is a mass retailer, not a participant in the social discussions going on in reader communities all over the world. As a book retailer, it is relying on its recommendation algorithms and the “foot traffic” of consumers. But online “foot traffic” is changing rapidly. Much more consumer time is being spent on Facebook.  And the “recommendation algorithm” on Facebook is far more powerful – because they are real friend recommendations, which are the #1 way people find their next book according to research by Goodreads.  Facebook has been slow to capitalise on this, however the commercial potential is there. With its own currency and mobile development platform, not to mention knowledge of every topic under discussion, Facebook could eat Amazon, Google and Apple’s lunch.

So is the rebellion seeing the slow decline of one Empire and the growth of a new one?  Probably. But small to medium sized publishers have much less to fear than large publishers who are reliant on a few bestselling authors. May the force be with us.

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The Publishing Ecosystem – Rogues and Benefactors

The community surrounding most publishers consists of an orbiting constellation of writers, translators, illustrators, publicists, agents, reviewers and other influential folk who all depend on the success of the publisher they surround. Publishers are a natural hub in their ecosystem, and because of their privileged position, they can enhance or diminish the success of their community members.

Publishers in turn are the stars wheeling about the big distributors and retailers, who form the hubs of the big galaxy accessing consumer demand. Distributors and retailers can therefore enhance or diminish the success of their community members.

Hubs and Spokes

The hub of a taro leaf ecosystem

Over the long term, business ecosystem hubs that enhance their community grow faster and more steadily than ecosystem hubs that weaken their orbiting members (Iansiti and Levien).

To illustrate how this happens, consider a retailer who goes to great lengths to share sales information, trends and demand forecasts with the publishers who supply it with stock. The publishers getting excellent information from their retailer are able to tune publicity campaigns and pricing, plan marketing efforts, acquire titles in tune with the “zeitgeist” and generally do a good job of surfing the consumer waves. This keeps the publishers healthy, and also helps the publishers keep their own communities healthy – able to pay advances for new work and support writers to keep writing.

Sometimes, a hub will “go rogue” – an executive team decides that they can leverage the privileged information they gain from being the hub of an ecosystem, and use it for their own personal gain at the expense of the members of their ecosystem. The most famous example of a rogue hub is Enron. Not only did Enron virtually wipe out the community surrounding them, their gaming of supply contracts caused consumers in the affected states to pay 70% more in electricity charges. Rogue hubs nearly always use privileged information about some aspect of the ecosystem. Several large US banks spring to mind as recent examples.

The opposite of a rogue is a “benefactor” hub that knows how important the information it collects is, and still decides to share that information for the betterment of its entire community. One example of such a hub is Walmart, which provides tremendous value to all of its suppliers through the liberal sharing of key sales data to enable better forecasting.

The Australian Publisher’s Association stands out as a benefactor hub through its provision of information systems and standards that benefit the whole Australian community of retailers, distributors and publishers. No other player in the local industry was providing these services, so the APA stepped into the breach and provided what was necessary for the health of its community. It is a nice parable about value sharing and creation being ultimately about people who get together and make decisions for the good of everyone, despite being part of a capitalist system.

A few moments thought about what happens when publishers attempt to become retailers, and retailers attempt to become publishers provides food for thought about the conflicts faced by the executive decision makers within such conglomerates;

“Let’s give all our sales information to our competing publishers to help them grow and be successful”. Yeah right!

It is easy to see how even good people, thrown into such situations, would struggle to reconcile the job demands with building a healthy community. These hybrid industry configurations are unlikely to be successful in the long term because they are less likely to create healthy communities.

My next few articles will cover some other interesting ecosystem inhabitants; leeches, sharks, and alien invaders, their impact on communities and how communities can guide, protect and repair themselves. Any suggestions from readers as to organisations that might fill these roles will be amusing for everyone. I will not (of course) be able to comment on your suggestions, but I will provide a checklist on our facebook page  for people to match  observed behaviour with roles. “Like” our page and you will see the checklist when it comes through.

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The Future of Literary Agents. Really?

It is a confusing time to be working in the publishing industry. Commentators are telling people they should forget what they know about publishing, and adapt to a digital future.  As regular readers will know, I love to find the reassuring thread of humanity that will guide us through future digital landscapes. In this article, I turn my attention to literary agents.

Traditionally, editors commissioned or discovered new titles (see my last article on the role of editors). However, during the last fifty years of mergers and acquisitions, many experienced editors left to become literary agents, and the big publishing houses started relying on  agents to find new material.

The self-publishing boom has created a new market for literary agents. When a new writer can’t sell the 1,000 copies under her bed, she looks for an agent who can sell rights or get distribution deals, and in some cases she will pay to be represented at a book fair by an agent. At book fairs, it is usually smaller publishers who buy self-published book rights. Last year, an editor at a small publishing house in London told me they had previously commissioned all their work. He was at the Frankfurt Book Fair to buy rights for the first time as a way to reduce their risk and grow their portfolio more quickly.

So the number of literary agents has been growing. They are probably finding at least half of the new material for large publishers, and a growing proportion for smaller publishers, including a greater number of international rights sales. Despite this growth the media is telling us two main stories about the future of literary agents:

  1. Literary agents will not be useful in a digital future, because writers’ ability to publish to the world directly will remove industry “middlemen”.
  2. Literary agents are becoming publishers because publishers are not doing a good job of re-issuing writers’ material in ebook format. This suggests the beginning of the end for literary agents because if they are also the publisher, then there is no one to sell to – so agents are redundant.

These stories create a stir, but agents are unlikely to disappear because the story writers fail to appreciate the economic value of each player in the publishing chain. The economic value of publishers is managing the financial risk of marketing a book. If they make too many wrong calls, they will go out of business. The economic value of agents is selling clients’ books to publishers (by lowering risk). If they don’t sell enough rights deals, they will go out of business.

Neither the financial risk management nor the sales functions will disappear in an internet world. Agents who re-issue ebooks for established writers are not taking a risk – they are skimming some cream. Most self-publishers (who have “eliminated the middlemen”) are already discovering that they are not in a good position to assess the financial risk of their project, and nor do they have the sales skills to sell their project to publishers.

I can hear some of you asking “so where does Sparkabook fit?” The value of the Sparkabook rights trading community is simply to save people time. Sellers need more efficient ways to find potential buyers, and buyers need faster and more efficient ways to find content that matches their audience.  People making risky decisions buy from people they trust, so agents will be around for a long time to come. I am pleased to report that many of the smartest ones are already Sparkabook members.

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Darwinian Evolution at the Frankfurt Book Fair

Frankfurt Book Fair days are the best of days, and also the worst of days. Within several huge halls are assembled a good segment of the global publishing community, and if you stand above the hubbub and watch carefully, you can detect ruthless Darwinian evolution at work.

Publishing has always selected winners and losers. The way for an editor or small publisher to succeed is to match a book to a market, using an intuitive sense of what that market wants. Junior editors are promoted at larger publishing houses when they earn their stripes by finding and backing a successful book. Many books do not succeed, and editors with a low strike rate are less likely to get promoted. The same applies to small and start-up publishers, battling for attention in the distribution and retail systems. If they have a good strike rate, they get enough cash flow to acquire more titles.

Success or failure in publishing rests on the intuition and judgement of editors. Publishers over the last few decades have outsourced printing and distribution functions to achieve economies of scale without ill effects, because these functions were irrelevant to the success of their house.

At Frankfurt Book Fair, I attended a seminar on the role of the editor in a “Brave New World”. One publisher said they had outsourced creation of multimedia applications, another said they were building this capability in-house and were now calling their editors “project managers”. The third (the only trade publisher) was diplomatically silent, but said his team was enthusiastically embracing e-book conversions.

The second editor spoke of some failures they had already experienced due to poor user-interface design. I started to puzzle over a question as I listened. Is the same failure not caused by bad, clunky writing, full of clichés? Why were these editors not taking the same approach to procuring applications that they used every day for procuring new books? The options they were discussing; “Build it yourself” or “outsource”, are both similar to the “contract a writer” scenario. If you know the writer is outstanding, then you have no problem – but how many hundreds of writers are rejected by publishers before one is contracted?

There is intense competition in the application development market, similar to the competition to get books published. With over 10,000 “children’s education” applications on iTunes, the world is ready for some discerning editors to select only the best. A publisher would then have a good chance of creating a best-selling application using their marketing capability, just as they would create a best-selling book.

The other option available these days is to “crowd source” creation of an application. Put up the book you want to create an application for onto one of the myriad crowd-sourcing sites, and seek submissions for the best concepts/pilots. Creative developers are lurking in all corners of the world, ready to generate fantastic concepts and ideas, if only they could find a project or a sponsor.

Perhaps the problem with the seminar was that the third publisher (who said very little) had already decided on one of these different approaches to procuring applications, but was unwilling to share it? I suspect it would give a marvellous competitive edge, so I will be watching what this house releases in the way of applications over the next year.

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Old Wisdom for the New Digital

Penguin was a small start-up publisher, which became an instant success in the publishing world. If we look at the reasons they were so successful, we can see they adopted many new concepts that added up to an explosive package.

First there is the format — small paperback, quality writing and simple graphics. Allen Lane, the founder of Penguin, lifted the entire concept from Hamburg publisher Albatross. To be smart you don’t have to come up with a new concept, but you do have to find it! Lane travelled extensively and kept in touch with new ideas. Does your itinerary for Frankfurt Book Fair allow time for discovery?

Second — impulse purchases can be planned. Penguin retailed their books through a carefully planned system of vending machines, railway stations, and other high traffic areas frequented by their target market. Airport booksellers are still growing in numbers today. What are the high traffic areas that your target market passes every day; Facebook? Gaia? Cyclingnews.com?

Finally — status matters. This is a human drive that will never change. Penguin appealed to status shoppers, who wanted to better themselves. In a digital world do we have to abandon the physical? As a frequent traveller for most of my life, I have witnessed many conversations between people about the books they were holding. How could people let other people know what book they are holding in a digital future?

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Lessons from an older format revolution

For many of us, the wave of digital change driven by e-books causes turmoil. “How can I succeed in this new world when I am a literary person, not a technology person?” “Should I acquire, market or distribute e-books in a different way to printed books?”

I take great delight when I can find a historical parallel to modern digital dilemmas. The new whizz-kids driving social media and transmedia changes may be creating new technologies, but the humans using them have been the same for thousands of years, which means history lessons can still be useful.

Over 80 years ago a new format caused a revolution in the publishing industry. Paperbacks. In 1934, most books were expensive hardbacks sold through established booksellers. Paperbacks had been invented, but were generally “pulp” fiction romances, comics or westerns. When Allen Lane at Penguin books decided to publish quality literature in paperback format in 1935, he made a leap of understanding about what people wanted. Traditional publishers of the time thought the working classes wanted pulp fiction, not quality literature. Lane ignored this dictum (he had a knack for ignoring society views in many areas) and stunned the publishing world when his first print run sold out through Woolworths. Within a year he had sold over one million copies.

Pocket Books in the USA emulated Penguin’s success. Their first print run of 200,000 quality titles sold out at department stores within 24 hours. By 1960, almost every major publisher had acquired or merged with a large paperback house. Those that did not, did not survive.

Why were traditional publishers in 1935 so wrong about what “the masses” wanted? In 1935, working class people and immigrants from outside the UK/USA were redefining themselves. Tolstoy and Marx had spread the idea that intellectual endeavour could free them from drudgery, and immigrants in particular were keen on education as a way to better their family’s prospects. When quality paperbacks were sold in department stores, people didn’t snap them up as cheap entertainment – they bought them as affordable keys to social elevation.

To succeed in an era dominated by new digital formats, we can ask ourselves questions informed by history. What is it that today’s “masses” want? What department stores are people passing through? I will explore these questions in my next posting.

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