Tuesday, March 15, 2011

Bleak Future of Publishing

In my JCDL2010 keynote last June I spoke about the bleak future for publishers in general, and academic journal publishers such as Elsevier in particular. As I expected, I was met with considerable skepticism. Two recent signs indicate that I was on the right track:
  • A few days ago an analyst's report on Reed Elsevier points out, as I did, that Elsevier cannot generate organic growth from their existing market because their customers don't have the money.
  • A fascinating blog interview between two self-publishing e-book authors reveals that the Kindle is providing them a profitable business model. John Locke then held the #1, #4 and #10 spots on the Amazon Top 100, with another 3 books in the top 40. Joe Konrath had the #35 spot. Of the top 100, 26 slots were held by independent authors. John and Joe had been charging $2.99 per download, of which Amazon gave them 70%. When they dropped the price to $0.99 per download of which Amazon only gives them 35%, not just their sales but also their income exploded. John is making $1800/day from $0.99 downloads. Kevin Kelly predicts that in 5 years, the average price of e-books will be $0.99. As he points out:
    $1 is near to the royalty payment that an author will receive on, say, a paperback trade book. So in terms of sales, whether an author sells 1,000 copies themselves directly, or via a traditional publishing house, they will make the same amount of money.
    If publishers were doing all the things they used to do to promote books, maybe this would not be a problem. But they aren't. Tip of the hat to Slashdot.


David. said...

Here's another straw in the wind, from the UK's Social Science Research Council:

'The Media Piracy Project ... reports that illegal copying of movies, music, video games and software is "better described as a global pricing problem" - and the only way to tackle it is for copyright holders to charge consumers less money for their wares.'

In summary, they are reporting a disagreement between customers and publishers as to what content is worth. The old motto of retailers says "the customer is always right".

David. said...

More on the SSRC report from Ars Technica.

David. said...

The future for publishers gets bleaker by the day. On Joe Konrath's blog he interviews Barry Eisler, a New York Times bestselling author who has made a lot of money through traditional publishers. Barry has figured out that even an author for whom the publishers actually do something is paying way too much for their services:

Joe: We figured out that the 25% royalty on ebooks they offer is actually 14.9% to the writer after everyone gets their cut. 14.9% on a price the publisher sets.

Barry: Gracious of you to say “we.” You’re the first one to point out that a 25% royalty on the net revenue produced by an ebook equals 17.5% of the retail price after Amazon takes its 30% cut, and 14.9% after the agent takes 15% of the 17.5%.

Joe: Yeah, that 25% figure you see in contracts is really misleading. Amazing, when you consider that there’s virtually no cost to creating ebooks--no cost for paper, no shipping charges, no warehousing. No cut for Ingram or Baker & Taylor. Yet they're keeping 52.5% of the list price and offering only 17.5% to the author. It’s not fair and it’s not sustainable.

The whole conversation is fascinating. Don't miss the randy monkey, the part about NPR, Random House and the blog post, and the analogy with burglaries. Here are two more tastes:

Barry: This is a critical point. There’s a huge data set proving that digital books are a price-sensitive market, and that maximum revenues are achieved at a price point between $.99 and $4.99. So the question is: why aren’t publishers pricing digital books to maximize digital profits?

Joe: Because they're protecting their paper sales.

Barry: Exactly.

Joe: It's awfully dangerous for an industry to ignore (or even blatantly antagonize) their customers in order to protect self-interest.


Barry: ... I know some people are going to be reading this and thinking, “Okay, but how will I ever cut through all that digital clutter? How will I ever get noticed without a publisher?”

Joe: How did anyone ever get noticed with a publisher?

Barry: Exactly. Walk into a bookstore--even with today’s diminished inventory, there are tens of thousands of titles. How do you get noticed? Getting noticed and other aspects of marketing is a challenge in any business, digital, paper, or otherwise. It’s too big a topic to cover here, but for now, let’s just say that it’s hardly a unique challenge for digital books. And, as you and many others have demonstrated, it’s hardly an insurmountable challenge, either.

If even their most profitable authors have figured out that the publishers are ripping them off in a desperate attempt to delay the inevitable, the inevitable can't be far away.

David. said...

On the other hand, St. Martin's Press just paid more than $2M to self-published author Amanda Hocking for a 4-book series. She had made $2M from more than 1M copies of her (mostly) e-books, and has thus apparently not figured out the $0.99c break point.

David. said...

There is more interesting discussion of self vs. legacy publishing on Joe Konrath's blog.