A Tale of Two Middles

A Tale of Two Middles

Writers write.  Readers read.

That’s the simple, purest relationship. 

In the middle, though, there are two entities…and in this evolving world of e-publishing, each is taking steps to reduce the role of the other.

The combatants?

In this corner, meet the publishers.  The publishers traditionally license the copyrights from the author to reproduce and distribute the books (often on a country by country, format by format basis).   They are huge veterans: they may be one hundred years old, have a presence in every state, and all over te world. 

In this corner, the retailers.  They traditionally buy the books from the publishers and sell them to the customers (the readers).  They are often nimble, used to reacting to the changing whims of the public.

That’s the way it was for decades: authors sell to publishers, publishers sell to retailers, retailers sell to readers (or people who buy the books for the readers).

In the paper world, publishers had the mechanism.  An author could have self-published, but good luck selling very many copies.  A store might have some books under their brand name, but not very many and not usually negotiated directly with the authors.

E-publishing means you don’t need the kind of mechanism that you needed to make paperbooks.

Authors could sell directly to readers, and some of them do.  Unless you have a really big name, though, it’s hard for people to find you.  That’s one of the things: publishers don’t just make books, and retailers don’t just sell them.  They handle legal and accounting issues, Customer Service, pay the sales taxes to the states (when appropriate), and promote the books.

Buyers are going to tend towards aggregators, who have books from many sources.  They want choices, they want to compare.

Amazon’s already made a major move to reduce the influence of the publishers: they’ve become a publisher.

As I reported recently, they now have four imprints (in addition to public domain books they offer).

This latest addition, Montlake, goes head to head with traditional publishers.  It’s a genre line, specifically romance.

My guess is this is going to be a success…and Amazon will start other lines.  I’d be very surprised if they don’t do a science fiction/fantasy imprint.

With the jobs for which they are advertising, they sound like a traditional full-service publisher: advertising and all.

Arguably, Amazon’s Kindle Direct Publishing is, well, also Amazon publishing.  We talk about it as independent publishing, but Amazon behaves in many ways like a publisher: they pay royalties, they distribute the book, they handle Customer Service.  The big difference is that Amazon doesn’t make the initial decision to publish the book…they don’t exercise editorial control.  However, they do have content guidelines, and they may reject books.  They have two royalty plans, and that helps guide which books are published.  They have publishing requirements.

My estimate is that over 20,000 books get into the Kindle store through Kindle Direct Publishing each month.

Is it possible that Amazon’s publishing efforts grow to the point where the chain changes, and it becomes authors to Amazon to readers…with no publisher in-between?  It’s possible…but might really mean a shift in content. 

What can the publishers do about it?  They can’t match Kindle Direct Publishing prices…their economic models are very different.  I wrote this in the Amazon Kindle Community:

Here’s a scenario for an independently published booK:

The author writes the book, which takes considerable time and effort. It’s lovingly crafted. Maybe a relative proof-reads it before release. The author publishes it using Amazon’s Kindle Direct Publishing. The author continues to work at a regular job, and promotes the book in blogs and online forums.

The financial costs? Very low. If the book sells some copies, the author/publisher gets 70% of the price (if it’s $2.99…if it’s ninety-nine cents, they get 35%…typically).

Here’s a scenario for a traditional publisher (with that same author’s work):

The publisher has paid a reader to read 250 manuscripts. The reader selects this author’s manuscript, and passes it to a junior editor (who is also being paid, of course). Eventually, it gets to an editorial meeting, where the decision is made to publish this book. That’s after very high-level (read: expensive) editors have made decisions not to publish ten others.

The book is now worked on by an editor. The author (even a new one) may get an advance during this time. Eventually, other paid people working on the book include: typographers; lay-out artists; publicists (let’s say they want to promote this one); lawyers (for the contract, copyright, and so on); proof-readers; sales agents (who work with the retailers to convince them to carry the book); and a cover artist.

This book is one risk…it’s one of a few unestablished authors being published by this publisher this month. Probably only one of them will make a profit…the profit from that one has to help cover the expenses of the ones that fail. The publisher also chose to publish a public-interest title that they know will lose money, but will get them prestige (they are hoping for some important award for that one…then, maybe, it will make its money back).

Over time, the publisher has Customer Service costs (although some of those are borne by the retailer), accounting costs, ongoing promotional costs with the retailers, costs in dealing with the retailers, and more.

The costs for a traditional publisher are much higher, even though a smaller percentage of the receipts goes to the author.

Amazon Kindle Community thread

Given that, the publishers have to do something different from price the books at ninety-nine cents.

In the traditional model, the publisher would set a “list price” for the book…and the retailers paid them fifty percent for it (and then sold it at whatever price they wanted).

In April of last year, five of the six largest US trade publishers implemented the Agency Model.

That redefined the retailers as “sales agents”.  Technically, the publisher was now selling you the book…Amazon was just processing the sale.  Amazon got thirty percent: the publisher got seventy percent.  Nice, huh?  Suddenly, a twenty percent increase…per book.  However, they also lowered the prices…they had been list pricing the Kindle edition similarly to the hardback, and Amazon was discounting from there.  The customers certainly might be paying more now.

Let me explain that one a bit.

Let’s say that the hardback was list-priced at $25…and so was the e-book.  Amazon would have paid the publisher $12.50 (fifty percent).  If it got on the best-seller list, Amazon was pricing it at $9.99…losing $2.51 in direct money per sale. 

Now, let’s say the publisher is using the Agency Model, and prices the book at $14.99.  The publisher only gets $10.49 (70 percent). 

Why did Random House decide to finally join the Agency Model this year, then?

Most books (the “long tail” or backlist) are not the bestsellers and the economics aren’t the same.

Let’s say there was a $7.99 paperback and the e-book was also $7.99.

In the old model, the publisher got about $4.  In the Agency Model, they don’t drop those paperback equivalent prices.   They get $5.59 instad of $4.99.

Still, the publishers want more…their market share may be eroding, so they’ll need more to stay where they are now.

They could (and some do) sell from their own websites, but they run into the same issue as authors (but not to as great an extent).  Is a reader actually going to go to six different sites to buy from the big publishers?

According to this

L.A. Times article

and other sources, three of the Big Six publishers are getting together to do a new site, called

Bookish

I like to admit my prejudices up front, so I need to say here that I’m a former bookstore manager, and I’ve done other retail.

That might be why I’m finding it a little hard to see this being hugely successful.

Here is their

Press Release

It sounds good…they say:

“Editorially independent, Bookish will be a place for readers to find great content about books and authors from a variety of publishers. Bookish will highlight a wide range of genres and allow readers to find their next book as well as recommend books to each other.”

Wow, editorially independent?  That means I don’t have to go to each publisher’s website to read information about authors and get reviews from readers?

Hmm…what does that sound like?  Oh, I know…

Amazon.

😉

Amazon already lets authors have videos and bios, and man, do they do customer reviews!

Here’s a major question:

Will readers just want to look at the traditional publishers (so far, Hachette, Simon & Schuster, and Penguin…and AOL/Huffpo), or do they want to look at them with independently published books?  Not to mention, windshield wipers and cat food.

If this does work really well for the publishers, is it possible they’d stop putting their books in the Kindle store?  We have to say, it’s hypothetically possible.

Don’t worry, that wouldn’t be any more anti-competitive than the Agency Model.  😉  That already makes prices the same at all the “sales agents”. 

My guess?

Some people will use it initially, but they’ll have to really push it.  How many people know Amazon versus knowing Hachette?  Familiarity is important online…you’ve got to trust the people from whom you buy.  Amazon has been cust0mer-facing for more than a decade…publishers are just really learning that.

I think the former retailers (including Amazon) have a good shot to facilitate the author-to-reader chain, through things like Kindle Direct Publishing.  If Stephen King uses it, that’s a major blow for the publishers, whether they have Bookish or not.   I think many authors want the services, whether it is from the publisher or from a retailer.  I think customers will tend towards retailers, rather than a publisher site, even if it is multiple publishers.

I could be wrong, though.  Feel free to tell me what you think.  Will Bookish make Amazon get out of the book business?  Will the significance of traditionally publish books diminish in the face of indie growth?  Will Amazon continue to expand its publishing ventures?  Make your best guesses…

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.