The Traditional Publisher’s Revenge: Turns out Publishing with Amazon has Drawbacks, too

cartoon credit: Dan Wasserman, Boston Globe. Distributed by the Tribune Content Agency.

On December 27 the New York Times ran an article called “Amazon offers all you can eat books: Authors turn up noses”. The problem starts with a new Amazon program called Kindle Unlimited, which allows readers a.k.a customers to buy into a monthly membership for $9.99 to get unlimited access to a wide range of titles. Needless to say, this is great for avid readers and for Amazon, who gets people to use their services, but a bad deal for authors who depend on selling books even if only for $0.99 a copy.

From the article: (bold emphasis mine)

“Authors are upset with Amazon. Again.

For much of the last year, mainstream novelists were furious that Amazon was discouraging the sale of some titles in its confrontation with the publisher Hachette over e-books.

Now self-published writers, who owe much of their audience to the retailer’s publishing platform, are unhappy.

One problem is too much competition. But a new complaint is about Kindle Unlimited, a new Amazon subscription service that offers access to 700,000 books — both self-published and traditionally published — for $9.99 a month.

It may bring in readers, but the writers say they earn less. And in interviews and online forums, they have voiced their complaints.

For romance and mystery novelists who embraced digital technology, loved chatting up their fans and wrote really, really fast, the last few years have been a golden age. Fiction underwent a boom unseen since the postwar era, when seemingly every liberal arts major set his sights on the Great American Novel.

Now, though, the world has more stories than it needs or wants to pay for. In 2010, Amazon had 600,000 e-books in its Kindle store. Today it has more than three million. The number of books on Smashwords, which distributes self-published writers, grew 20 percent last year. The number of free books rose by one-third.

Revenue from e-books leveled off in 2013 at $3 billion after increasing nearly 50 percent in 2012, according to BookStats. But Kindle Unlimited is making the glut worse, some writers say.

The program has the same all-you-can-eat business model as Spotify in music, Netflix in video and the book start-ups Oyster and Scribd. Consumers feast on these services, which can offer new artists a wider audience than they ever could have found before the digital era.

Holly Ward, who writes romances under the name H.M. Ward, has much the same complaint about Kindle Unlimited. After two months in the program, she said, her income dropped 75 percent. “I couldn’t wait and watch things plummet further,” she said on a Kindle discussion board. She immediately left the program. Kindle Unlimited is not mandatory, but writers fear that if they do not participate, their books will not be promoted.

One major point of contention: Kindle Unlimited generally requires self-published writers to be exclusive, closing off the possibility of sales through Apple, Barnes & Noble and other platforms. (Ms. Ward was an exception.)

Amazon usually gives self-published writers 70 percent of what a book earns, which means a novel selling for $4.99 yields $3.50. This is much more than traditional publishers pay, a fact that Amazon frequently points out.

Are you Addicted to Social Media?

First off, Happy Holidays to all this December, no matter what you celebrate.

For this post I’ve decided to look at social media addiction. In an article written by Jess Ostroff at Spin Sucks, she talks about how lots of us are not only internet addicts, but social media addicts.

womenonthefence.com

Do you care what your friends, family, and favorite celebrities are up to all the time? Do you frequently check you social media pages to see new statuses, tweets, pins, keekbacks, vine posts, etc. etc.? Could you go an entire day without social media? How about a week? a month?

Jess writes: “Some people are addicted to social media the same way others are addicted to heroin.”

The summary of the article is this: There is a chemical called dopamine which, when released, provides you with the feeling of pleasure. For many people the constant need to read what others are posting {you can be excused for my blog- I love it when you read my posts :)}, post new content yourself, or struggle with Fear Of Missing Out syndrome (FOMO) which for some people is a real disorder, is a direct result of our brains being retrained by our internet browsing habits to crave the internet and get annoyed when we aren’t around it.

under30ceo.com

For me personally I don’t dispute that I do monitor social media during the week, as for my job I am required to update and post new content at least once daily. However on weekends I am pretty good about turning off the social media and picking up a book or at least continuing the books I’m working on now.

This is an important point for those of you trying to complete projects, especially books, film projects, etc. One way I find I’m able to write better is to put my phone in another room so I can hear it but I’d have to get up to answer it. This removes at least one distraction.

What about you? Are you or someone you know a “social media addict”?

Aspiring Authors: do you deserve a seven-figure book deal?

The holiday season is ending soon and we’ll be fifteen years into the millennium. Here’s a story for all you authors to think about as you weigh traditional publishing vs. self-publishing. From Publisher’s Weekly: (bold emphasis mine- edited for length)

Seven-figure book deals are nothing new in corporate publishing. But lately, these deals seem to be happening more frequently. During the run-up to this year’s Frankfurt Book Fair in early October, three seven-figure deals for debut works were closed by Big Five houses. Shortly after the fair, the New York Times ran an article about a waitress who landed a high six-figure advance. The streak continued with news that St. Martin’s Press had paid seven figures for a debut novel by New York Times reporter Stephanie Clifford. And, two weeks ago, word broke that indie author Blake Crouch landed seven figures at Crown for Dark Matter, his science fiction novel. For some in the industry, the flurry of big advances is simply business as usual. Others, however, attribute the run to a dearth of great material, along with the ever-pressing need on the part of the big houses to publish major bestsellers.

George Gibson, an industry veteran who is now publishing director at Bloomsbury USA, warned against reading too much into the latest round of big deals, noting that they happen “fairly regularly during the year.” Nonetheless, Gibson acknowledged that the business has changed. For the Big Five, especially, the highly sought-after projects have become essential. “The game plan to make your budget, or exceed it, relies on having bestsellers. That’s always been the case, but it’s the case now more so than ever.” Because both midlist and backlist titles aren’t selling as well as they once did, Gibson explained, the big books, “are more important.”

That a number of the major deals of late have been for debut works—five of the six aforementioned acquisitions were for books by first-time authors—is also not surprising. One editor, who spoke on the condition of anonymity, said that since the advent of BookScan (which gives editors, sales reps, and retailers approximate print sales for any given title), having no track record is usually a plus.

Other insiders, who also spoke off the record, theorized that there is less of everything, which drives up the price for the most coveted projects. “The whole pool of talent is shrinking,” explained one source. “There are fewer publishers, fewer slots, and fewer submissions so… the higher the quality of the project, the more you’re likely to get.”

Agents, of course, see the trend of bigger advances as mostly positive. “It’s great for the industry,” said Stacey Glick, a v-p at Dystel & Goderich.

Glick felt the influx of big-money-deals might owe something to the fact that publishers feel a need to “prove themselves,” with more and more authors finding success self-publishing.

Regardless of why the big deals are happening, Glick did address one downside to this way of doing business. “The bigger issue is setting up an expectation level for an author that often can’t be met,” she said. While it’s wonderful when a writer lands a huge sum of money for their first book, it puts the author under more pressure to achieve commercial success. If the book doesn’t sell to expectations—which will be high—the author’s career, in the long-term, may be hurt. As Glick explained, the situation “can make it challenging for the author’s future books.”

Alison Callahan, an editor at Simon & Schuster, described what’s going on now as “the new normal.” She said that competition for the perceived best projects has been stiffer for the last four years, and that the biggest shift is how quickly sought-after titles will sell to editors. In the not-so-distant past, when there were multiple bids on a book, an author would often talk to competing editors—or meet them—as part of what’s known in the industry as a beauty contest. Those meetings, or exchanges, took time. “These days,” Callahan explained, “[a big book] is either preempted in 24 hours for an exorbitant sum of money, or you get a best-bid situation.”

The best-bid scenario Callahan referred to, in which editors must submit their best offer without knowing what their competition is putting up, is another element that can drive up prices.

Best-bid auctions can sometimes mimic high-stakes real-estate deals, in which bidders come forward with previously unheard of offers—huge sums of cash or other enticements—to beat out their competition. In publishing, the best-bid auctions are inspiring some jaw-dropping behavior. Supposedly, one editor at a Big Five house offered $500,000 sight unseen for the debut novelThe Girls—one of the most buzzed-about acquisitions of the season, and one of the pre-Frankfurt sales mentioned earlier.

Judging which books merit big advances is still as much art as science. Editors insist that there are specific factors (beyond taste) that go into paying large advances. Although many sources acknowledged there are aspects of luck involved—having an agent who is skilled at setting up auctions, for example—almost all those who spoke to PW said it’s a mistake to think money is being spent haphazardly. “We don’t throw caution to the wind,” Callahan said. “We really sit down and think about it. We have meaningful conversations when it comes to a seven-figure offer.” And what strikes some as excessive is, in actuality, the cost of doing business these days. As Callahan put it: “For a lot of books, it’s justifiable.”

______________________

An advance for those of you who don’t know is a book publishing industry term for a one-time payment made in exchange for a lower royalty (percentage paid for copies sold). So it’s reasonable to assume all the seven-figure authors, especially the debut novelists, earn somewhere between 5-15% royalty, industry standard. BUT paying $1 million or more means the publishing company must earn over $1 million in sales just to cover the advance- remember, the author does get a royalty, even if it’s small! So say an author gets 10% (just to be even). If the average book sold goes for $15 (let’s say $10 for traditional e-book and $20 for print/hardcover copies, just for mathematical ease), that means the publisher must sell about 66,700 copies to cover the advance, minus expenses for editing, illustration, printing and materials, paying distributors, and taxes. Plus, 10% of that million goes to the author, meaning the book company has made $900,000 in gross revenue. What if the publisher gives $2 million? $3 million? You could argue that one would expect the publisher to need to sell at least 90,000 copies (includes e-books) to break even on a $1 million. Even if most copies sold are e-books anything less than 80,000 copies sold for $1 million-plus has to be considered a flop, regardless of whether it’s fiction or non-fiction.

Again, please keep in mind “success” varies from publisher to publisher and author to author. Certainly if I ever got a million bucks for writing a book I’d be very, very happy. But from a business standpoint unless the author or book can be reasonably believed to move lots of copies, this is a throw-away of money. The lure to find the next big best-seller must not come before common business sense.

Agree? Disagree? What do you think?

Photos from Miami

*News alert: If you didn’t see the news this morning, this horrific story from Pakistan where the Taliban says in a statement coordinated an attack on a Peshawar (capital of Khyber Pakhtunkhwa providence, which borders Afghanistan) school in retaliation for a Pakistani army offensive against Islamic extremists in North Waziristan and in nearby Khyber Providence. However, the Taliban could have had any number of reasons, including the hatred of anything seen as “Western”. Like Boko Haram, the Taliban only tolerate “Islamic education”. Click HERE to read the story.

To my original post: Here are a few photos from Miami. In the next blog post I’ll put in my third-to-last post of 2014, talking about seven-figure advances to debut authors with no celebrity status. Is this not a big deal, a normal business risk? Or are big publishers stupid for paying huge fees to authors who have no way of guaranteeing success? can an author’s career be damaged if s/he does not help the publisher recuperate the advance? We’ll talk about this.

For those of you who are Jewish: Happy Hanukkah!

Bonus: I’ll send a Miami mug to anyone who can answer the following before this Thursday, December 18, at 2 P.M. Look carefully at the photo from my hotel room overlooking Biscayne Bay. What hotel did I stay in? Hint: The hotel was part of a well-known chain.

pre-dinner cocktail reception. Free beer! I had two Coronas with a lime wedge.

conference post-dinner dessert

home of “Mr. 305” Pitbull.

Vizcaya Museum and Gardens

View from my hotel room, Biscayne Bay

outside Vizcaya Museum and Gardens

downtown Miami late afternoon

plane from Miami to Philly was about half-empty. Friday night to Philly in December must not be popular.

Books in 2014: Year in review

This post is about the state of book publishing. Whether you’ve gotten a book published or if you’re looking to get one published, here are some highlights:

  • $5.25 billion: Amazon’s current annual revenue from book sales, according to one of Packer’s sources. That means books account for 7% of the company’s $75 billion in total yearly revenue.
  • 19.5%: The proportion of all books sold in the U.S. that are Kindle titles. E-books now make up around 30% of all book sales, and Amazon has a 65% share within that category. Apple and Barnes & Nobles make up nearly all of the rest.
  • >50%: The decrease in the number of independent bookstores over the past 20 years. There used to be about 4,000 in the U.S.; now there are fewer than 2,000. Amazon’s arrival on the scene is only part of the story here, of course; the decline of the indies started with the debut of big-box stores like B&N and Borders. (Forbes.com)
  • E-books Still Outsold by Hardcover and Paperback E-book sales accounted for 23% of unit sales in the first six months of 2014, according to Nielsen Books & Consumer’s latest survey of the nation’s book-buying behavior. Paperback remained the most popular format in the first half of the year, with a 42% share of unit sales. Hardcover’s share of units was just ahead of e-books, accounting for 25% of unit purchases.
  • The fight is over Amazon and Hachette’s feud over the price-setting of Hachette books sold on Amazon ended with Amazon winning some ground, though a look back shows it was probably a draw. In the short-term, Hachette may have held its ground, but the fact that Amazon controls so much of the book selling market means they can outlast their print and brick and mortar store competitors (if the company can keep from losing more money).
  • Print isn’t dead despite the belief that someday no one will hold a paper book, there are more small indie presses than there were ten years ago.
  • The top ten publishing houses of 2013:
  • Rank (2013) Rank (2012) Publishing Company (Group or Division) Country Mother Corporation or Owner Country of Mother Corporation 2013 Revenue in $M 2012 Revenue in $M
    1 1 Pearson UK Pearson UK $9,330 $9,158
    2 2 Reed Elsevier UK/NL/US Reed Elsevier UK/NL/US $7,288 $5,934
    3 3 Thomson-Reuters US The Woodbridge Company Ltd. Canada $5,576 $5,386
    4 4 Wolters Kluwer NL Wolters Kluwer NL $4,920 $4,766
    5 5 Random House Germany Bertelsmann AG Germany $3,664 $3,328
    6 6 Hachette Livre France Lagardère France $2,851 $2,833
    7 10 Holtzbrinck Germany Verlagsgruppe Georg von Holtzbrinck Germany $2,222 $2,220
    8 8 Grupo Planeta Spain Grupo Planeta Spain $2,161 $2,597
    9 11 Cengage* US Apax Partners et al. US/Canada N/A $1,993
    10 7 McGraw-Hill Education US The McGraw-Hill Companies US $1,992 $2,292

(Publishers Weekly)

We won’t have final 2014 numbers for publishing companies for some time, but in the meantime one thing’s pretty clear: despite the consolidations in the publishing industry, smaller indies are managing and an increasing number of best-sellers are coming from self-publishers (basically, anyone not with a Big 5 contract). Even though many kids don’t read (a goal of mine I want to work on), people have not yet thrown away all the books for Angry Birds.

What do you think 2015 will hold?

Is Uber worth $40 billion?

There has been a rush of venture capital money going to tech companies-Airbnb’s valuation went up to $13 billion, which is more than the the entire chains of Hyatt, Wyndham, and Holiday inn. Mind you, this is a company which doesn’t have any physical property besides a headquarters. All the costs of renting and insuring a home* falls on the homeowner and most insurance companies don’t (yet) offer homeowners insurance for Airbnb. But it’s still considered more valuable.

Enter Uber, the same company which got into a spat with Buzzfeed over negative reporter coverage of the company (PR lessons for another post). They are being valued at $40 BILLION, yes with a “B”. That’s about $7 billion more than Mark Zuckerberg is worth as of today. All for a company founded in 2009.

The question is, is Uber worth $40 billion? And what does it say that the fastest growing companies are all “tech” companies? Tech is a popular industry but the way companies are valued puzzles me.

First, Uber does not own or pay for the property being used. It’s an app which people use to find Uber drivers who function as cheaper, more efficienct taxis. I love the app (Lyft and Sidecar are similar) and I personally support the idea of free-market. I think it’s great the taxi industry, which is essentially a government-sanctioned monopoly, has to be challenged to provide cheaper and more efficient services, and it speaks volumes they feel threatened by people’s ability to choose another means of transportation. However, Uber doesn’t do anything besides connect drivers to customers. The cars, the insurance, the service itself, are all provided by the driver. Just as Airbnb is now insuring homeowners up to $1 million for damanges suffered from guest use, Uber and Lyft do no such thing.

Second, Uber (like Lyft and Sidecar) operate in a gray area. The companies are considered tech companies but the government considers them “Transportation” companies- which by law are subject to state regulation, something Uber drivers avoid doing. Say what you want about your craziest taxi driver, but they industry is regulated with real ways to report taxi drivers for road infractions. Uber doesn’t work that way; you take the risk that literally anyone with a driver’s license can give you a ride. Totally fair, in my opinion, but since the company does not insure customer or driver for liability or damages

it’s hard to justify how any venture capitalist can look at an app and throw it $40 billion. Don’t tell me it’s “technology” or “disruptive”. Ride-sharing apps are both these things but the valuations don’t appear to be ground in reality. It’s like Silicon Valley has made so much money over the last 20 years their investors can afford to just give billions to any tech app it wants. If you don’t think tech companies have been overvalued in the past, look up the Dot Com Crash, and check out the stock market: Tech companies rise and fall much faster than traditional companies like General Electric, Du Pont, or Boeing.

Final word: I support Uber, Lyft, and Sidecar’s right to offer a service to challenge the government-sanctioned monopolies and status quo. Anything to offer fair competition and lower prices in the marketplace is fine with me. But handing billions to people for doing nothing but coding some lines when they hold few assets and have little to no liability seems irresponsible. Kind of like bailing out businesses who were “too big to fail.”

Next week I’ll review book sales for 2014 and offer my thoughts on the state of book publishing. Then I’m off to Florida! See if you can guess where :). First one to guess wins a prize.

Logo copyrighted by Uber, Inc.

Support a nonprofit this #GivingTuesday

Today is Giving Tuesday, a day created by the UN and 92nd Street Y nonprofit to encourage people to consider giving to a nonprofit/charitable organization instead of buying more stuff for the holidays. As someone who currently works at a nonprofit, I can’t emphasize enough how critical donations are to keeping the organization running. I know stories abound about nonprofits where the CEO’s and top executives pull in six or seven figure salaries and very little that’s donated goes to the actual mission. That may be true for a small number of larger nonprofits or shady enterprises, but I can assure you the vast majority of us who work in nonprofits are not rolling in money. So please find a charity (like the Caesar Rodney Institute, hint hint) and make a contribution today. You can also visit smile.amazon.com and choose a nonprofit you want Amazon to contribute to. For every dollar you spend on Amazon they will make a small contribution to your designated nonprofit. It won’t cost you any money and it’s an easy way to give. So what are you waiting for? Support #GivingTuesday today! PS. Don’t forget to follow me on Twitter @sammydrf and on Youtube: samramirezfriedman logo: givingtuesday.org