Tuesday, February 11, 2014

Me, Hugh Howey, and Legacy John on AuthorEarnings.com

Joe sez: Go and join the fun over at www.authorearnings.com if you want to see Hugh Howey blow the lid off of Amazon author earnings. To say it is a revelation is putting it lightly. 
I've also duplicated the entire report here, with comments by me and my imaginary Big 5 gatekeeper buddy, Legacy John.
Hugh Howey: It’s no great secret that the world of publishing is changing. What is a secret is how much. Is it changing a lot? Has most of the change already happened? What does the future look like?
The problem with these questions is that we don’t have the data that might give us reliable answers. Distributors like Amazon and Barnes & Noble don’t share their e-book sales figures. At most, they comment on the extreme outliers, which is about as useful as sharing yesterday’s lottery numbers [link]. A few individual authors have made their sales data public, but not enough to paint an accurate picture. We’re left with a game of connect-the-dots where only the prime numbers are revealed. What data we do have often comes in the form of surveys, many of which rely on extremely limited sampling methodologies and also questionable analyses [link].
This lack of data has been frustrating. If writing your first novel is the hardest part of becoming an author, figuring out what to do next runs a close second. Manuscripts in hand, some writers today are deciding to forgo six-figure advances in order to self-publish [link]. Are they crazy? Or is signing away lifetime rights to a work in the digital age crazy? It’s hard to know.
Anecdotal evidence and an ever more open community of self-published authors have caused some to suggest that owning one’s rights is more lucrative in the long run than doing a deal with a major publisher. What used to be an easy decision (please, anyone, take my book!) is now one that keeps many aspiring authors awake at night. As someone who has walked away from incredible offers (after agonizing mightily about doing so), I have longed for greater transparency so that up-and-coming authors can make better-informed decisions. I imagine established writers who are considering their next projects share some of these same concerns.
Other entertainment industries tout the earnings of their practitioners. Sports stars, musicians, actors—their salaries are often discussed as a matter of course. This is less true for authors, and it creates unrealistic expectations for those who pursue writing as a career. Now with every writer needing to choose between self-publishing and submitting to traditional publishers, the decision gets even more difficult. We don’t want to screw up before we even get started.
When I faced these decisions, I had to rely on my own sales data and nothing more. Luckily, I had charted my daily sales reports as my works marched from outside the top one million right up to #1 on Amazon. Using these snapshots, I could plot the correlation between rankings and sales. It wasn’t long before dozens of self-published authors were sharing their sales rates at various positions along the lists in order to make author earnings more transparent to others [link] [link]. Gradually, it became possible to closely estimate how much an author was earning simply by looking at where their works ranked on public lists [link].
This data provided one piece of a complex puzzle. The rest of the puzzle hit my inbox with a mighty thud last week. I received an email from an author with advanced coding skills who had created a software program that can crawl online bestseller lists and grab mountains of data. All of this data is public—it’s online for anyone to see—but until now it’s been extremely difficult to gather, aggregate, and organize. This program, however, is able to do in a day what would take hundreds of volunteers with web browsers and pencils a week to accomplish. The first run grabbed data on nearly 7,000 e-books from several bestselling genre categories on Amazon. Subsequent runs have looked at data for 50,000 titles across all genres. You can ask this data some pretty amazing questions, questions I’ve been asking for well over a year [link]. And now we finally have some answers.
When Amazon reports that self-published books make up 25% of the top 100 list, the reaction from many is that these are merely the outliers. We hear that authors stand no chance if they self-publish and that most won’t sell more than a dozen copies in their lifetime if they do. (The same people rarely point out that all bestsellers are outliers and that the vast majority of those who go the traditional route are never published at all.) Well, now we have a large enough sample of data to help glimpse the truth. What emerges is, to my knowledge, the clearest public picture to date of what’s happening in this publishing revolution. It’s a lot to absorb, but I believe there’s much here to learn.
The Value Ratio
I’m going to start with some of the smaller lessons to be gleaned from this data. We’ll conclude this report by looking at author earnings, but I don’t want that bombshell to drown out these equally important observations.
The first thing that jumped out at me when I opened my email was these next two charts, which our data guru had placed side-by-side. What caught my eye was how they seem to be inversely correlated:

On the left, we have a chart showing the average rating of 7,000 bestselling e-books.1 On the right, we have a chart showing the average list price of the same 7,000 e-books. Both charts break the books up into the same five categories. From the left, they are: Indie Published, Small/Medium Publisher, Amazon Published (from imprints like 47North), Big Five published, and Uncategorized Single-Author.2
It’s interesting to me that the self-published works in this sample have a higher average rating than the e-books from major publishers. There are several reasons why this might be, ranging from the conspiratorial (self-published authors purchase their reviews) to the communal (self-published authors read and favorably rate each-others works) to the familial (it’s friends and family who write these reviews). But the staggering number of reviews involved for most of these books (over a hundred on average across our entire sample) makes each of these highly unlikely. As I’ve seen with my own works—and as I’ve observed when watching other books spread organically—the sales come before the reviews, not after. There are a number of more plausible explanations for the nearly half a star difference in ratings, and one in particular jumped out at me, again from seeing these two charts next to one another.
Note the shortest bar in one graph correlates to the tallest in the other. Is it possible that price impacts a book’s rating? Think about two meals you might have: one is a steak dinner for $10; the other is a steak dinner that costs four times as much. An average experience from both meals could result in a 4-star for the $10 steak but a 1-star for the $40 steak. That’s because overall customer satisfaction is a ratio between value received and amount spent. As someone who reads both self-published and traditionally published works, I can tell you that it’s getting harder and harder to tell the difference between the two. Most readers don’t know and don’t care how the books they read are published. They just know if they liked the story and how much they paid. If they’re paying twice as much for traditionally published books, which experience will they rate higher? The one with better bang for the buck.
This raises an interesting question: Are publishers losing money in the long run by charging higher prices? Are they decreasing the value/cost ratio and thereby creating lower average ratings for their authors and their products? If so, this might have some influence on long-term sales, and keep in mind that e-books do not go out of print. What if in exchange for immediate profits, publishers are creating poorer ratings for their goods and a poorer experience for their readers? Both effects will hurt a work’s prospects down the road (a road with no end in sight). And since ratings on e-books also apply to the physical edition on Amazon’s product pages, this pricing scheme ends up adversely affecting the very print edition that higher e-book prices are meant to protect [link].
It is common these days to hear that the quality of self-published work is hurting literature in general. I counter this notion with one of my own: Pricing e-books higher than mass market paperbacks used to cost is having an even more deleterious effect on reading habits. Books are not only in competition with each other, they compete with everything else a reader might do with their time. Creating a poor experience is a way to lose readers, not a way to protect a physical edition or a beloved bookstore. And high prices are a quick and easy way to create a poor reading experience, harming everyone.
High prices are also a way to drive customers to other, less expensive books. Rather than serving to protect print editions, publishers are creating a market for self-published works. And harmful price practices is not the only way the Big Five are powering the self-publishing revolution.
Joe Konrath: "And I heard, as it were, the noise of thunder. One of the four beasts saying, 'Come and see.' and I saw, and behold a white horse"
Welcome to the Book of Revelations.
The shadow industry of self-publishing now has a tiny bit of light shed on it, and it's blinding.
Many worried about the Tsunami of Crap, bringing down the overall quality of books. I countered that argument in 2011 using common sense. Now here are the facts to back it up.
But how will the industry react to this news? Let's ask Legacy John, an imaginary amalgam of gatekeepers created by me from the nonsense they continually spout.
Legacy John: This data doesn't reflect our own data. Readers are continuing to pay higher prices for what they consider to be premium material, and overall gross is what ultimately matters, not average reviews that are only differentiated by a fraction of a percent.
Readers recognize the imprimatur that comes from our brand, and will pay what we want them to pay. In fact, if we controlled the retail price, we could make them pay even more.
Joe: Uh, LJ. You tried that. It was called the Agency Model. And the DOJ filed suit for collusion. And you lost.
Legacy John: Listen to me! Readers WANT to pay more! Watch and see how the data confirms this.
Joe: Okay, let's watch...
Hugh: Next, we’re going to look at some sales numbers within these genre bestseller lists to see how underserving a high-demand market has resulted in the creation of a brand new supply of books.  
Listening to Reader Demand
The next chart shows the percentage of genre e-books on several Amazon bestseller lists according to how they were published:

The bestseller lists used were Mystery/Thriller, Science Fiction/Fantasy, and Romance. All of the subcategories within these three main genres were also included. Why choose these genres? Because they are the most popular with readers. Our data guru ran a spider through overall bestseller lists and found that these three genres accounted for 70% of the top 100 bestsellers on Amazon and well over half of the top 1,000 bestsellers.3 Future earnings reports will look at all of fiction4, but for now, we started with a simpler data set that captured the vast majority of what readers purchase.
What this chart shows is that indie and small-publisher titles dominate the bestselling genres on Amazon. We can clearly see that the demand from readers for more of these works is not being fully met by traditional publishing. Among the advice given to aspiring writers, you’ll often hear: “Write in the correct genre.” And here we see the sales-potential of that advice.
Looking back to the price/review comparison and also to the chart above, we can surmise that major publishers would be well-served by publishing far more titles in these genres and also by charging less for them. This is wisdom the indie community knows very well. Publishers must be tuning in, as prices began to decline last year [link], and publishers such as Simon & Schuster have announced new genre imprints [link]. Hopefully this data will help accelerate these trends, for the benefit of both the reader and the newly signed author.
Now take a look at this chart:

Again, daily unit sales are estimated by sales ranking, using publicly shared data from dozens of authors who have logged the correlation between rank and daily purchases (included among those authors are the two involved in this study).5 Some obvious things immediately jump out. The first is that Amazon has an incredible ability to market their own works, which shouldn’t be too surprising, considering it’s their storefront. We see from this and the previous chart that their 4% of titles command an amazing 15% of the sales. That’s impressive. It’s nearly 4 times the average unit sales volume per book. Now look at the Big Five, who with all their marketing efforts and brand recognition actually end up with pretty average per-book sales: a mere 1.2 times the overall average.
The other eye-popper here is that indie authors are outselling the Big Five. That’s the entire Big Five. Combined. Indie and small-press books account for half of the e-book sales in the most popular and bestselling genres on Amazon.
Joe: "Then another horse came out, a fiery red one. Its rider was given power to take peace from the earth and to make men slay each other. To him was given a large sword."
Legacy John: Why do you keep quoting scripture?
Joe: Because your ass is getting kicked in biblical proportions.
Legacy John: Maybe you and I are reading different data, but this is based on unit sales, not gross sales.
Joe: So?
Legacy John: Since we price our books higher than you do, we make more money than you do. And people are still willing to pay the prices we charge. So who's looking stupid now? If we charged $3.99 for an ebook, we'd be leaving money on the table.
Joe: Whose money?
Legacy John: Come again?
Joe: Whose money would you be leaving on the table?
Legacy John: Our money, of course. We make 75% of net on ebooks. Why would we want to lower prices?
Joe: Because authors are only making 25%, which translates to 12.5% royalties of the Digital List Price you set. Why do you think authors are going to continue accepting 12.5% when they can get 70% by self-pubbing, and also outsell you in units? Your average book price was $7.00, which means $0.88 goes to the author. The average self pubbed book price is $3.25, which means $2.28 goes to the author.
Authors make almost three times as much when they self-publish.
Legacy John: The data is cherry picked. It only counts a few bestsellers.
Joe: The royalties remain the same. On average, self-pubbed books earn authors more money, and with the genre bestsellers they sell more copies than the books you publish. I'd guess the long tail will concur, but we'll know when that data comes out.
Legacy John: Well, we can always lower prices. Then we'll outsell indies and make it up in quantity.
Joe: Do you really think if you lower your prices from $7.00 to $3.25 your sales will triple in volume?
Legacy John: It could happen.
Joe: Then why haven't you done this sooner?
Legacy John: We've lowered prices on select titles.
Joe: And those titles are no doubt included in this data. Know what I think? I think if you lower prices, you'll gain a bit in volume, but not enough to overcome the overall loss of income. On a $3.25 legacy book, the author only earns $0.41.
Legacy John: Why do you keep bringing up how much the author earns?
Joe: Wrong question. The question is, "Why don't you care how much the author earns?"
Legacy John: Look, we do more than simply push a button to publish books. We edit, provide art, proofread…
Joe: Self-pubbed writers can hire professionals to do that. For sunk, fixed costs that don't require giving up royalties for the term of copyright (death plus seventy years.)
Legacy John: We have whole divisions devoted to marketing, advertising, and publicity…
Joe: How do you advertise ebooks?
Legacy John: Excuse me?
Joe: I know you spend a lot of money on Amazon. According to the New Yorker, you have to give Amazon a percentage of your annual gross sales, from 5%-7%. That's what you pay for various Amazon promotions, right?
Self-pubbed authors pay Amazon nothing, and those in KDP Select get Countdown Deals and free days. Amazon-published authors also get these services (email campaigns, Kindle Daily Deal, Gold Box, banner ads, etc.) for free, and A-Pub pays a minimum of 35% royalties off list compared to your 12.5%. Do the promotional fees you pay Amazon come from your royalties, or off the gross so the authors have to bear the expense too?
Legacy John: Huh? I… uh…
Joe: As a self-pubbed author who made $1M last year, I paid about $10k in various promotions. About 1% of my income. Sounds like you're paying quite a bit to sell as well as you're selling. And that doesn't even include all the money you must spend through your marketing, advertising, and publicity divisions that do… what exactly do they do for your average author?
Legacy John: Well, we do print ads.
Joe: Uh-huh. How effective are those?
Legacy John: We're not really sure. And we've never tried to figure it out. 
Joe: Sounds smart.
Legacy John: We also get reviews.
Joe: I have 10,000 reader reviews on Amazon.
Legacy John: And we... we give away galleys and advance reading copies! Yeah! Because print is still 70% - 75% of the business, haven't you heard?
Joe: I've heard. But I've found that data to be lacking because it doesn't account for Amazon and the shadow industry of self-pubbing. 
Legacy John: Well, the data is true. It certainly is. Maybe self-pubbed ebooks cost less, and outsell our ebooks, and earn the author more, but the big money is still in paper.
Joe: Really? Let's look at some more data.
Hugh: Instead of feeling any sort of confirmation bias, my immediate reaction was to reject these findings. Surely they weren’t accurate. And so I complained to our magical data snoop that we were only looking at e-book sales. What percentage of the overall reading market does this represent? Our data guru said this was a question we could easily answer. You won’t believe what he found.
Everything You Know About E-Books is Wrong
The experts? They have no idea. It’s not entirely their fault; it’s just that the data they’re working with is fundamentally flawed.
You may have heard from other reports that e-books account for roughly 25% of overall book sales. But this figure is based only on sales reported by major publishers. E-book distributors like Amazon, Barnes & Noble, Kobo, the iBookstore, and Google Play don’t reveal their sales data. That means that self-published e-books are not counted in that 25%.
Neither are small presses, e-only presses, or Amazon’s publishing imprints. This would be like the Cookie Council seeking a report on global cookie sales and polling a handful of Girl Scout troops for the answer—then announcing that 25% of worldwide cookie sales are Thin Mints. But this is wrong. They’re just looking at Girl Scout cookies, and even then only a handful of troops. Every pronouncement about e-book adoption is flawed for the same reason. It’s looking at only a small corner of a much bigger picture. (It’s worth noting that our own report is also limited in that it’s looking only at Amazon—chosen for being the largest book retailer in the world—but we acknowledge and state this limitation, and we plan on releasing broader reports in the future.)
There’s a second and equally important reason to doubt a 25% e-book penetration number: The other 75% of those titles includes textbooks, academic books, cookbooks, children’s books, and all the many categories that are relatively safe from digitization (for now). Print remains healthy in these categories, but these aren’t the books most people think of when they hear that percentage quoted. E-book market share is generally spoken of in the context of the New York Times bestsellers, the novels and non-fiction works that are referred to as “trade” publications. If we look specifically at this trade market, it’s quite likely that e-books already account for more than 50% of current sales (some publishers have intimated as much [link]). Factoring in self-publishing and further limiting the scope to fiction, I’ve seen guesses as high as 70%. But that can’t be possible, right?
I asked our data guru if we could find out. Could we look at the bestseller lists and tally by format? Of course, we would be looking only at Amazon, which might skew toward e-books—but to reiterate, we are looking at the largest bookseller in the world, digital or print. To do a first study of this sort on a smaller distributor would be less than ideal. Still, keep this caveat in mind.
We analyzed the overall Amazon bestseller lists for several categories and used the web spider to grab the text description of format type: paperback, hardback, e-book, or audiobook. This is what we found:


Did the smelling salts work? Are you with us? It turns out that 86% of the top 2,500 genre fiction bestsellers in the overall Amazon store are e-books. At the top of the charts, the dominance of e-books is even more extreme. 92% of the Top-100 best-selling books in these genres are e-books!
I know, right? Allow that to soak in for a moment, and then let’s look at author earnings. Here, we will see that publishers should cross their fingers and hope that the share of e-book sales increases rather than flattens. Because they are doing quite well on the backs of their authors. Major publishers are taking in record profits [link], but they aren’t the big winners to emerge from this report. Read on. The real story of self-publishing is up next.
Joe: Hmm. That kinda blows your "paper accounts for 75% of sales" theory all to hell.
Legacy John: That doesn't count all paper sales! That data is just looking at Amazon, not B&N or libraries or other places paper books are sold.
Joe: Last year Bowker estimated that online retail accounts for almost half of total book sales, and that 30% of that was ebooks. Now, I don't know where they got their data, because Amazon doesn't reveal it. But according to Hugh's data, of the Top 2500 bestsellers, only 5% sold on Amazon were paper.
I'm no math whiz, but your paper sales must be astronomical outside of Amazon. If that's the case, you certainly have nothing to worry about. Your robust paper industry will no doubt endure forever.
Or at least until B&N closes. I heard they just fired a lot of their Nook engineers. But that probably doesn't mean anything…
Hugh: Writing Doesn’t Pay?
This is a story that has been sensed by many. The clues are all around us, but the full picture proves elusive. It is being told in anecdotes on online forums, in private Facebook groups, at publishing conventions, and in the comment sections of industry articles. Authors are claiming to be making more money now with self-publishing than they made in decades with traditional publishers, often with the same books [link]. I’ve personally heard from nearly a thousand authors who are making hundreds of dollars a month with their self-published works. I know many who are making thousands a month, even a few who are making hundreds of thousands a month. But these extreme outliers interest me far less than the mid-list authors who are now paying a bill or two from their writing.
My interest in this story began the moment I became an outlier. When major media outlets began asking for interviews, my first thought was that they were burying the lead. My life had truly changed months prior, when I’d first started making dribs and drabs here and there. And I knew this was happening for more and more writers every day. But that inspiring story was being buried by headlines about those whose luck was especially outsized (as mine has been).
Before we reveal the next results of our study, keep in mind that self-publishing is not a gold rush. It isn’t a get-rich-quick scheme. There are no short cuts, just a lot of effort and a lot of luck. Those who do well often work ludicrous hours in order to publish several books a year. They do this while working day jobs until they no longer need day jobs. This is also true of the writers earning hundreds or even thousands a month. Please keep this in mind. The beauty of self-publishing is the ownership and control of one’s work. You can price it right, hire the editor and cover artist you want to work with, release as often and in as many genres as you want, give books away, and enjoy a direct relationship with your reader. It isn’t for everyone, but you’re about to see a good reason why more authors might want to consider this as an option.
Here is what our data guru found when he used sales per ranking data5 and applied it to the top 7,000 bestselling genre works on Amazon today:

Looks good for the Big Five, doesn’t it? When it comes to gross dollar sales, they take half the pie. Remember, they only account for a little over a quarter of the unit sales. Also keep in mind that they only have to pay 25% of net revenue to the author. By contrast, self-published authors on Amazon’s platform keep 70% of the total purchase price.6  Let’s now look at revenue from the author’s perspective:

It’s a complete inversion. Indie authors are earning nearly half the total author revenue from genre fiction sales on Amazon. Nearly half. This next chart reveals why:

Blue represents the author. You can clearly see that for Big-Five published works, the publisher makes more than twice what the author makes for the sale of an e-book. Keep in mind that the profit margins for publishers are better on e-books than they are on hardbacks [link]. That means the author gets a smaller cut while the publisher takes a larger share. This, despite the fact that e-books do not require printing, warehousing, or shipping. As a result, self-published authors as a group are making 50% more profit than their traditionally published counterparts, even though their books have only half the gross sales revenue.
Before we move on, take another long look at this chart. Here you find everything that needs to change in the publishing industry. Readers and writers alike should take note.
A quick note on how we calculated author earnings for the Big Five publishers in the above graphs. These numbers are based on estimates of wholesale pricing for e-books (publisher’s net was modeled as 80% of Amazon price). That estimate could be off by 10% either way, but even if we adjusted it to assume a wholesale price of 120% of retail (which would mean Amazon is taking a loss on every traditionally published e-book sold), indie authors would still come out on top. Also interesting is the observation that for the top-selling genres, Amazon is currently making nearly as much profit from indie e-books as from Big Five e-books.7
It’s also worth keeping in mind that this graph ignores the long tail of publishing. We’re just looking at the top 7,000 genre e-books. This represents the most popular offerings from both self-published authors and their traditionally published counterparts, which makes it an extremely fair comparison. Other surveys have compared all self-published works to only those in the traditional route that made it past agents and editors. That is, they compared the top 1% of traditionally published titles to the entirety of self-published works. Looking at bestselling charts avoids that mistake. Here we have 7,000 e-books as they are selling on any given day, which also serves to move the discussion away from misleading outliers and into the more interesting midlist. Now let’s see how Uncle Sam feels about all of this.
Tax Brackets
We’ve seen that self-published authors are earning more money from genre e-books than traditionally published authors. But how much more? The next thing we wanted to do was estimate yearly e-book earnings for all of these authors based on their daily Amazon sales. We ran this report and put each author into one of seven income brackets. The results, again, were startling:

Indie authors outnumber traditionally published authors in every earnings bracket but one, and the difference increases as you leave the highest-paid outliers. But even these extreme outliers are doing better with their self-published works. The scale is difficult to see, but the breakdown of authors earning in the seven figures is: 10 indie authors, 8 Amazon-published authors, and 9 authors published by the Big Five. The much higher royalties and other advantages, such as price, seem to counterbalance the experience and marketing muscle that traditional publishers wield. This is something many have suspected to be true, but which now can be confirmed.
Of course, we still doubted this even after seeing the results. Our first thought was that top self-published authors can put out more than one work a year, while Big Five authors are limited by non-compete clauses and a legacy publishing cycle to a single novel over that same span of time. Indie authors are most likely earning more simply because they have more books for sale. Was this skewing our results? We ran another report to find out, and to our surprise, it turns out that only the handful of extreme earners have this advantage. Most self-published authors are, on average, earning more money on fewer books:

This suggests that the earnings discrepancy will grow greater over time, as self-published authors develop deeper catalogs. We hope to answer questions like this as we run reports every quarter to track shifting trends. For now, the full data set for this study has been anonymized by removing the title and author info, and is available for download below this report. By tweaking the values in the yellow areas of the spreadsheet, you are able to play around with the data yourself. Our aim here is complete openness and to invite community discourse. It is also worth remembering that all of our base data comes from publicly perusable bestseller charts, so there’s an added layer of transparency and reproducibility. The information was there all along; grabbing a useful quantity of it simply required someone like my co-author to come along and snag it.
Joe: So remind me again why I should take a legacy deal?
Legacy John: We, uh... we nuture.
Legacy John: This data could be entirely incorrect. We don't know exactly how it was acquired. No one knows how much we're actually making. There are other polls and surveys that show quite the opposite is happening.
Joe: Those polls and surveys don't include Amazon, where many authors, both legacy and self-pubbed, make the majority of their income. By the looks of these numbers, authors are much better off avoiding legacy publishers such as yourself. So I ask you, what do you have to offer authors? I'm guessing your paper sales don't account for much for the majority of authors you have under contract. The services you provide can be hired out for a one-time fee. The massive amounts you pay Amazon for marketing don't seem to have much effect compared to the tiny amounts the average indie author spends on marketing. Your royalties, and contracts, suck wheelbarrows full of ass.
Hugh Howey and his programming guru friend have just turned a bright light on the shadow industry of self-publishing, and revealed that the legacy industry is in Big Fucking Trouble.
 Legacy John: Neener neener neener! My fingers are in my ears and I'm not listening!
Joe: You never did. I've been telling you this shit for years. Does this sound familiar?
Publishers should stop trying to convince themselves and others that they're relevant, and start actually being relevant. Here's how:
1. Offer much better royalties to authors.
2. Release titles faster. It can take 18 months after a book is turned in to be published. I can do it myself in a week.
3. Use up-to-date accounting methods that are trackable by the author, and pay royalties monthly.
4. Lower ebook prices.
5. Stop futilely fighting piracy. Hint: all such fighting is futile. Piracy can only be made redundant with cost and convenience.
6. Start marketing effectively. Ads and catalog copy aren't enough. Neither is your imprint's Twitter feed. Especially if your author has more Twitter followers than you do.
That was from a post of mine from 2011. You've had years to figure this out.
Instead you spent those years colluding with each other, screwing authors, and thinking you were the invincible masters of your domain.
Oops.
Hugh: An Easier Choice?
Choosing which way to publish is becoming a difficult choice for the modern author. This choice has only grown more challenging as options have expanded and as conflicting reports have emerged on how much or how little writers can expect to make. Our contention is that many of these reports are flawed, both by the self-selected surveys they employ, the sources for these surveys, and, occasionally, the biases in their interpretation. Our fear is that authors are selling themselves short and making poor decisions based on poor data. That is the main purpose for fighting for earnings transparency: helping aspiring writers choose the path that’s best for them. A secondary goal is to pressure publishers to more fairly distribute a new and lucrative source of income. Operating in lockstep in offering authors only 25% of net is not just unfair but unsustainable, as more and more authors are going to jump to self-publishing.
Of course, self-publishing isn’t for everyone. There is no absolute right or wrong way to publish; the path taken depends entirely on what each author wishes to put into their career and what they hope to get out of it. But as marketing falls more and more to the writer, and as self-published authors close the quality gap by employing freelance editors and skilled cover artists, the earnings comparison in our study suggests a controversial conclusion: Genre writers are financially better off self-publishing, no matter the potential of their manuscripts.
Consider the three rough possibilities for an unpublished work of genre fiction:
The first possibility is that the work isn’t good. The author cannot know this with any certainty, and neither can an editor, agent, or spouse. Only the readers as a great collective truly know. But what we may simplistically, and perhaps cruelly, call a “bad” manuscript stands only a slim chance of getting past an agent and then an editor. To the author, these works are better off self-published on the open market. They will most likely disappear, never to be widely read. But at least they stand a chance. And those who fear that these titles will crowd out other books are ignoring the vast quantities of books published traditionally—or the fact that billions of self-published blogs and websites don’t impede our ability to browse the internet, to find what we are looking for, or to share discovered gems with others.
The second possibility for a manuscript is that it’s merely average. An average manuscript might get lucky and find an agent. It might get lucky a second time and fall into the lap of the right editor at the right publishing house. But probably not. Most average manuscripts don’t get published at all. Those that do sit spine-out on dwindling bookstore shelves for a few months and are then returned to the publisher and go out of print. The author doesn’t earn out the advance and is dropped. The industry is littered with such tales. Our data shows quite conclusively that mid-list titles earn more for self-published authors than they do for the traditionally published. And the advantage grows as the yearly income bracket decreases (that is, as we move away from the outliers). It is also worth noting again that self-published authors are earning more money on fewer titles. Our data supports a truth that I keep running into over and over, however anecdotally: More writers today are paying bills with their craft than at any other time in human history.
The third and final possibility is that the manuscript in question is great. A home run. The kind of story that goes viral. (Some might call these manuscripts “first class,” but designations of class are rather offensive, aren’t they?) When recognized by publishing experts (which is far from a guarantee), these manuscripts are snapped up by agents and go to auction with publishers. They command six- and seven-figure advances. The works are heavily promoted, and if the author is one in a million, they make a career out of their craft and go on to publish a dozen or more bestselling novels in their lifetime. You can practically name all of these contemporary authors without pausing for a breath. We all like to think our manuscript is one of these. And from this hubris comes a fatal decision not to self-publish.
Why is that decision fatal? Our data suggests that even stellar manuscripts are better off self-published. These outlier authors are already doing better via self-publishing, when compared one to one. Now consider that the authors with the greatest draw, the most experience, and possibly the best abilities, are not yet a part of the self-publishing pool. What will our graphs look like once more up-and-coming authors skip straight to self-publishing? What will they look like when self-published authors have a decade or more of experience under their belts? What about when more authors win back the rights to their backlists? Or when top traditionally published authors decide to self-publish, as artists in other fields are doing? [link] [link] [link] What will these graphs look like then? We look forward to finding out.
Joe: I love it that Hugh posed these questions already knowing what the answers will be.
Legacy John: Are the answers that gatekeepers are going to continue to reign?
Joe: I don't think so.
Legacy John: So... what do indie authors pay freelance editors? Do you give them $70k a year, a 401k, an office in Manhattan, and an unlimited expense account?
Joe: No, we don't. But if you send me a two page query letter, detailing your experience, I'll try to respond within 6-12 months. And don't forget that SASE.
Hugh: Final Thoughts
What is presented here is but one snapshot of the publishing revolution as it stands today. That revolution isn’t over. These reports can be run so long as books are ranked. Our hope is that the future brings more transparency, not less. Other artistic endeavors have far greater data at hand, and practitioners of those arts and those who aspire to follow in their footsteps are able to make better-informed decisions. The expectations of these artists and athletes are couched in realism to a degree that the writing profession does not currently enjoy.
Our ambitious goal is to help change that, but we can’t do it alone. And so we hope others will run their own reports and analyze our data. We hope they will share what they find and that this will foster greater discourse. We also hope publishers and distributors will begin sharing their sales figures. We expect many to disagree with our analysis. We expect flaws will be found in our reasoning and our sampling methodologies. Discovering those flaws will lead to better data, and we look forward to that process.
If I had to guess what the future holds, I would say that the world of literature has its brightest days still ahead. That we have come so far in such a short period of time is revealing. We take for granted changes in other mediums—the absence of that tall rack of CDs beside home stereos, the dwindling number of people who watch live TV, that missing thrill of opening a paper envelope full of printed photos. There will be casualties in the publishing industry as the delivery mechanisms for stories undergo change. There already have been casualties. But there are opportunities as well. And right now, the benefits are moving to the reader and the writer. Speaking as both of these, I count this a good thing. I marvel that there are so many who fight for higher prices for consumers and lower pay for authors, all to protect a legacy model. That model needs to change.
Publishers can foster that change by further lowering the prices of their e-books. The record margins they’re currently earning are certainly seductive, but taking advantage of authors is not a sustainable business model. Hollywood studios had to capitulate to their writers when a new digital stream emerged. Publishers will likewise need to pay authors a fair share of the proceeds for e-book sales. 50% of net for every author is a good start. If they do this, they will stop losing quality manuscripts, back catalogs, and top talent. If publishers nurture their authors and work hard to satisfy their customers, they will see those average ratings go up and sales increase. They will see more people spending time with a book rather than on a video game or on the internet. And then the entire publishing industry, as well as those who love to read and those who hope to write for a living, will benefit.
Joe sez:  In 2011 I wrote a blog called The End of the Bestseller. I said:
The Big 6 can't publish ebooks priced low enough to compete with me. They have fancy NY offices, lots of employees with benefits and expense accounts, and a whole industry to support.


With print, they know how to create a bestseller. They buy it.
They buy the real estate. They buy the advertising. They buy the discounts.
But in an ebook world, their money offers no advantage. They can't get more shelf space or a longer shelf life than I can, and they can't discount for less than I can.
The stranglehold NY publishing has had on the US, forcing people to read what they decide to make available, is loosening up. When given a choice, readers will buy books other than those vetted by NY. The Kindle bestseller lists prove this. My sales prove this.
And now, Hugh's data proves this.
If legacy publishers drop their ebook prices, I don't think they'll see a proportional rise in sales to make up for the lower price. Which means legacy publishers, and their authors, will be earning even less. And I doubt publishers will ever do this, because they'd be cannibalizing their paper sales even more, and paper sales are all their only monopoly.
If legacy publishers offer authors higher royalties, they won't be able to support their infrastructure, and authors still won't be earning as much as they do by self-pubbing.
The power has shifted. Gatekeepers aren't in charge anymore. Authors are. And authors can now reap the rewards the gatekeepers used to reap—a higher share of the profits.
No matter how you publish, it's still a lottery. I knew this back before the Kindle came out, and the Kindle didn't change anything. You have to get lucky in order to find readers.
But now there are no barriers to entry. It's a level playing field. You don't need to hope some gatekeeper recognizes your potential, and then hope they do a good job publishing you while they keep your rights forever under terrible contract terms and shitty royalties.
You don't have to let someone else gamble with your money. You can do it yourself. And this data proves that many authors are doing it themselves, and succeeding.
What path you choose is up to you. But one choice gives you full control, and the other takes all of your control away, without—according to these numbers—any benefit at all.
Legacy John: But you don't understand! We've been in business for decades! We know what the readers want! You can't do this without us!
Joe: We just did. 


Addendum Deux

The authorearnings.com website is now up and running again.


Even if you've read the info here, I encourage everyone to visit authorearnings.com and take the Author Survey and sign the Petition.