Sunday, August 17, 2014

Konrath's Advice to Publishers

Over four years ago I wrote a blog post about ebooks:

Joe sez in May 2010: I'd always assumed that print publishers would begin to lose market dominance once ebooks took off in a big way, and they'd have to either restructure or die.

But now I'm predicting another death for them.

What is going to happen when authors stop sending their books to publishers?

If I know I can make $100,000 on a self-published ebook in five years of sales, and I have the numbers to back up this claim, why would any informed writer--either pro or newbie--ever settle for less?

The dominance of ebooks is coming. I have no doubt. But I always thought it was the readers who would lead the charge, based on cost and convenience.

Now I'm starting to believe that the ones with the real power are the ones who should have had the power since the beginning of publishing. The ones who create the content in the first place.

The authors.

It's a wonderful, dynamic, empowering time to be an author. For the first time, we can command our own ships.

We're the ones who write the books. We can reach readers without any gatekeepers at all. And we can make money doing it.

The print publishing industry's biggest fear shouldn't be the eventual dominance of ebooks over print.

Their biggest fear should be not having any books to publish in any format, because the authors all wised up.

Joe sez in August 2014: This prediction hasn't happened yet. There are still boatloads of authors sending publishers their books.

But www.AuthorEarnings.com is revealing how many authors aren't going with legacy publishers. As a result, publishers actually believe ebook sales have plateaued.

Ebook sales haven't plateaued. They've plateaued only insofar as legacy publishers can track them.

The Big 5 are looking at their own sales and seeing plateaus (or at least that's what they're reporting). Major bestselling authors have already peaked with Kindle.

They believe this is universal, because their own data is limited. They can only rely on their sales, and Bookscan, which doesn't report sales without an ISBN. I've sold over a million ebooks without ISBNs. I'm not the only indie author who doesn't care about ISBNs. I'm part of a shadow industry that the legacy industry is ignoring at their own peril.

I foresee publishers collapsing. As ebooks continue to eat away at the paper market (again, this is happening even if publishers aren't seeing it and/or admitting it), a death spiral will occur.

1. Bookstores stock fewer books.
2. Publishers buy fewer books from authors.
3. Bookstores stock fewer books.
4. Repeat until bankruptcy.

Authors, slowly but surely, are wising up. Diehard legacy authors who snubbed self-pubbing have come over to the dark side and are making money (money that goes unreported to Bookscan.) Many authors, both newbie and pro, aren't bothering to submit to publishers anymore. There may still be enough submitting that publishers don't see a difference, but it really doesn't matter if they notice it or not. They've always rejected 99.99% of the books that come across their desks. If a publisher has 100 slots to fill in a given year, I'm betting it doesn't matter to them if they had 10,000 submissions or only 2000.

It does, however, matter to authors. Because every author that doesn't submit to publishers (or is rejected by publishers) then becomes another revenue stream that publishers haven't tapped into.

The market is getting bigger. Publishers aren't seeing it, because their sales remain flat. But in a growing market, that's almost the same as sales diminishing.

In short, their market share is getting smaller, bit by bit. Like the proverbial frog swimming in a kettle, not noticing that the water temp is going up one degree per hour. Froggy will eventually boil, and not understand what happened.

I personally don't believe publishers will survive. I can't see them moving to Jersey for reasonable rent, which I advised two years ago, let alone completely changing their business model to adapt to the changing tides. But, as a thought experiment, I wondered how I'd react if I controlled one of the Big 5.

Hugh Howie had some very smart blog posts earlier this year on this same topic, and he echoed a lot of things I've said in the past. His suggestion that hardbacks come with free ebooks (which Harpercollins is now doing) is something I said directly to HarperCollins editors at the Google Conference back in 2007). This was before Kindle, and before they were widely called "ebooks" (I called it "digital text"). Hugh discussed more favorable contract terms (I've pointed out at length the unconscionability of legacy deals in 2012), and about eliminating returns (I mentioned this in 2006, along with using POD and giving authors higher royalties.)

Hugh also mentioned some things I didn't, like instant access to sales data and monthly royalty payments, which I agree with. It's amusing that both Lee Child and Douglas Preston have admitted that they can contact their publishers at anytime and get their sales data, but the rest of us have to wait 18 months to get an accurate sales figure.

But besides everything I've said in the past, and the things Hugh has said, how would I save publishing? What would my business plan be?

1. Immediately abandon the paper midlist.  Unless the book can get into Wal-Mart, it shouldn't be published in paper via offset printing.

2. Separate the company into paper and ebook divisions. The paper division will have two segments: mass market and deluxe hardcover. The mass market can be sold anywhere. Deluxe editions will be priced as luxury items, $40 or more. They'll be printed on acid free paper with embossed covers, come with downloads for the ebook and the audiobook, and be the collectible than many readers demand.

The ebook, mass market paperback, and hardcover will all come out at the same time. No windowing.

3. Offer new or midlist authors a $10,000 stipend. This isn't an advance, and doesn't have to be reimbursed by the author. This is more like a signing bonus. In return, the author will sign an author-friendly contract that gives the publisher rights to ebook, paper, and audio for 5 years. As soon as the books start selling, authors start earning money. After the 5 year period, the rights revert back to the author, or the publisher can continue to publish the work if both parties agree and another bonus is paid.

4. Give authors 50% royalties on ebooks. Since midlisters and newbies won't get paper editions, they should get more for their ebooks. That, plus a $10k bonus, should keep plenty of quality authors submitting rather than self-publishing. POD can also be ordered by bookstores for all titles, with authors getting a 25% net royalty rate. 

5. Monthly payments and 24/7 access to sales data. Nuff said.

6. Ebooks are priced appropriately. If the ebook is no longer competing with paper, publishers should be able to find the sweet spot for sales.

But here's the really cool part:

7. When ebook sales hit a certain threshold, the author will be put into the paper distribution division. The books that do well will then get the current title (or the next title) into brick and mortar stores as mass market and deluxe hardcover editions. So authors are rewarded for decent sales with an additional revenue stream, and publishers will only offset print books by authors that the public has been proven to enjoy.

Right now, the only advantages big publishing offers over self-pubbing are the advance, and the ability to get paper books onto shelves.

This model eschews the advance for a signing bonus (and $10k is much less than a print run would cost so it saves the publisher money), and paper books are reserved for authors and titles that have been shown to sell.

Naturally, publishers should also do many of the things Hugh and I already said, like move to Jersey and eliminate non-compete. But this seven step program is the minimum publishers can do to save themselves. If they listen to me, they'll continue to attract authors. $10k isn't chump change, and the carrot on the stick is getting onto bookshelves everywhere.

Of course, publishers aren't going to listen to me. They're so busy worrying about holding onto their paper oligopoly, they're losing thousands of authors to self-pubbing, and losing a shit ton of money by inflating their ebook prices. Rather than let the customer choose the format they'd like to read, publishers are continuing to try and force the customer to read what they tell them to, at the prices they tell them to. In an open source market, this approach isn't sustainable.

What I predicted in 2010 is already happening, and the trend will continue. The pie is growing. Publishers' market shares are not. I don't see B&N being around much longer, and when they disappear the midlist will, too. Readers will be forced to accept ebooks if they want to read their favorite midlist authors, just like every household with a VCR had to get a DVD player to enjoy new releases when they stopped putting them out in VHS format. That will also shrink the bestseller paper mass market. Once a reader has a Kindle (or Kindle app on their tablet) they won't be buying from the bestselling paperback racks in airports or in supermarkets. The laggards who stubbornly refuse to give up dead trees won't be around forever, and we have an entire generation right now learning how to read on electronic devices who will consider paper quaint when they start buying books, like my generation views 8 track tapes.

Or maybe I'm wrong. After all, what do I know about predicting things?