Monday, January 2, 2012

Visions of the Future

I think traditional publishing houses bring value to the market. I don’t want to see them disappear. But I think there’s a few things that will need to be revised in order for them to stay in the now-evolving publishing game. With the advent of the e-book, the market is changing rapidly, and old methods of business need to be revised to keep up. With a new year beginning, I’ve written down what I think needs to happen in this year (okay, and probably in the next few years) for authors, agents, and publishing houses to all obtain the most favorable long-term outcomes. These ideas aren’t set in stone – a well-structured, well-supported argument can change my mind on any point. But right now, this is the model I think would work best.

What I want to see:

I want see authors’ work continue to have value, with the market accepting that e-books costing more than $.99 are worth purchasing.

I want to see e-books less expensive than paper-and-ink books.

I want to see traditional publishing houses stay in the game, because I feel the houses offer substantial services to writers and force us to improve ourselves through setting high standards for entry into the market, and because I feel these houses offer the most formidable competition for Amazon’s book trade.

I want to see more people buying books, and a growth in the overall book market, encompassing both e-books and print-and-ink books.

I don’t want Amazon to successfully become a monopoly.

This is the e-book industry approach I think is needed to obtain these goals:

E-books costing at least $1 less than paperback versions, but no more than $2 less

Looking only at traditionally published books here, and not self-published books, I feel that e-book versions should be offered between $1-2 less than paperback versions.
A virtual book is less inherently valuable than a physical book. It’s a virtual asset versus a tangible one, and the e-book is actually license to possess and read the book, which is not true ownership. It can't be traded back and forth; it can’t be resold at a used book store; you can’t dunk it in the tub and shrug it off with an, “oops; time to buy a new copy.” It can’t be signed and propped on a shelf to display. And while you can carry more at once in less space, if you lose one, you loose them all.

Add to that the actual cost of an e-reader. At minimum, we’ve got a $79 Kindle, a basic system that lets someone download and read e-books without many extras. I’m not going to make an investment that won’t save me money in the long-term, especially if the asset I’m getting is of less value than the alternative (again, I consider virtual books to be inherently less valuable than physical ones.) At $2 less a book, that’s at least 40 books before my investment pays for itself (assuming I don’t get a nicer e-reader!). Yes, I could read that many in a year or two. Most people who read for pleasure would read that many in 2-4 years. That’s a reasonable time period for an e-reader to pay for itself. But if e-books cost the same as physical books, I’m not going to invest, because then I’m losing money. An Aug 2011 survey shows that only one in five Americans owned e-readers or tablets in May 2011. The other four must therefore rely on print.

The cost of actually printing a book (ink, paper, etc) really isn’t that much. Most of the money goes to paying for intangible benefits – editing, branding (the Publisher’s mark), advertising, etc. Therefore, the prices should be relatively close, because the reader is paying for the work, not the paper and ink. We’re talking a year or more of writing, editing, and rewriting. Years of a person’s life. I’m paying the writer’s salary by purchasing her or his book. I don’t mind stocking a writer’s cabinets with food – writing is a job, a hard job, and a writer deserves to be able to eat from it. Maybe even buy Christmas gifts for the family, and go to the doctor once in a while when little Johnny gets sick.

Discounts on e-books when a physical book is bought, and visa versa

Recently, Barnes & Nobles had the great idea to offer a James Patterson e-book free when two physical books have been purchased. Great advertising for e-readers! Will the concept of buying a physical book and getting the e-book free last in the long-term, or get extended to all books? I don’t, honestly, think that this would be a sustainable dream. Buy the book, download the free copy, hand off the paperback to a friend as a gift. I don’t see the current industry accepting this as a rule.

On the other hand, I do think that steep discounts would fly in a long-term situation. If you’re buying the paper-and-ink version first, it makes sense that the less valuable, economy version would be offered as a bonus at a steep discount. Because you’ve already bought the words. You just want a more portable version. So, for $1-2 more, you can buy the e-version that usually costs $5.99.

Now let’s look at it the other way around. You buy the e-book, and love the book. You’ve already bought it – why waste money getting another copy when you can read the original again on your Nook? Why will people continue to buy paper-and-ink books, even when they have an e-reader? Because books then become the luxury item, a physical embodiment of a favorite book that can still be read while visiting the relatives out in the electricity-free boondocks, that can be shown off in a shelf with the first page opened to show off the author’s autograph, that can be prettily wrapped for Cousin Sharon’s birthday. The likelihood that a person will invest in a hardback book will go up. I suggest, therefore, that proof-of-license (i.e., a receipt or bringing the book in on the e-reader with a “I bought this, not borrowed it” mark that publishers would need to develop) would earn a consumer either a $2 or a 20% discount, whichever is larger.

35-40% royalties for authors through e-books

That’s a lot more than most publishers are currently paying (the standard seems to be around 25%), but much less than most self-publishers get per book. Why the increase? Because there’s a growing industry of self-publishers, and I want traditional publishing houses to be able to stay in the game. I don’t think traditional publishing houses will continue to be able to compete in the e-book market if they don’t offer a higher royalty rate than they currently do with the growing competition. But, it’s unreasonable to give authors a 70% cut. Why? Again, writers are paying for things like editing, advertising, use of the publisher’s brand, and marketing. Those are valuable services, and worth taking the royalty cut.

Transparency in industry costs

If publishing houses are going to continue to take a cut, they’re going to have to justify it to both authors and consumers. Emerging authors are faced with the choice of self-publishing or traditional-publishing. Why take 35% instead of 70% royalties? If traditional publishing houses don’t want to get cut out of the market, they’re going to have to market themselves. So it only makes sense that they shout from the rooftops all the services they offer – or, more importantly, shout from every book’s purchase page. That’s what’s going to keep authors coming to them, instead of going it alone.

Why is this e-book worth $5.99, when that one is $2.99? Publishers will also have to justify to consumers the difference between a higher-priced, legacy published book and a self-published, cheaper book. Consumers want to know what extras they’re buying. Everyone likes extra. Everyone likes quality. When a publishing house says “These are the services you’re paying for, and this is where your money is going,” the consumer feels like they’ve paid just a little more for a bunch of extra services. This may require renaming some services (“brand licensing fee” instead of “company profits,” for example), but if the publishers are completely honest about where the money’s going, then they should see both authors and consumers drop some of the questions raised in recent months (“Are publishers worth their price?”)

Branding – logos on e-book cover art

With traditional publishing houses explaining all the services they’ve provided, consumers who buy an e-book from a traditional publishing house will feel they’ve gotten a better quality product than if they’d spent less on a self-published book. Maybe they haven’t. There’s lots of really good self-published books out there, and there always will be. But if traditional publishing houses are smart, they’ll make their mark – they’ll make it big, and they’ll put it on the cover. With prominently displayed logos on the cover art of their e-books, readers will begin to associate the logos with quality. It’s pure marketing. Make it easy to see who published it, and readers will start paying attention.

Self-published e-books will never lose their market. There may be a hit in sales, but consider: The books are usually cheaper; there are many, many high-quality self-published e-books out there; self-publishing is easy to do; and there are verified accounts proving the ability to be successful through self-publishing.

Call it branding. Call it building snob-appeal. Call it building a market. Call it anything, but if traditional publishing houses want to stay in the game, they’re going to need to sign up now. Publishers have traditionally been relegated to the background of books: when asking for a recommendation of a good book, do you ask who published it? So if publishers want in on the action, they need to take steps to change the consumer mindset. Make purchasers recognize the logo first. And that means making it obvious.

50-60% royalties for e-book-only contract extensions

Eventually, the services offered by publishing houses (editing, cover art, formatting, initial advertising, possibly even advances) will be bought out. Contracts usually come with time-out clauses, because after a while, print copies cease to earn significant revenue. If a publishing house doesn’t make money off an author, they’re not going to continue publishing them. Therefore, when an author’s contract is finally completed, the author usually gains back full rights (and full royalties, for those who then self-publish or republish the book). On the downside, the author is no longer in print by that publisher, and subsequent books will no longer have that publisher’s name on them.

What if, however, the author wants to continue having the publisher’s brand but doesn’t expect enough sales to succeed in a second print run? In the e-book industry, if traditional publishing houses are smart enough to start “branding” themselves, I expect there to be a market division between traditionally published works and self-published works. What if the publisher’s brand mark increases a book’s sales?

I’d suggest publishing houses offer a “contract extension” for authors for contract-expired e-books only. Most authors I have personally met, when their rights revert to them, self-publish the novels in e-format. In exchange for another 2-3 years of using the publisher’s mark in e-books, the author gives the publisher a cut of the earnings. Most e-books show higher profitability the longer they’re on the market, while physical books show the most profitability in the first couple of years.

There’s no (or at least few) new costs incurred by continuing to offer the house’s endorsement. What this is, is a mutually beneficial arrangement: The author gets the publisher’s endorsement (see ‘branding’), and the publisher continues to make a cut from the author while being able to say the author is part of their company. And, if the book gains enough sales, it makes it easier to print a targeted second run (With the current market-research internet tracking programs out there, do you really expect me to believe that the industry won’t know who bought which books?).

Amazon prevented from becoming a monopoly

Monopolies, historically, are bad. I want brink-and-mortar bookstores to continue to thrive. I want publishing companies to continue to exist because Amazon is very much set in a position from which it could undercut all competition. What’s to stop them from opening their own publishing house? Oh, wait, they already have. They’ve also already got Smashwords. There’s a lot of talent on that site. While many self-publishers bash traditional publishing, I don’t think they’re looking at the whole picture

I can see Amazon becoming a monopoly (both a horizontal and a vertical monopoly, at that). This is one way I think it might happen:

Amazon would love to make Smashwords the best, and biggest, and then only, legitimate site for self-publishing. Now say they begin printing paper-and-ink books from their best-sellers, recruiting new publishing deals from the self-published established writers. Amazon doesn’t need brick-and-mortar stores to sell books – it mails them. They offer books at discounts to grow readership, and with their price-check app, they can easily price-match or undercut brick-and-mortar stores. Authors do most of their own marketing (welcome to self-publishing!). So over time, brick-and-mortar stores start to phase out, because Amazon can cut costs and offer a cheaper product. Good-bye, B&N; hope I can buy as many cheap books as I did when Borders closed.

Then Amazon begins to pressure traditional publishing houses into offering large numbers of books at cheaper and cheaper rates. They’re already doing this; without brick-and-mortar stores through which to sell their products, publishing houses will have no choice but to comply. They become unprofitable and, one-by-one, let themselves and their existing contracts be bought by Amazon. Now the only places to buy books are from Amazon or small, local publishing houses that Amazon deems fit to continue existing to satisfy the Department of Justice that there is sufficient ‘competition’ for them to not be considered a monopoly.

This sets Amazon up to become the final say in how much authors earn. Authors either go to small publishing houses, and hope they’ll be one of the two or three authors each year that Amazon discreetly makes internationally successful as proof that the small publishing houses are a legitimate ‘threat’ to them (while the majority of authors sell less than 10,000 books over the book’s lifetime due to limited market), or go to Amazon and have a larger chance at becoming reasonably well-known and decently profitable. Amazon will pay authors just more than they’d on average earn with a small publisher, which is what will stop any of the small publishing houses from emerging as a new Big Six.

Forget advances. Forget agents. Amazon might, in a move of good faith, hire on agents to scour the ranks for self-published geniuses, just to say they’re not putting the agents out of their jobs. The agents would still be talent-hunters, and they would still get to read for a living. Only, they’d be looking for already self-published geniuses to become the new paper-and-ink generation.

I don’t think authors will come out better from this model. Nor do I think consumers will. When Amazon obtains its de facto monopoly, it can raise book prices to just below small-press level. And that means books will cost more than they do now. Authors, meanwhile, will find their royalties slowly getting squeezed smaller and smaller, and advances disappearing entirely. Writing becomes a vanity hobby, but because people like to write, it continues. Only because fewer people make survival-level money from it, it’s a hobby. Less money is spent on editing, since writers are responsible for finding their own editors, and thus, less editing is done. While good writers and great books continue to exist, refinement begins to be lost in the majority of the market, and the average quality of new books goes down.

I don’t like this vision of the future. I want Amazon to run into a few solid walls in lieu of achieving this world. Traditional publishing houses are one of the walls they might run into, so I want traditional publishing houses to continue to succeed, even if it means taking a new approach. There are enough great self-published writers for that side of the market to continue being profitable, even if branding occurs and somewhat diminishes self-pub sales, but I don’t think writers (in the long-term) will be benefited by elimination traditional publishing.

To sum up:

Personally, I feel like e-book and physical book sales complement one another. As e-books gain popularity, their convenience turns reading into a daily habit - even in people who were formerly non-readers. This means that the market will grow. But how it grows has a lot to do with how the industry presents itself. Will new readers purchase only cheap, self-published works? Or will traditional publishing houses continue to have appeal to the next generation of readers? I believe some changes are necessary to continue competition, and while some of them may be, in the short-term, less value for writers, in the long-term we'll benefit.

That’s my six cents. What’s your opinion? And why? What future do you see?


  1. Kindles are the only e-readers with the really nice E-ink screens, correct? I want to get an e-reader and have been leaning towards Kindles for that reason alone. If another company were to offer it, I'd consider them instead just to fight the potential monopoly.

    Do you know any kind of stats for why people buy e-readers? Academics like me tend to want them so we can carry around pdfs of papers, meaning a screen size closer to 8.5 x 11 is preferable. Personally, I couldn't care less about e-books. If a physical copy is available, I'd much rather have that than have to stare at a screen to read it (I have to do that too much as is!). I have two on my computer (one a friend self-published and another which only had a very limited physical release). It wasn't anywhere near as satisfying to read them...

    Re: discounts on e-books when physical versions are bought
    Something similar has been happening with movies. You can buy a physical copy with a code for a digital download which costs only slightly more than the physical alone. It's an excellent option for anyone who travels a lot or has long shifts of doing nothing at work.

    1. Nooks from Barnes & Nobles actually have excellent E-ink, and from what I hear, they tend to put a lot more effort into pre-testing their products, so there are fewer bugs. Not all Nooks have e-ink: the Nook Color doesn't, for sure, and the fancier ones in general. But I just got the Simple Touch, and it's E-ink. Really nice. The Nook Classics are E-ink, too, if you plan on purchasing one used. That was actually a major buying point for me; the glare from the lights at work has been giving me headaches lately, so to give my eyes a break, I really wanted to get E-ink. That was why I went with a Simple Touch instead of a Color or a Kindle Fire.

      Honestly, I don't have much on stats as to why people buy e-readers. Most people I know with one have it to carry many books around without the paperweight, or to save shelf space due to already overcrowded bookshelves. I'd rather have physical books, too, but then, my shelves /are/ stacked 2-deep...

      I didn't know that about the movies. Glad to see the trend is starting!

  2. Addendum: One of the HCRW ladies posted this link on where and how romance books are purchased.