Thursday, September 4, 2014

So you want to self-publish...

So you want to publish your own book? That’s good news. Sort of. Why only sort of? Because it’s never been easier to do so. That’s the 'good news' part. The 'sort of' part is because it’s never been easier for you, it’s also the same for every other aspiring author out there. As we learned in the previous post, last year there were as many self-published titles as there were traditionally published titles. About 400,000 for each. Also consider that according to a recent survey it was estimated that 75% of self-published authors make less than $500 for their efforts. And yet, the number of self-published authors continues to rise. Up almost 60% between 2011 and 2012 and up 422% from 2007 (when the Amazon Kindle first appeared).

But why be discouraged. After all, E.L. James, known for the 50 Shades of Grey 'mommy porn' trilogy, started out as self-published author of eBooks. Last year she topped the revenue charts with $95 million, making her the world's most successful author. And she didn’t even try her hand at writing until 2009. (Editor's Note: She's kind of the Macklemore of the literary world). There’s also Amanda Hocking, from smalltown Minnesota, who tried for years to get her work published and had all but given up. Without much faith at all she decided to take a what-the-hell approach and self-publish an eBook back  in 2010. Since that time she has sold several million copies and banked over 3 million dollars. And for Exhibit C we have Bella Andre, who, after years with major publishers --  Hachette, Random House, Simon & Schuster --  decided to try doing things on her own and self-publish. Using tools like search engine optimization and test marketing covers and themes, she's been able to sell close to 2 million books on her own and achieve annual earnings of between 1 and 3 million for the last few years.

Could you be the next E.L. James, Amanda Hocking, or Bella Andre? Sure, somebody has to be. Will it be you? Probably not, but that doesn’t mean you shouldn’t arm yourself with the cascade of information about self-publishing about to come down in this post. If you’ve been following this series on book publishing in these digital times you’ll have a reasonable grasp of the eBook market. Today we move on to look at some of the new platforms and models. When we get beyond a system based on few market entrants and a ‘big 5’ (the handful of companies that dominate an industry), what do things look like?

First, a quick refresher of the traditional value chain in the book business:


You see many links in the chain, each providing a service that adds value in the book’s journey from author to reader. Now, if this illustration was completely accurate, it would show throngs of authors on the left hand side of the picture, with a infinitesimal number actually advancing beyond the dotted line in the upper left hand corner, and in turn getting the chance to play this game. You would also see some visual representation of rights usually being signed away to publishers, as a kind of collateral in return for the publishers’ sizable investment in a product they have no way of knowing the viability of, which provides some insight into why publishers turn a profit only about a single digit percentage of the time, as explained in this earlier blog post. But, bearing those things in mind that’s the general picture of how the book industry has worked for several decades.

Now, options for publishing abound. You don’t have to deal with agents, publishers, printers, wholesalers, et al -- if you don’t want to. But of course there are new risks, costs, and skills associated with self-publishing and taking the direct-to-reader route. As one industry insider put it: “The most successful self-publishers don’t view themselves as writers only, but as business owners…They invest in their businesses, hiring experts to fill skill gaps and that’s building a thriving new service infrastructure in publishing.”

What follows is a quick, and certainly not exhaustive, overview of some of the services available to self-publishing authors in today’s digitally enabled landscape, where the basic configuration goes from the flowchart above to to something like this:

We may as well start with the biggest players in eBook publishing and eBook distribution and work down from there. Most of these companies don’t require up front payment for basic services and then have an a la carte model where you can additional services, like cover design, marketing and publicity, and analytics for additional fees. 

First up is Lulu. It’s an eBook/self-publishing pioneer that launched in 2002. Since that time they’ve published 1.5 million books and are adding to their catalog at a rate of 20,000 new items per month. On Lulu, anyone can publish. For free. That’s just the basic hitting the button and making your document available. You also have the option to cherrypick additional services from a menu  or bundle them into packages.

Example of services available on a la carte basis at

And as they say right on their site, research shows that authors who use the additional services go on to sell twice as many books as those who totally DIY’d it. This makes perfect sense to me as a document uploaded to a web platform, without the benefits of design, editing, marketing, etc has precious little chance of getting noticed.
Lulu’s biggest competitor is Smashwords, which started in 2008 and now has over 300,000 books published by approximately 100,000 authors. The company reports that it’s been profitable since 2010 so, while one would think it’s hard to make money with businesses that have so many no-to-low sellers, they have obviously figured out a formula. Smashwords is the world’s largest independent eBook distributor, and like Lulu, they offer the full menu of services for authors. Just follow their step-by-step guide and you then decide if you want to do a little by yourself, do it all by yourself, or something in between. As much as 85% of net proceeds are paid to the author, net being revenue from the sale minus fees taken by payment systems such as PayPal and percentage taken by Smashwords, which is only taken when actual books are sold. The percentage paid to authors drops to between 60% and 70% when affiliate marketers and/or retailers are involved, such as Apple iBooks, Barnes & Noble, and Kobo, or third party bloggers or aggregators who agree to promote your book in exchange for a fee or commission. 
Pro tip #1: A comparison of Smashwords and Lulu and Createspace, another self-publishing platform (acquired by Amazon in 2005), can be found here.

And how do the dollars of self-publishing generally compare with the dollars of traditional publishing model? I broke down the numbers in an earlier post on this blog but if you're too lazy or pressed for time the broad strokes are that if you’re self-publishing your royalty rate is going to be 10-15x of what it would be with a traditional publisher. But -- don’t start thinking about that vacation property yet. As Smashwords’ founder says right in the ‘about’ tab of the site:

Lulu, Smashwords, and Createspace are just a few of the companies that make self-publishing easy. There is also a whole raft of companies, with ‘book’ in their name, e.g. Booktango, BookbabyBooklocker, and if you’re wondering about how they stack up you can see a comparison here.

Pro Tip #2: For the full list of the top platforms for ebook self-publishing click here.

Now you have the basics for getting your self-published project from idea to eReader. With so much uncertainty in the industry innovation is emerging in the form of small companies specializing in small pieces of the pie that authors can now buy in as standalone services. And, at the same time many publishers are getting increasingly comfortable with experimentation and trying out new models in house. Here’s what some of the major publishers doing to dip their toes, or more, in the digital pond.

HarperCollins has Authonomy, which bills itself as an online community where writers become authors and great books get published.

Macmillan has Swoon Reads, an imprint that focuses on the “YA” (young adult) market and uses the community’s votes, not editors’ calls, to decide what gets published.

Simon & Schuster has partnered with a company called Author Solutions to get in on the self-publishing game

...And recognizing that increasingly publishers aren’t just in the business of selling books but of curating and communicating ideas, Random House Canada has the online magazine and associated imprint Hazlitt  They say they have two conditions for those wanting to get involved: Write well and don’t bore us.

Screenshot of Random House Canada's online magazine and publishing portal Hazlitt

And where does this all leave you, the aspiring author? Worse off, or better off, as a result of the opening up of publishing via digital processes and platforms? Only you can make that determination for yourself, but remember that stat from earlier in this post, that 75% of self-published authors earn less than $500? Well, the accompanying stat would be that 25%, or around 100,000 self-published authors make more than $500. And this figure of 100,000 authors earning at least $500 would have pretty much been zero a few years ago, because the systems and technologies that enabled direct routes between author and reader simply did not exist. So while you will probably not become the next E.L. James by going the self-publishing route, the ability to give it a shot has never been better. We are all only limited by our own excuses, and I guess that's the double-edged sword that is the good news and the bad news.

Blog Bonus section: All this talk about 'free' eBook publishing...But what does it really cost to do your own eBook? 

Click herehere, and here to learn more.

Wednesday, August 27, 2014

Between the lines: Sizing up the eBook market

Welcome to Part 3 of this series looking at the ways in which the book industry is in a state of flux as part of the move to digital formats and services. I’m not using terms such as ‘crisis’ to describe the situation because I believe that across the various industries examined in this blog we’re looking at redistributions – of value, power, and access -- and rather than characterize such changes as evil/apocalyptic or godsend/cybertopian I’m more interested in considering new ways of being that are made possible via new technologies, new systems, and new relationships between creator and audience. 

I was originally going to include a section on the new intermediaries/middlemen in the book industry in this post, but decided to save that for a few days from now as I didn't want to overload you first with statistics, followed by information about value chains at the industry level. So we'll take this in two parts. In the first, which is today’s post, we'll take a closer look at more book industry facts and figures, and then next week we’ll look at some of the new players emerging in the world of publishing as traditional publishing houses prove themselves to be adept at dealing with blockbuster titles (on the odd occasion when they happen) but less effective for the smaller, niche titles that seemingly come out of nowhere but can still find an audience with the right mix of interesting material and smart outreach and promotion.

With traditional print revenues dropping double digit percentages in recent years there are some obvious questions that arise at this juncture, such as ‘will this be the music industry all over again’? Will the digitization of the product lead to a significant downsizing of the overall market? The music industry was the first to feel the wet towel slap of digitization, with file sharing technologies, unbundling of the album format, and streaming music services dramatically changing the way the business worked, for both music labels and artists. Today the music industry is worth about half of what it was in 2000 and to varying extents labels and artists have had to retool how they earn revenues.

Will a similar pattern follow in the book publishing industry? Will chapter books become the 'singles' of the book world? Will book-of-the-month style subscriptions such as those offered by (owned by Amazon since 2008) take over the roles of retail outlets, and to some extent print publications and radio, as they also offer credits and bundles featuring radio shows, podcasts, and interviews with authors. Will authors increasingly take the DIY route and crowdfund with sites such as Kickstarter, essentially a prepaid way to offer specialty products to avid fans who just want to see the project get done? And what about Netflix-style ‘all you can eat’ plans, such as those offered by Scribd and Kindle Unlimited, where subscribers pay $9.99/month or less for laptop, eReader, tablet, and/or smartphone access to a library of 500,000+ titles, and growing. Will consumers shift from the habit of buying a few specific titles a year to moving to the book buffet? And if so to any or all of these possibilities, what will the effects be on writers, booksellers/retailers, publishers, and, of course, readers?

Or...will the future of the book business be something for which we don’t yet have a model, that will emerge through a series of ongoing marketplace experiments and writers' and publishers' innovations, such as those listed above? Remember, few among us thought things like Indiegogo or Kickstarter would work to any significant extent, and now the former has raised hundreds of millions for creative projects of all stripes and the latter well over a billion. (Okay maybe a few Silicon Valley types had a strong premonition it would be the next big thing, but don't forget even they get it wrong more often than they get it right). Time will tell how this will all shake out, but for now let’s start with a few numbers that shed a bit of light on the state of the eBook industry in particular today, because that's where things go all digi-Gutenberg on us. These stats should help set the stage for the next post in this series, which will look at the new options outside the traditional industry that are being experimented with by both writers and publishers.

First, some statistics from the world of eBook sales:

1. eBooks now account for approximately 1/3 of all books sold.

2. Amazon has about 65% of the eBook market (with Barnes & Noble and Apple coming in with 25% and 10% for second and third places respectively).  Ed. Note: This market dominance is one reason why the dispute between Amazon & Hachette has been so heated. 

3. The market for books is bigger -- and more fragmented -- than ever. To wit, there are now hundreds of thousands of self-published and/or eBooks released each year – and that number has grown by over 400% since 2007, the year the Amazon Kindle eReader was introduced. Last year there were close to 400,000 self-published books released, an amount more or less equal to the number released by traditional publishers in the US.

4. About 50% of Americans have devices optimized for eBook consumption. Less than five years ago that number was almost zero and you’ll see in the chart below that the penetration rate of tablets and eReaders has been dramatic. This will likely continue to grow, as will eBook publishing, resulting in eReading becoming a completely mainstreamed practice.

 5. On average, self-published books represented 32% of the top 100 selling eBooks on Amazon in 2013, up from about 20-25% in 2012. Note: These numbers are estimates, triangulated from various data points, as Amazon does not share data about eBook sales directly. And, if we extend our purview from the Amazon top 100 eBooks to the top 2500 books sold by Amazon in 2013 (eBook, audiobook, and physical book, including self-published, indie press published, and major house published) then we find that a mind-boggling 86% in this category were eBooks.

There are a few things to bear in mind with these figures. For example, by the time you get to #1000 on the top 2500 list the actual sales figures are likely to be pretty darn small, and almost certainly not a living wage. As is the case in many industries, a disproportionate amount of the sales are concentrated in the top 1% or so of earnings, with the other 99% distributed across an increasingly large group of creators.  We know, e.g. that the top earning author made $95 million last year, and that if we scroll down the list to the 10th best selling author the figure for earnings ‘drops’ to $20 million. Still a large number, yes, but a difference of almost 80% between the earnings of author #1 and author #10. My very strong hunch is that if we were able to peer at the sales figure for, say, the 500th best selling author, the numbers would probably not be very high. Why? Well, as we learned in a previous post on this blog90% of books published sell fewer than 100 copies per year.

The eBook market, being digital every click of the way, is also able to provide us with granular data on reading habits, such as these, from the past year of Scribd, one of the eBook subscription services referred to above.

Ed. Note: Among the things we learn: People seem to have great intentions when it comes to improving their mind, body & spirit, and their business acumen, but only seem to follow through with romance.  
This collection of numbers and anecdotes provides us with a glimpse of the landscape in which book publishing today needs to be considered. Not as the business it once was, where there were fewer authors handed the keys to the kingdom, where advances were generally in the tens of thousands of dollars and higher, and where physical retail and broadcast media were the holy grail of distribution and marketing. Instead we have a new world with new formats, new commerce platforms, and in which hundreds of thousands can participate. All this can be achieved with a relatively small financial investment, in the case of self-publishing an eBook, or an investment of nothing but time, as is the case with a blog. Excuses for not participating in publishing, in the broadest sense of the term, are limited only by one's efforts. Whether it's a small gesture like a Tumblr account or an Instagram feed -- yes, that's publishing too -- or a larger undertaking like a blog or eBook, it is often about self-expression, accumulating social and cultural capital, and creating links in a value chain, more than it is about trying to bring in dollars. It's a different kind of marketplace, as is now the case in so many of the creative industries, where we see mass production as the dominant way of being shifting to production by the masses.

And with all this in mind, the next post in this series will look at some of the new intermediaries that are forming the links in this value chain, making self-publishing feasible as hobby, small scale cash flow, or full time living for those able to figure out how to turn crisis into new opportunities.

Thursday, August 21, 2014

Where does the money go -- Book industry edition

In the previous post we took a look at the Amazon/Hachette dispute, and did so in a way that sought to add context to a feud in which one party was often characterized as the ‘good guy’ and the other as the ‘bad guy'. As with most things, it’s more complex than that, particularly as the book publishing industry attempts to steady itself on the choppy waters of the shift from physical to digital products and services.

Source: PWC

As hard copy print declines in popularity and eBook sales rise, the profit margins of publishers also stand to slide. When you’re not in the business of making, shipping, and selling things that occupy physical space in boxes, warehouses, and stores, it’s a whole different game. The pricing model of the legacy system looks something like this:

A new hardcover book now usually retails for $27.99. The pie chart below provides a rough guide to how those dollars are divided up between publisher, retailer, author, and agent. Not all authors have agents, but authors dealing with the major publishing houses generally do and for their services agents receive 15% of the author’s royalty rate. Note that these are not carved in stone numbers, but according to a source in the publishing industry, who I ran them past, they’re accurate, give or take a percent here or there.

It always helps to add some notes to such numbers, so here we go:  

Note that absent from this breakdown are fees paid to designers, printers, wholesalers, warehousers, shippers,  and publishing house staff. Those costs tend to come out of the publisher’s piece of the pie and when added up leave the publisher with about 10 - 12%.  

And then there’s the bookseller/retailer, who appears to be helping him/herself to an oversized slice, but rest assured, overhead in retail is high – leases, staff, equipment, advertising, etc.  (Ask yourself: when was the last time you met a wealthy bookstore owner...meaning one that became wealthy from selling books, not dabbling in retail for fun or philanthropic purposes).

Also note that the 10% paid to the author (minus 15% to the agent) is paid after the advance – the money the publisher paid the author before the book was actually written -- is paid back to the publisher.  

And finally, to cap off our notes section, it’s worth mentioning that the dollar pie, as split above, does not include any rights the author and/or agent have retained for licensing merchandise, foreign markets, or dramatic use (e.g. film adaptation).


After this post went up last night I heard from a friend who is a veteran of the New York and Boston publishing industry (who preferred to remain anonymous) and he added the following way of looking at the flow of dollars, so I'm sharing those notes with you here.

Using the same suggested list price of $27.99 for a book the numbers can be broken down this way:

The book is sold by the book publisher to the bookseller, or retailer, at a 'discount' of 50%. In other words, the publishing company gets $13.50 of revenue and the retailer then prices the book for sale in his/her store at a level at which costs can be covered and (hopefully) some profit margin can be obtained. Of the $13.50 now in the book publisher's pocket the dollars are divided as follows:

So, working with these numbers we have about $2.50 going to the author and about $0.50 to the agent, per book sold. Again, these payments would be after any advances made to the author have been recovered from actual sales of actual books. Until such time the book publisher is fronting all the cash. Of the approximately $10 the book publisher now has in cash flow, project expenses are paid (copy editing, book design, proofing, printing, shipping, etc)  as well as overhead (rent, staff, equipment, insurance, the electricity bill, any Keurig pods in the kitchen, etc). 

Is that everything? Not quite. The books the publisher sells to the retailer aren't really sold. They're consigned. Meaning that depending on the deal struck, the retailer can return unsold inventory to the publisher, in which case the publisher will be issuing a refund to the retailer. 

The other things that can happen: 

- The books that didn't sell at full price remain in the store, but move from the nice neighborhood, i.e. the window display or attractive tables at the front of the store, to the grab bag that is the remainder table, where they're usually priced between two and ten dollars. 

-The books get sold by the retailer to an overstock company, such as a discount store (Marshall's, Winners) or dollar store. 

- The books get 'pulped', or destroyed, which in the past probably meant landfill and today means shredded and recycled.

Now that we have two sets of data on the dollars, albeit with some variation, we can agree on this: the pie charts above shows us the book industry as it’s been for the past several decades. Like the rest of the creative industries, where outcomes are impossible to know until they actually happen, it’s a high risk/high reward system. Major book publishers, not unlike music labels and movie studios, have to put up capital in the hope that they will turn a profit, even though in all of these industries the general rule of thumb is that about 95% of projects taken on do not break even. If anyone really knew anything would JK Rowling’s manuscript for Harry Potter have been rejected 12 times? And would Penny “Laverne” Marshall have received a hefty $800,000 advance for her memoir, which ended up selling 17,000 copies. Using our newly acquired skills in book industry math, that level of sales constitutes a small fraction of what the publisher would need just to get back to $0.

The next question in our analysis: how do these numbers change when we look at small press or indie publishers? Or when we consider the new possibilities in the publishing marketplace, such as bypassing hard copy altogether and going the route of the self-published eBook? There's a chart for that -- primarily because I whipped one up -- and here it is:

Click to enlarge

And a few notes regarding these numbers:

The number of copies to break even can be a few hundred for a self-published eBook (no advance to repay), approximately 1500 to a few thousand for an indie press book (advance of zero to a few thousand), and ten thousand plus for a title with a major publishing company (assuming an advance in the low tens of thousands).

On average --  and averages in cases such as these can be charitable,  because they also include the numbers at the top end -- this is what sales figures look like:

The average book published sells 250 copies per year and 3,000 copies over its lifetime. In other words, it loses money. And even at that level we’re talking about the top 10% of all books published. 90% of books published sell fewer than 100 copies per year. For eBooks, average sales are estimated to be 100-150. And that's total lifetime sales, though admittedly we're still in the early days. And while the major eBook retailers (Barnes & Noble, Amazon) do not publish statistics on eBook sales (whereas they do for print books), this conscientious blogger ran the numbers forensically and came up with a figure of $297 for the average eBook royalty paid to authors in 2013.

Which brings us to the grand finale of this post on books and bucks. When we take the whole picture into account – let’s use the approximately 1 million books published each year in the U.S. because it’s an easy landscape to work with and it's the world's largest book market – this is how the dollars shake out:

With a single digit percentage of authors published by major houses making something resembling a barebones living wage ($40,000 or more), and the biggest proportion of authors being those that self publish. Though the chart below shows this group as earning $1 - $4,999 per year, I think that after taking into account the other numbers in this post it’s safe to assume that the actual dollars in pocket come closer to covering the cost of a take-out meal, as opposed to, say, a really nice couch. (Source: Digital Book World 2014 report)

Click to enlarge

So there you have it for the basics of the book industry numbers. Remarkably similar to the music industry, as examined in detail on this blog last year.

In Part 3 of this post we take a look at the size of the overall eBook market, which will set the stage for Part 4, when we’ll go beyond the big publishers and big retailers, and look at some of the new players in the publishing industry as it transitions from a high barrier to entry hard copy based business to a low barrier to entry digital one. Is it meet the new boss, same as the old boss? Or are we better off than we were in the world of a handful of gatekeepers, many aspirants, and a relative few selected for a promenade in the marketplace?