
The collective insanity of the publishing industry - suraj
http://genedoucette.me/2016/02/the-collective-madness-of-the-publishing-industry/
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kevinr
I have a small pile of friends in publishing, so I'll take this from the other
side. The reasons for the publishers' apparent insanity are:

* Contrary to popular belief, physical production is _NOT_ the single largest part of a book's cost. In fact, even before ebooks, the cost of paper and ink and shipping was actually a pretty negligible part of the final cost.

Most of the cost of a book is the highly-skilled labor involved (writing,
editing, copyediting, proofreading, designing, typesetting, marketing,
selling) and these critically don't go away or even get much cheaper in an
electronic world. Even ebooks need specialized design and typesetting, and I
have some examples which did not get that love which will make your eyes bleed
if you don't believe me.

Salaries in publishing have for decades been nosing around the minimum the
market will bear---as just one example, freelance proofreaders get paid a
penny per word; the good ones get two. Many freelance proofreaders are also
editors, copyeditors, and authors in their own right, and hustle their asses
off to make incomes that, coming from tech, we wouldn't consider starvation
wages.

* Price is an important signalling mechanism, and so---given the costs of book production---it's important to the publishers not to drive the perceived fair cost of books down below, no matter whether Amazon is currently subsidizing that or not.

~~~
StefanKarpinski
Legitimate question: what is the total cost of labor to publish a book, aside
from writing it and physical production? It's hard to imagine it being more
than $25k – a quarter-person's salary at $100k/year for editing, typesetting
and design. At $5 per book, that's covered by 5000 sales. With ebooks, the
rest is pure profit – or could go directly to the author if authors hired
publishers to do that work instead of the other way around. The push to revive
print books seems like a last ditch effort to preserve a model where the
publishers are essential and therefore in control instead of the authors
running the show.

~~~
kevinr
This is weird because there's great variety between books and publishers, and
there are lots of hidden costs. The one most self-publishers miss is marketing
and sales---at the big publishers, there are

I am not a publishing industry insider, so these numbers are an educated SWAG,
but let's see if they shed any light.

Let's say a top editor at a big-5 genre publisher makes $100k a year. That's
_way_ high, but we'll roll with it, 'cuz it makes the math work out nicely.
Let's say they work on ten books a year, also probably high, but that's
$10k/book. If they make $50k and work on five books a year that's still the
right ballpark.

The art and production departments are shared across a publisher's whole line,
or possibly even multiple imprints. Let's say the department costs $300k total
and does thirty books a year, for $10k/book, which includes the cost of
soliciting and paying the artist for the cover art, ebook and physical
production, copyediting and proofreading.

We're up to $20k now.

 _Now_ we get to the fun part. Your big-5 publisher literally pays people to
go read your book and then drive to all the bookstores in a geographic area
and convince them to buy it. Figure that there are 10 of them in the US, each
of them pulls in $50k, and they're repping 25 books a quarter, so 100 a year.
That's another $5k on top just for their salaries, not counting their travel
and expenses, for which $15k a person a year seems not unreasonable. And this
isn't counting ad buys or any marketing, just plain sales. So figure half your
book's total budget is sales.

So that's $40k/book for a midlist, 100k-word genre title from a well-regarded
editor before we get to the author or the physical production.

(Things I'm leaving out: legal department, some kind of business/management
structure, some kind of web site???)

Professional rates in fiction are a princely seven cents a word, so for an
author who's worked a year on a book (not unreasonable) that's a whole $7k---
but this book was acquired by a well-regarded editor at a good house, so let's
say the author is getting a whole _twenty_ cents a word, or $20k, for this
year of labor. That's a third of the cost of the book so far. Accounting
around authors in publishing gets weird---advances versus residuals, etc.;
actually accounting in publishing is just plain weird, period---and a $20k
advance is princely, but not unreasonably so.

So then the publisher has spent $60k on your book, and wants to earn its money
back and then some.

My sense is that 5k sales is a low number, and certainly you aren't going to
get a $20k advance next time, if your next book gets picked up at all.
Publishing is a hits business---most sales happen in the first few months---so
rates matter more than absolute numbers. 5k sales over ten years might finally
earn out your advance, but 5k sales in the first month will get the second
book of your trilogy picked up. 100k sales is John Scalzi territory, and my
sense is that 30k sales is comfortable midlist territory.

Now, 30k sales on $60k spent out of the gate works out to $2/book, or $8/book
profit at $10/book ($13 list with an Amazon/wholesale cut of 30%), but
remember that in a hits business not nearly every book will sell even that
many copies, but no one can predict ahead of time which ones, so publishers
need to invest in many more books which won't sell to find the ones that will.
It's anecdotally reported in the publishing industry---and I think it's
evident in the financials as well---that breakout, millions-of-copies-sold
success _50 Shades of Gray_ subsidized essentially all of Random House's other
books for a year or two.

It depends on your hits business how bad the ratio is, but in genre publishing
figure that less than half of books earn out for the author, so at $60k/book
that's 6k sales minimum, which not every book makes. (Classic scenario:
publisher gives you a big advance on your outline but then decides not to sell
or market the book when you turn it in and they don't like it, but they don't
want to pay the kill fee, so they rush it through production, ignore it in
marketing, print the minimum required copies, and hope nobody buys them.
Whoops.)

The key expense self-publishing discussions usually miss is really the sales
and marketing one, followed closely by editorial. And freelance editors do
exist and are quite good, so if you're self-publishing, consider one. I don't
know of any freelance book salespeople, though. For some reason salespeople
are very good about getting paid.

I should add that this is not to say that, if you're self-publishing, you
should expect to spend $60k on your book. My sense is that even $10k/book is
on the high side. Certainly out here in the freelance world I would tell an
author expecting to put that much up to self-publish her book that she was
being taken for a ride, and not the fun kind.

Remember that you're giving up sales and marketing, and you're not paying
yourself an advance, so you're down to $20k already, and then you're working
with newer artists and freelance professionals. Depending on how good you are
at the various aspects of the work (and don't kid yourself here, he says
mostly to himself), figure $3-5k is a decent ballpark for an anthology or a
full-length novel. It's not going to sell 6k copies either, but then paying
more probably wouldn't help its sales any. Still, do your research, don't
shortchange your business partners, pay for quality where it counts, and don't
pay for vanity publishers (Author Solutions, etc.)

~~~
dilemma
I have some insight into the industry and while some details may be slightly
off, I believe your outline is very accurate. Thank you!

------
Booktrope
The comments to this post are really interesting - one comment claims that
(according to an agent) agency pricing was Amazon's idea, not the big 5, even
though, the big 5 very publicly insisted on agency pricing. It's really
absurd. Of course, agency pricing for ebooks was first pushed by Apple, part
of what got them and the big publishers in trouble for antitrust conspiracy
(when the publishers agreed to withhold books from Amazon if Amazon kept
discounting)

The the comments about Amazon and publishing, Amazon has a very major
publishing operation (called, suprise!, Amazon Publishing). It's grabbing
market share very quickly. If you want information about this check
authorearnings.com (which provides industry sales estimates that include self-
publishing) Of course the big story in the publishing business is that self-
publishing is rapidly eclipsing traditional publishers in the ebook space.

Amazon is not only doing Netflix for books. It's doing Netflix for film and
TV. The big competitor to Netflix is not any network or studio -- it's Amazon.

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dcw303
> The sales that would go to that $15.99 book are going to lower-priced books
> from indie authors and self-published authors, like me.

> They actually proved the consumer will buy the cheaper option, but okay

I find it alarming that an indie author does not seem to be concerned with
cheap product flooding the market. Amazon's attempts to lower barriers to
entry means more aspiring authors competing for a piece of the pie. Look at
how the race to the bottom in the App Store is destroying indie iPhone
developers.

~~~
TheOtherHobbes
The indie author isn't concerned, because indie authors get much more per
Amazon sale than they do from a traditional publishing contract.

The flooding already happened. There was a gold rush a few years ago when
anyone who had any interest in writing slapped together an ebook and put it
online.

Some of those authors did incredibly well for a year or two, then the market
became saturated.

So there was a shake out. Authors who understand business - marketing, leads,
keeping a mailing list, and running a blog that provides value - are doing
somewhere between "ok, I guess" and "still earning well."

The opportunists and not-so-greats and other amateurs have given up and run
away.

Now, the market for indies is stronger than it was - because as the post says,
trad pub has strangled its own market share. And this is _excellent_ for
indies.

~~~
x0x0
I remain stunned the authors don't do mailing lists. There are a handful of
authors that I will purchase everything they write. Until goodreads, there was
no real way for them to notify me to buy something from them. And even now
goodreads isn't particularly efficient about it.

I really think they would benefit from asking fans to sign up for an
announcements list that is just announcements of new work. Plus it gives them
the ability to sell smaller works published via kindle to their fans to pad
out the gaps between full books.

~~~
Semaphor
I agree, I discovered some authors via Reddit and Kindle Unlimited whose books
I loved. But keeping up with what they are releasing is a PitA. One only had a
presence on twitter so I set up twitter to rss just for him, some others I
check their websites once in a while and hope there's new info…

I wish goodreads would let me say "hey, notify me of every new release from
this person, okay? No other mails, just release notifications of those I
checked here." (maybe it's already possible? If so please tell me how :D)

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coldtea
> _That sounds thoroughly reasonable, and it sort of is, but please let me
> explain because the crazy is in the details. What was happening was that
> Amazon was discounting the price of the ebooks, and it may seem like this is
> something the Big 5 would want to stop, except the markdown was coming off
> of Amazon’s end. In other words, if Hachette wanted to charge $15.99 for an
> ebook, and Amazon marked it down to $9.99, Hachette was still paid their cut
> of the full price of the book. More people will buy a book at $9.99 than at
> $15.99, so essentially, the Big 5 was coming out ahead in this arrangement
> in every conceivable way. They collected royalties at an unreasonably high
> price point while moving the number of units that corresponded to a lower
> price point._

Sounds good, unless you factor in other Hachette customers that get the shaft,
because a company with deep pockets like Amazon uses their cash reserves to
undercut them with unhealthy margins (actually negative margins).

This is downright monopoly behavior. Why should they accept it?

And of course those other outlets will complain to Hachette or ask for the
same prices.

It's also a good way to screw the customers in the long run, as they get their
cheap books from Amazon first, and then when the other stores with lesser
means have died (unable to keep up with the negative margins), they can jack
the prices again...

~~~
AlgorithmicTime
Everyone keeps saying that Amazon has a secret evil plan to become THE source
for everything and then jack up the prices, but no actual evidence of this
ever happening.

~~~
coldtea
"Secret evil plan"? That's the very open and natural thing for any monopoly to
do. It has been done by monopolies time and again.

Amazon just haven't reached that status in most areas yet.

And where it has, e.g. books, it already used its power to manipulate
producers and the market in its favor. Siphoning millions for selling books
below what you pay for them is not some kind of marketing trick, it's anti-
competitive behavior meant to kill less loaded rivals...

------
pja
Anybody with the slightest interest in this topic should read Charlie Stross’
(cstross on HN) series of essays on the publishing industry:
[http://www.antipope.org/charlie/blog-
static/2010/04/common-m...](http://www.antipope.org/charlie/blog-
static/2010/04/common-misconceptions-about-pu-1.html)

------
kitsune_
Hachette isn't stupid. Amazon has a publishing arm, and of course, more
importantly, has the Kindle. By lowering the prices Amazon gets people to buy
into their eco-system . As a publisher you don't want a single distrubutor
controlling your market.

------
amelius
It seems that all creative/intellectual industries are caught in some sort of
race to the bottom (e.g., software, publishing, music).

This is sad.

~~~
hrnnnnnn
I think it's the same reason salaries are low in the games industry: everyone
would rather have an interesting job in a creative industry for less money
than a boring job at a bank for lots of money.

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Grue3
So apparently the publishers trying to prevent a monopoly-grabbing maneuver
from Amazon is insane. On the contrary, it would be insane if they let Amazon
drive all other booksellers out of business and ruin the market.

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jameshart
The behavior does look irrational if you ignore the fact that publishers also
want to sell their books in to other retailers and those retailers will not
order books if they believe Amazon will deeply undercut them for the same
titles. So they ask the publisher to put in place a deal with all the
retailers through which the book will be sold that guarantees no one retailer
will offer the book below a certain price. This is, of course, quite a _lot_
like price fixing, but seems to be how it's been done in many areas of retail
for just about ever.

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jay_kyburz
I'm often laughed at when I suggest it, but I think the publishing world needs
to look at what's happening with free to play games.

You remove the barrier to entry so that as many people as possible will try
your product (free).

You identify those people who really enjoy your book and want to consume more
of the same.

You provide them with so much content that they can spend as must as they
like.

It's not unreasonable for people to spend 100's of dollars a month enjoying
their favorite pastimes.

Why put a $15 cap on it per book.

~~~
yolesaber
Congratulations, you invented the magazine.

~~~
jay_kyburz
I see you are not familiar with free to play games, or magazines, or both.

------
Pxtl
I'm surprised Amazon hasnt gone into publishing. Get some big name authors on
board, pick up some classics, etc. Do Netflix.

~~~
kevinr
Amazon have a huge pile of different publishing imprints, see:

[https://en.wikipedia.org/wiki/Amazon_Publishing](https://en.wikipedia.org/wiki/Amazon_Publishing)

And that's just original imprints; it doesn't list things like Audible, which
Amazon owns, and which are THE major audiobook publisher, but almost always
published secondary to a print publication rather than original.

And _that 's_ not including Amazon's multiple self-publishing options,
including the Kindle Direct program.

------
lenepp
What a great piece. The point about how the big publishers have more control
over printed books gets to the heart of the matter.

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petra
If the ebooks many want to read are expensive electronically, maybe many won't
buy a kindle, but still buy the printed books ? And without a kindle, they
won't buy cheaper books from the competition ?

And maybe this will slow Amazon's success for a few profitable years, more
profitable than current loses ? And maybe by that time the publishers will
find an ebook strategy that will work(hard to believe, but maybe).

Also,let's look on the other side - what happens if ebooks fully kill print ?
can publishing even make money in such state of affairs ?

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deegles
If Amazon really wanted to twist the knife, they would look into making the
first-sale doctrine apply to ebooks. They might have to limit it to Kindle-to-
Kindle sales at first, but Amazon would be able to take a cut of every book
transfer in perpetuity.

My guess is that it would drive authors into services like Kindle Unlimited,
since they would be able to create a long-term income stream unlike physical
books or non-transferrable ebooks.

------
facepalm
I can see the rationale of the publishers - they don't want Amazon to become a
monopoly. Their counter-strategy will fail, but that is besides the point.

What is really puzzling is the many authors who thought the publishers are
fighting for them and stated public support for their publishers. Especially
since the publishers blockade apparently cost them a lot of sales.

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chrisseaton
> Often, the prices were higher than the price of the print edition, which is
> just fundamentally insane.

Why is this insane? An ebook has more value to me than the print one as it's
more convenient. Since it has more value to me I'm prepared to pay more.

The physical copy could be free and I'd still pay to get the ebook instead in
most cases.

~~~
kevinr
Also that's often comparing the discounted price of a print edition to the
full price of the ebook. Print books being still sold under the old wholesale
model, Amazon can still discount them, whereas ebooks being sold under the new
model, Amazon can't discount them.

~~~
GabrielF00
When I'm looking at prices at an online bookstore, I don't care what the list
price is, I care what the price I have to pay is.

When a physical object that has to be manufactured and shipped costs more than
a text file, I feel ripped off. Especially since I can lend a physical book to
someone or sell it to a local used book store, neither of which I can do with
an ebook.

~~~
kevinr
Leaving aside the secondary markets for a moment---which yes, I agree with you
on---do you feel ripped off buying video games online? They are, after all,
just really large files.

~~~
GabrielF00
I don't buy enough video games to really answer that - usually I buy a couple
of games a year during Steam sales and that's about it. I usually buy a couple
of books a month (print and ebooks).

~~~
kevinr
Fair enough.

------
muddi900
The publishing industry did this before by colluding with Apple. Had to settle
out of court with DoJ over it.

------
officialchicken
> Guess who saw an uptick in print sales in 2015?

Textbooks.

