Merrill R. Chapman's Blog, page 5
September 11, 2014
What Hugh Howey Won't Talk About (but Should). The Book Channel Part V of Several Parts. The Resellers
The Resellers (the Second Tier)
We finally come to the most exciting part of this series, the resellers, in particular Amazon.
Resellers are the customer facing side of the book distribution channel. When I was a kid, resellers primarily consisted of independent stores and small regional chains (Bookmasters, for example, in NYC). Over time, national chains such as Crown, Waldenbook and and others spread across the country, usually opening stores in strip and enclosed malls. (Paperbacks were also widely available in drug stores, toy shops, supermarkets and similar outlets.)
In the 1970s, Barnes and Noble pioneered the concept of the big box bookstore and was joined by Borders. These mega stores were usually built in large strip and some indoor malls and provided special in-store sitting areas, served light food, premium coffee, and sold music, gifts, games, magazines and newspapers in addition to books. Over time, the big box stores, in conjunction with Amazon (remember, the company went into business in 1995 as online book reseller), steadily ate away at the mid-sized chains and independent stores and drove many of them out of business.
In the early 2000s, senior executives at both B&N and Borders were positive the future lay in building as many large stores in as many economically viable locations as possible. In their view, independents and regional chains would survive only in areas that were demographically unable to support a big box. In that event, many in the industry predicted that Amazon would pick up most of the independents' business (a prediction that has turned out to be true in many markets).
Then, in 2007 Amazon introduced the Kindle and began to disrupt the sales and business model of the last great analog technology, one whose existence began in the West with Gutenberg.
(As a quick historical note, you should be aware Amazon did not pioneer the concept of the inexpensive E-reader. From 1999 to 2001, several technology companies, including Adobe, Sony, Panasonic and perhaps a dozen others who are gone and buried attempted to kick start the E-pub market to life. They failed because the technology of the time provided a reading experience that was far inferior to that of the book. To read more about the effort, I suggest you pick up a copy of my immortal tome In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters , available in Kindle on Amazon, B&N and other fine retailers everywhere (print too, though if you're in technology, you won't buy a piece of a dead tree).
The impact of the Kindle was profound, comparable in many ways to the introduction of the Apple iPod. The Kindle's reading experience matched that of the printed page in the "eyes" of most of the market and offered portability and flexibility options not possible with printed material. Growth in the print market came to a quick halt, then began to contract. The contraction is continuing and cannot be halted.
By 2011, Borders had liquidated operations and B&N was battling for its life. The company attempted to claim its share of the digital future with the Nook reader, but lacked the infrastructure content, financial pockets, and patient shareholders, to compete with Amazon. B&N backed out of the Nook and sold the rights to Samsung. I don't think the timing was particularly fortuitous for the Korean giant. Dedicated E-readers are being subsumed by smartphones and tablets in the same fashion as the smartphone subsumed the iPod. Amazon's Kindle reader is available on every major hardware platform and works fine on all of them (especially on Amazon's own Fire line of tablets). I suspect Amazon will be happy to vacate the dedicated E-reader market ASAP as at its best, the units were sold on a break-even basis and many more at loss leader prices.
The Reseller Channel Today
The book reseller channel today is broken into two primary components, print and digital. If you are an indie author, you will almost never have any reason to interact with print resellers. Please note that if you as an indie or a publisher sell your books online or perhaps at shows, you are not considered a channel. You are a direct seller. More on this later in the series.
Print resellers can be categorized into:
Independent booksellers. There are about 2K independent stores in the US and they account for perhaps 10% of the print market.The B&N big box chain. Perhaps 50% of the US trade book print market.College bookstores.Airport, bus, and train bookstores. (Often overlooked, they account for about 10% of the paper books sold in the US, though like all such resellers, they are coming under increasing pressure from Amazon and its counterparts.)All other venues such as drugstores, supermarkets, sometimes gift shops, local lunch shops, etc. When I was a kid, "pulp" paperbacks were available in toy stores, "dime" stores, candy stores, etc. Most of these placements have vanished.Online booksellers (including Amazon, the online arm of B&N, and any print reseller that offers an online catalog). Amazon owns 65% of online print book sales.
If you are an indie author, you will almost always be required to interact with online digital resellers based on your book's price point. The digital reseller channel consists of:
Amazon (which is presently estimated to control about 65% to 80% of the digital book reseller market).
Apple (perhaps 15%).B&N (perhaps 15%).Smashwords.Oyster.And a score of smaller online firms, many of which address niche or genre markets.
What is the Future of Print Reselling?
It has none. Within 10 years, the market will have shifted to digital delivery. The environmental arguments against print alone make the demise of the technology inevitable. (I've worked in print shops and it's a pretty dirty business.) Throw in cost, form factor, flexibility, potential tie-ins to multimedia and games and production issues and the future is clear. Print will survive as a niche technology and occasionally see micro rebounds in the same way that vinyl records enjoyed a small resurgence about six or seven years ago (good for me, as I collect turntables) among some millennials. But that will be it.
What is the Future of Digital Reselling?
Digital publishing will be the dominant means of producing and selling books within 10 years. Within 20, print will be a curiosity within the market.
How Do Resellers Make Money?
Resellers make money by selling books via three primary models.
The wholesale purchase and markup of books.
The agency purchase of books.
The collection of marketing and development funds (MDF) from both publishers and indies. This is currently a minor issue with indies, but will change in the future. We'll discuss this in greater detail in the next release in this series.
The battle between the books publishers and Amazon that has captured so much press attention focuses on the desire of larger publishers to price some (not all) of their books via the agency model while Amazon wants to buy and price books via the wholesale model. The best interests of authors are not the primary or secondary concern of either party. The battle is over control of the industry's balance of power.
In the next article, we'll dig into the two models and analyze why the publishers are fighting for agency and Amazon for wholesale and the likely impact on authors depending on who prevails. We'll also be digging further into MDF, an acronym that indies will come to know very well, but perhaps not love very much.
We finally come to the most exciting part of this series, the resellers, in particular Amazon.
Resellers are the customer facing side of the book distribution channel. When I was a kid, resellers primarily consisted of independent stores and small regional chains (Bookmasters, for example, in NYC). Over time, national chains such as Crown, Waldenbook and and others spread across the country, usually opening stores in strip and enclosed malls. (Paperbacks were also widely available in drug stores, toy shops, supermarkets and similar outlets.)
In the 1970s, Barnes and Noble pioneered the concept of the big box bookstore and was joined by Borders. These mega stores were usually built in large strip and some indoor malls and provided special in-store sitting areas, served light food, premium coffee, and sold music, gifts, games, magazines and newspapers in addition to books. Over time, the big box stores, in conjunction with Amazon (remember, the company went into business in 1995 as online book reseller), steadily ate away at the mid-sized chains and independent stores and drove many of them out of business.
In the early 2000s, senior executives at both B&N and Borders were positive the future lay in building as many large stores in as many economically viable locations as possible. In their view, independents and regional chains would survive only in areas that were demographically unable to support a big box. In that event, many in the industry predicted that Amazon would pick up most of the independents' business (a prediction that has turned out to be true in many markets).
Then, in 2007 Amazon introduced the Kindle and began to disrupt the sales and business model of the last great analog technology, one whose existence began in the West with Gutenberg.
(As a quick historical note, you should be aware Amazon did not pioneer the concept of the inexpensive E-reader. From 1999 to 2001, several technology companies, including Adobe, Sony, Panasonic and perhaps a dozen others who are gone and buried attempted to kick start the E-pub market to life. They failed because the technology of the time provided a reading experience that was far inferior to that of the book. To read more about the effort, I suggest you pick up a copy of my immortal tome In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters , available in Kindle on Amazon, B&N and other fine retailers everywhere (print too, though if you're in technology, you won't buy a piece of a dead tree).
The impact of the Kindle was profound, comparable in many ways to the introduction of the Apple iPod. The Kindle's reading experience matched that of the printed page in the "eyes" of most of the market and offered portability and flexibility options not possible with printed material. Growth in the print market came to a quick halt, then began to contract. The contraction is continuing and cannot be halted.
By 2011, Borders had liquidated operations and B&N was battling for its life. The company attempted to claim its share of the digital future with the Nook reader, but lacked the infrastructure content, financial pockets, and patient shareholders, to compete with Amazon. B&N backed out of the Nook and sold the rights to Samsung. I don't think the timing was particularly fortuitous for the Korean giant. Dedicated E-readers are being subsumed by smartphones and tablets in the same fashion as the smartphone subsumed the iPod. Amazon's Kindle reader is available on every major hardware platform and works fine on all of them (especially on Amazon's own Fire line of tablets). I suspect Amazon will be happy to vacate the dedicated E-reader market ASAP as at its best, the units were sold on a break-even basis and many more at loss leader prices.
The Reseller Channel Today
The book reseller channel today is broken into two primary components, print and digital. If you are an indie author, you will almost never have any reason to interact with print resellers. Please note that if you as an indie or a publisher sell your books online or perhaps at shows, you are not considered a channel. You are a direct seller. More on this later in the series.
Print resellers can be categorized into:
Independent booksellers. There are about 2K independent stores in the US and they account for perhaps 10% of the print market.The B&N big box chain. Perhaps 50% of the US trade book print market.College bookstores.Airport, bus, and train bookstores. (Often overlooked, they account for about 10% of the paper books sold in the US, though like all such resellers, they are coming under increasing pressure from Amazon and its counterparts.)All other venues such as drugstores, supermarkets, sometimes gift shops, local lunch shops, etc. When I was a kid, "pulp" paperbacks were available in toy stores, "dime" stores, candy stores, etc. Most of these placements have vanished.Online booksellers (including Amazon, the online arm of B&N, and any print reseller that offers an online catalog). Amazon owns 65% of online print book sales.
If you are an indie author, you will almost always be required to interact with online digital resellers based on your book's price point. The digital reseller channel consists of:
Amazon (which is presently estimated to control about 65% to 80% of the digital book reseller market).
Apple (perhaps 15%).B&N (perhaps 15%).Smashwords.Oyster.And a score of smaller online firms, many of which address niche or genre markets.
What is the Future of Print Reselling?
It has none. Within 10 years, the market will have shifted to digital delivery. The environmental arguments against print alone make the demise of the technology inevitable. (I've worked in print shops and it's a pretty dirty business.) Throw in cost, form factor, flexibility, potential tie-ins to multimedia and games and production issues and the future is clear. Print will survive as a niche technology and occasionally see micro rebounds in the same way that vinyl records enjoyed a small resurgence about six or seven years ago (good for me, as I collect turntables) among some millennials. But that will be it.
What is the Future of Digital Reselling?
Digital publishing will be the dominant means of producing and selling books within 10 years. Within 20, print will be a curiosity within the market.
How Do Resellers Make Money?
Resellers make money by selling books via three primary models.
The wholesale purchase and markup of books.
The agency purchase of books.
The collection of marketing and development funds (MDF) from both publishers and indies. This is currently a minor issue with indies, but will change in the future. We'll discuss this in greater detail in the next release in this series.
The battle between the books publishers and Amazon that has captured so much press attention focuses on the desire of larger publishers to price some (not all) of their books via the agency model while Amazon wants to buy and price books via the wholesale model. The best interests of authors are not the primary or secondary concern of either party. The battle is over control of the industry's balance of power.
In the next article, we'll dig into the two models and analyze why the publishers are fighting for agency and Amazon for wholesale and the likely impact on authors depending on who prevails. We'll also be digging further into MDF, an acronym that indies will come to know very well, but perhaps not love very much.
September 5, 2014
Review of "The Far Bank of the Rubicon" by Erik Wecks
The Far Bank of the Rubicon by Erik Wecks (The Pax Imperium Wars: Volume 1)
Length: 309 pages (Contains Real Page Numbers)
Page Numbers Source ISBN: 1499619820
Sold by: Amazon Digital Services, Inc.
Language: English
ASIN: B00M1EH5TC
The Father of Space Opera is E.E. "Doc" Smith, a writer who I devoured as a child but is not widely read today. I've often thought that the Skylark and Lensman series were naturals for the big screen (especially the Lensman books), but I also devoured Edgar Rice Burroughs, particularly the John Carter of Mars books. I couldn't understand why no one hadn't made a great movie based on the series when you could work with a hot Martian chick named Deejah Thoris who ran around the surface of the Red Planet planet in a bikini and gave birth by laying eggs. (No, I'm not kidding.)
And then they did do the movie and just look how that turned out. So I'm out of the recommending- media-properties-for-production business. Except for my book, of course.
The modern space opera has evolved in a framework consistent with the rules laid down by E.E. In a space opera, thou shalt have:
A handsome, brave hero. (Kimball Kinnison).
A winsome heroine. (Clarissa "Samms." Go read First Lensman to understand the quotes. She's the Grey Lensman's main squeeze and genetically bred to be the perfect bride for our hero. Yeah, yeah, I can hear you gals gagging. Don't worry. In modern Space Opera, they breed boys for babes, as in the recent Honorverse tomes.)
Lots of big spaces ships. (E.E. had armored planets. THAT's space opera).
Lots of big space ships firing ray guns. (Got those in Lensman ).
Lots of ship to ship battles in space. (In Lensman , not only did you have those, you boarded the enemy space ship carrying battle axes. How does that work in hyperspace? I have no idea, but it's cooolll.)
An evil organization (Boskone).
A super evil villain running the evil organization (Helmuth of Boskone).
An ultra evil shadowy organization serving as the puppet master of the evil organization (the Eddoreans).
Lots of setbacks, spies, traitors, the death of numerous lovable minor characters, the death of a major best friend of the hero or heroine whom we've grown to love and admire, and as many twists, turns, and personal betrayals as the author thinks he/she can get away without blowing credulity into the Magellanic Clouds.
And, at the climax, a giant battle between the good guys and the bad guys with good, of course, triumphant over evil and the battle ending with just enough loose ends left untied to justify a sequel or spin-off.Oh, and the good guy and gal usually get hitched. Sometimes after the big climax (heh, heh), sometimes before, but almost always there's at least one little package delivered to dad with the first name of "Next Generation.")
So, given these time honored traditions, how does The Far Bank of the Rubicon do?
Very well, thank you. The mark of a good space opera is that if you step into it in the middle, as I did with Rubicon , you want to circle back and pick up the first book in the series to ensure you're caught up. I did and I'm caught up. The space battles are fun, the technology interesting, and the characters get under your skin. By the end of Rubicon , you've developed that pleasing compulsion to immediately buy the next book in the series to find out what happens next.
The plot of Rubicon is as follows. Our hero, Jonas, is the Prince Harry Windsor of Athena, a star state ruled over by the beneficent King Nicholas, who's caught and toasted with his royal trousers down when the evil Unity unleashes a dastardly sneak attack on the Athenan kingdom. Unity is a corporate state that feel like a cross between Stalinism and maybe the boardroom of GM in the 1950s and soon overruns most of Athena. Along the way, Jonas and his friends manage to launch a few good counterpunches, a series of compelling space battles that are an exciting hoot to read.
Despite the valiant efforts of our Prince, it becomes apparent that all will soon be lost. Jonas's older brother, King Stephen, will have to surrender his kingdom to Unity and endure a prison regimen of cold tea and soggy scones before the inevitable midnight smothering carried out by masked henchman holding those convenient wool blankets. In the meantime, Jonas and the last surviving Athenan fleet depart their home stars and head out into the void in search of supplies, allies, and ultimately, revenge.
I do have one bone to pick with Rubicon , and that's an early sex scene between Jonas and his paramour Sophia, the daughter of Athena's treacherous Duke Malek. The writing in this passage is awkward and at points unintentionally funny (Space Opera guys, watch "Gone with the Wind" to learn the best way to handle the naughty scenes. Yeah, I know. But believe me, it works out better nine out of ten times):
"He wrapped his arms around her and ran his hands over her butt, while he kissed her belly."
First of all, that sounds like a difficult position to get into. But worse, did he say "butt?!" Hey, we're talking a space princess here. They don't have "butts." They may have smoldering curves, stormy eyes, mysterious nooks, luscious crannies and shapely bottoms but never a butt!
In New Jersey, they have "butts."
This quibble aside, if you're a fan of Weber's Honor Harriman series, The Uplift Saga, or similar tales of galactic swashbuckling, you'll greatly enjoy The Far Side of the Rubicon.
Review of "The Far Bank of the Rubicon" by Eric Wecks
The Far Bank of the Rubicon by Erick Wecks (The Pax Imperium Wars: Volume 1)
Length: 309 pages (Contains Real Page Numbers)
Page Numbers Source ISBN: 1499619820
Sold by: Amazon Digital Services, Inc.
Language: English
ASIN: B00M1EH5TC
The Father of Space Opera is E.E. "Doc" Smith, a writer who I devoured as a child but is not widely read today. I've often thought that the Skylark and Lensman series were naturals for the big screen (especially the Lensman books), but I also devoured Edgar Rice Burroughs, particularly the John Carter of Mars books. I couldn't understand why no one hadn't made a great movie based on the series when you could work with a hot Martian chick named Deejah Thoris who ran around the surface of the Red Planet planet in a bikini and gave birth by laying eggs. (No, I'm not kidding.)
And then they did do the movie and just look how that turned out. So I'm out of the recommending- media-properties-for-production business. Except for my book, of course.
The modern space opera has evolved in a framework consistent with the rules laid down by E.E. In a space opera, thou shalt have:
A handsome, brave hero. (Kimball Kinnison).
A winsome heroine. (Clarissa "Samms." Go read First Lensman to understand the quotes. She's the Grey Lensman's main squeeze and genetically bred to be the perfect bride for our hero. Yeah, yeah, I can hear you gals gagging. Don't worry. In modern Space Opera, they breed boys for babes, as in the recent Honorverse tomes.)
Lots of big spaces ships. (E.E. had armored planets. THAT's space opera).
Lots of big space ships firing ray guns. (Got those in Lensman ).
Lots of ship to ship battles in space. (In Lensman , not only did you have those, you boarded the enemy space ship carrying battle axes. How does that work in hyperspace? I have no idea, but it's cooolll.)
An evil organization (Boskone).
A super evil villain running the evil organization (Helmuth of Boskone).
An ultra evil shadowy organization serving as the puppet master of the evil organization (the Eddoreans).
Lots of setbacks, spies, traitors, the death of numerous lovable minor characters, the death of a major best friend of the hero or heroine whom we've grown to love and admire, and as many twists, turns, and personal betrayals as the author thinks he/she can get away without blowing credulity into the Magellanic Clouds.
And, at the climax, a giant battle between the good guys and the bad guys with good, of course, triumphant over evil and the battle ending with just enough loose ends left untied to justify a sequel or spin-off.Oh, and the good guy and gal usually get hitched. Sometimes after the big climax (heh, heh), sometimes before, but almost always there's at least one little package delivered to dad with the first name of "Next Generation.")
So, given these time honored traditions, how does The Far Bank of the Rubicon do?
Very well, thank you. The mark of a good space opera is that if you step into it in the middle, as I did with Rubicon , you want to circle back and pick up the first book in series to ensure you're caught up. I did and I'm caught up. The space battles are fun, the technology interesting, and the characters get under your skin. By the end of Rubicon , you've developed that pleasing compulsion to immediately buy the next book in the series to find out what happens next.
The plot of Rubicon is as follows. Our hero, Jonas, is the Prince Harry Windsor of Athena, a star state ruled over by the beneficent King Nicholas, who's caught and toasted with his royal trousers down when the evil Unity unleashes a dastardly sneak attack on the Athenan kingdom. Unity is a corporate state that feel like a cross between Stalinism and maybe the boardroom of GM in the 1950s and soon overruns most of Athena. Along the way, Jonas and his friends manage to launch a few good counterpunches, a series of compelling space battles that are an exciting hoot to read.
Despite the valiant efforts of our Prince, it becomes apparent that all will soon be lost. Jonas's older brother, King Stephen, will have to surrender his kingdom to Unity and endure a prison regimen of cold tea and soggy scones before the inevitable midnight smothering carried out by masked henchman holding those convenient wool blankets. In the meantime, Jonas and the last surviving Athenan fleet depart their home stars and head out into the void in search of supplies, allies, and ultimately, revenge.
I do have one bone to pick with Rubicon , and that's an early sex scene between Jonas and his paramour Sophia, the daughter of Athena's treacherous Duke Malek. The writing in this passage is awkward and at points unintentionally funny (Space Opera guys, watch "Gone with the Wind" to learn the best way to handle the naughty scenes. Yeah, I know. But believe me, it works out better nine out of ten times):
"He wrapped his arms around her and ran his hands over her butt, while he kissed her belly."
First of all, that sounds like a difficult position to get into. But worse, did he say "butt?!" Hey, we're talking a space princess here. They don't have "butts." They may have smoldering curves, stormy eyes, mysterious nooks, luscious crannies and shapely bottoms but never a butt!
In New Jersey, they have "butts."
This quibble aside, if you're a fan of Weber's Honor Harriman series, The Uplift Saga, or similar tales of galactic swashbuckling, you'll greatly enjoy The Far Side of the Rubicon.
September 4, 2014
What Hugh Howey Won't Talk About (but Should). The Book Channel Part IV of Several Parts. The Distributors
The Channels
In the last part of this series we discussed the traditional writer/publisher relationship. Let's move on to the book distribution channels. If you are an indie publisher you will now be dealing and building relationships with the entities that sell your book. The depth and level of engagement with these entities will vary greatly depending on how many books you sell. In the case of JK Rowling, who as of this writing probably has more clout in the industry than any single writer, she was able to turn Amazon into an affiliate reseller. When you click on a Harry Potter link in Amazon's bookstore, Amazon receives a referral fee from her online store "Pottermore. (I don't know what the fee is, but based on Amazon's own affiliate struecture, 5% to 10% is a safe guess.) If you are a smaller presence, such deals will not be available to you.
If you are formally published, you will normally not deal with the distribution channels unless you are a very successful writer. Your involvement with the channel will be limited to promotional activities such as book signings and sponsored lectures on topics based on your book. In point of fact, the channel does not like to deal with writers and in most cases has discouraged attempts by them to educate themselves on how book distribution channels work. You are expected to take your royalties and pretty much keep quiet. However, as the book distribution system is undergoing disruption, this is changing rapidly.
The Distributors (the First Tier)
I was going to bypass the distributors and move straight to the resellers, but decided it would be useful to briefly cover them. If you are formally print published, your book will often go through two tiers of distribution. (Remember, you have transferred rights to the publisher and they now "own" the book.They, not you, are the supplier in so far as the channel is concerned.) The first tier is a distributor such as Ingram or Baker and Taylor. These are companies that specialize in receiving goods from suppliers and shipping them on to resellers. Looked at as percentage of the total gross revenue of the sale of any particular item, their fees typically comprise 3% to 20%. In books the upper range is around 8%.
The primary function of a distributor is to "break bulk." They do not create or sustain markets. The main reason for their existence in the book channel is that many resellers do not wish to maintain independent accounts with dozens of smaller publishers and use the distributors to aggregate them into a central buying "portal." Also, the large publishers wish to avoid shipping to thousands of smaller resellers and will push or require them to order from the distributors.
Distributors can offer ancillary services in addition to shipping. In some cases, they may provide production services or some forms of drop shipping. These are never a major part of their business model. Their primary function is always to break bulk.
The Future of Distributors in Book Selling
They have none. Recently, there's been some excited talk about this publisher or that allying with this distributor or that. All such arrangements will over the next several years become irrelevant. Inevitably, as the book market shifts over to digital delivery, the distributors will be disintermediated from the publishing industry. Their fate can be predicted by looking at the retail software industry. From the late 70s to the early 2000s, distributors were major players in this business. Millions of boxes of WordStar, Lotus 123, Microsoft Windows, Norton Utilities, and so on were shipped through Ingram, TechData and entities that have disappeared or been forgotten. In the early years of the software industry, distributors were major players in the market. Today, they are irrelevant. The process of disintermediation began in the 2003/2004 time frame and is almost complete today.
The death of the distributors in book selling is a good thing for both writers and resellers in the long run (though the distributors will of course disagree. Don't worry, they'll replace books with other physical things they can ship. It will take Star Trek-style transporters before they disappear from business. Or maybe locally distributed medium and large scale 3D-printers.) Other than breaking bulk, they never supplied any vital services.
This will be important to writers and indies whose books will be acquired by traditional publishers over the next several years. Your royalties on your E-book sales should reflect the margin recaptured from the disappearance of the distributors in the reselling equation. Claims by publishers that it will "cost the same" to not ship E-books to distributors (and expect the publishers to make this claim, even though it's ridiculous) should be ignored and your royalties should be higher on your E-books if only for this reason. While most publishing contracts to date do not break out the revenue overhead generated by transshipping boxes of books to distributor warehouses, you can believe the cost was factored into your royalty split. Some quick time spent with a spreadsheet and some minimal research will uncover to within a point the costs. These should be subtracted out of the royalty structure and returned to you and the publisher (you'll fight with them over the split. Fight for all of it). If your contract with the publisher includes selling dead tree formats, you can use that as a baseline for your calculations.
Of course, this means your E-pub royalties should be calculated on a different schedule than your paper ones. Don't sign contracts that lump them all into one pot.
In the next article, we'll take a look at the resellers (B&N, Amazon, and their counterparts) and analyze why the publishers are locked in a death struggle with Jeff Bezos and his merry band of disruptors.
In the last part of this series we discussed the traditional writer/publisher relationship. Let's move on to the book distribution channels. If you are an indie publisher you will now be dealing and building relationships with the entities that sell your book. The depth and level of engagement with these entities will vary greatly depending on how many books you sell. In the case of JK Rowling, who as of this writing probably has more clout in the industry than any single writer, she was able to turn Amazon into an affiliate reseller. When you click on a Harry Potter link in Amazon's bookstore, Amazon receives a referral fee from her online store "Pottermore. (I don't know what the fee is, but based on Amazon's own affiliate struecture, 5% to 10% is a safe guess.) If you are a smaller presence, such deals will not be available to you.
If you are formally published, you will normally not deal with the distribution channels unless you are a very successful writer. Your involvement with the channel will be limited to promotional activities such as book signings and sponsored lectures on topics based on your book. In point of fact, the channel does not like to deal with writers and in most cases has discouraged attempts by them to educate themselves on how book distribution channels work. You are expected to take your royalties and pretty much keep quiet. However, as the book distribution system is undergoing disruption, this is changing rapidly.
The Distributors (the First Tier)
I was going to bypass the distributors and move straight to the resellers, but decided it would be useful to briefly cover them. If you are formally print published, your book will often go through two tiers of distribution. (Remember, you have transferred rights to the publisher and they now "own" the book.They, not you, are the supplier in so far as the channel is concerned.) The first tier is a distributor such as Ingram or Baker and Taylor. These are companies that specialize in receiving goods from suppliers and shipping them on to resellers. Looked at as percentage of the total gross revenue of the sale of any particular item, their fees typically comprise 3% to 20%. In books the upper range is around 8%.
The primary function of a distributor is to "break bulk." They do not create or sustain markets. The main reason for their existence in the book channel is that many resellers do not wish to maintain independent accounts with dozens of smaller publishers and use the distributors to aggregate them into a central buying "portal." Also, the large publishers wish to avoid shipping to thousands of smaller resellers and will push or require them to order from the distributors.
Distributors can offer ancillary services in addition to shipping. In some cases, they may provide production services or some forms of drop shipping. These are never a major part of their business model. Their primary function is always to break bulk.
The Future of Distributors in Book Selling
They have none. Recently, there's been some excited talk about this publisher or that allying with this distributor or that. All such arrangements will over the next several years become irrelevant. Inevitably, as the book market shifts over to digital delivery, the distributors will be disintermediated from the publishing industry. Their fate can be predicted by looking at the retail software industry. From the late 70s to the early 2000s, distributors were major players in this business. Millions of boxes of WordStar, Lotus 123, Microsoft Windows, Norton Utilities, and so on were shipped through Ingram, TechData and entities that have disappeared or been forgotten. In the early years of the software industry, distributors were major players in the market. Today, they are irrelevant. The process of disintermediation began in the 2003/2004 time frame and is almost complete today.
The death of the distributors in book selling is a good thing for both writers and resellers in the long run (though the distributors will of course disagree. Don't worry, they'll replace books with other physical things they can ship. It will take Star Trek-style transporters before they disappear from business. Or maybe locally distributed medium and large scale 3D-printers.) Other than breaking bulk, they never supplied any vital services.
This will be important to writers and indies whose books will be acquired by traditional publishers over the next several years. Your royalties on your E-book sales should reflect the margin recaptured from the disappearance of the distributors in the reselling equation. Claims by publishers that it will "cost the same" to not ship E-books to distributors (and expect the publishers to make this claim, even though it's ridiculous) should be ignored and your royalties should be higher on your E-books if only for this reason. While most publishing contracts to date do not break out the revenue overhead generated by transshipping boxes of books to distributor warehouses, you can believe the cost was factored into your royalty split. Some quick time spent with a spreadsheet and some minimal research will uncover to within a point the costs. These should be subtracted out of the royalty structure and returned to you and the publisher (you'll fight with them over the split. Fight for all of it). If your contract with the publisher includes selling dead tree formats, you can use that as a baseline for your calculations.
Of course, this means your E-pub royalties should be calculated on a different schedule than your paper ones. Don't sign contracts that lump them all into one pot.
In the next article, we'll take a look at the resellers (B&N, Amazon, and their counterparts) and analyze why the publishers are locked in a death struggle with Jeff Bezos and his merry band of disruptors.
August 24, 2014
What Hugh Howey Won't Talk About (but Should). But Hugh is Getting It (a .6 Release)
I've just finished reading the latest post up on Hugh Howey's blog and some light seems to be penetrating the darkness which has recently descended on the site. The post is called
"Stuff I Want to Know"
and it's directed at Amazon. I urge you read it. Publishers in particular should study carefully some of the ideas and speculation on data collection and marketing programs and take notes. There is some good stuff there.
However, some of these questions require Hugh to perform a 'physician, heal thyself" exercise. For example, Hugh wants to know:
+++ I want to know why you all haven’t come out and explained that the 70% cut we make on ebooks priced in a certain range aren’t really royalties. (See #5 of this list for an example of improper usage of the term). When they’re called royalties, the 70% seems exceedingly generous. Because publishers pay a lot less. But publishers provide other services, like editing and cover art. We are handing you a finished product. As a distribution fee, you taking 30% (plus more for delivery fees) sounds less crazy-generous. It seems downright reasonable, in fact. Or even an area where you all could afford to give a little more.+++
One of the reasons that Amazon hasn't told people this is that, to date, Howey's site has done a great deal to reinforce this misapprehension. For example, on August 1st, in his Friends and Corporations blog post, he told us:
"Amazon pays roughly six times the royalty rate that Hachette pays."
Also, in last week's article, I pointed out a post by Shelagh Watkins, who repeated the Amazon 70% royalty rates myth and no one at the time, including Hugh, told her she was mistaken in her beliefs and calculations. But, it's certainly a very good thing that Hugh has learned in the ensuing 23 days that Amazon does not pay anyone a dime in royalties when you upload your book to its servers and pay your 30% retail usage fee.
It needs to be pointed out that the greatest source of the confusion about royalties vs. retail usage fees is Amazon, which describes the 70% left over once the fee has been paid as a royalty. Amazon should stop using that word and Hugh and other writers should call on them to do it. I just have. I hope Hugh does also.
It's also refreshing to see Hugh, for the first time, take a closer look at that 30 point retail usage fee. However, I disagree with him, in so far as indie authors are concerned. I don't think it's reasonable. I think it's way too high. As I've already pointed out in this blog, close to 30 points net margin is a license to print money in channels. Later in this series, I'm going to post up a "what your time is worth" analysis that will help you visualize how that 30 point fee makes earning money on your book an even harder task than it already is. It will also help bring the pricing issue into sharper focus.
Hugh also wants to know about this:
Why the 70% price cut-off? In a recent announcement about ebook prices, you all admitted that there are occasions when ebooks deserve to be priced higher than $9.99. I agree. I’d love to package my entire Silo Series trilogy together and sell it for $12.99. That would be an amazing savings to the reader, a great value to your customers. But you all treat every ebook product the exact same, which means my royalty rate would drop from 70% to 35%. That’s not good. I’d love to know why you all can’t make exceptions for certain products. In fact, indies are unlikely to EVER price their ebooks above $9.99, so why not drop the KDP price ceiling altogether. I promise you we’ll be more reasonable than other business partners you work with.
It's also a fine thing that Hugh has started to realize that Amazon's 35/65 retail usage fee is ridiculous. I kind of wonder what took him so long to see the problem in terms of bundling. And there are other aspects of the issue he's missed to date.
But the reason for the fee isn't hard to figure out if you understand what's going in the Hachette vs. Amazon battle. It has almost nothing to do with the welfare of the authors and almost everything to do with the desire of two industry forces to change the balance of power between them. If you haven't worked in and researched channels, the motivations of both can be obscure. If you have (I have), it's nothing that new. Suppliers and channels are always duking it out. Unfortunately, Hugh so far has failed to understand this and has not provided dispassionate and accurate analysis on the struggle.
Later this week, we'll be providing just that. I'm not sure Hugh will read the post (though it feels to me like he's read the previous ones), but when you read it, I think you'll have a better take on what's going on and can use that information to your best advantage.
However, some of these questions require Hugh to perform a 'physician, heal thyself" exercise. For example, Hugh wants to know:
+++ I want to know why you all haven’t come out and explained that the 70% cut we make on ebooks priced in a certain range aren’t really royalties. (See #5 of this list for an example of improper usage of the term). When they’re called royalties, the 70% seems exceedingly generous. Because publishers pay a lot less. But publishers provide other services, like editing and cover art. We are handing you a finished product. As a distribution fee, you taking 30% (plus more for delivery fees) sounds less crazy-generous. It seems downright reasonable, in fact. Or even an area where you all could afford to give a little more.+++
One of the reasons that Amazon hasn't told people this is that, to date, Howey's site has done a great deal to reinforce this misapprehension. For example, on August 1st, in his Friends and Corporations blog post, he told us:
"Amazon pays roughly six times the royalty rate that Hachette pays."
Also, in last week's article, I pointed out a post by Shelagh Watkins, who repeated the Amazon 70% royalty rates myth and no one at the time, including Hugh, told her she was mistaken in her beliefs and calculations. But, it's certainly a very good thing that Hugh has learned in the ensuing 23 days that Amazon does not pay anyone a dime in royalties when you upload your book to its servers and pay your 30% retail usage fee.
It needs to be pointed out that the greatest source of the confusion about royalties vs. retail usage fees is Amazon, which describes the 70% left over once the fee has been paid as a royalty. Amazon should stop using that word and Hugh and other writers should call on them to do it. I just have. I hope Hugh does also.
It's also refreshing to see Hugh, for the first time, take a closer look at that 30 point retail usage fee. However, I disagree with him, in so far as indie authors are concerned. I don't think it's reasonable. I think it's way too high. As I've already pointed out in this blog, close to 30 points net margin is a license to print money in channels. Later in this series, I'm going to post up a "what your time is worth" analysis that will help you visualize how that 30 point fee makes earning money on your book an even harder task than it already is. It will also help bring the pricing issue into sharper focus.
Hugh also wants to know about this:
Why the 70% price cut-off? In a recent announcement about ebook prices, you all admitted that there are occasions when ebooks deserve to be priced higher than $9.99. I agree. I’d love to package my entire Silo Series trilogy together and sell it for $12.99. That would be an amazing savings to the reader, a great value to your customers. But you all treat every ebook product the exact same, which means my royalty rate would drop from 70% to 35%. That’s not good. I’d love to know why you all can’t make exceptions for certain products. In fact, indies are unlikely to EVER price their ebooks above $9.99, so why not drop the KDP price ceiling altogether. I promise you we’ll be more reasonable than other business partners you work with.
It's also a fine thing that Hugh has started to realize that Amazon's 35/65 retail usage fee is ridiculous. I kind of wonder what took him so long to see the problem in terms of bundling. And there are other aspects of the issue he's missed to date.
But the reason for the fee isn't hard to figure out if you understand what's going in the Hachette vs. Amazon battle. It has almost nothing to do with the welfare of the authors and almost everything to do with the desire of two industry forces to change the balance of power between them. If you haven't worked in and researched channels, the motivations of both can be obscure. If you have (I have), it's nothing that new. Suppliers and channels are always duking it out. Unfortunately, Hugh so far has failed to understand this and has not provided dispassionate and accurate analysis on the struggle.
Later this week, we'll be providing just that. I'm not sure Hugh will read the post (though it feels to me like he's read the previous ones), but when you read it, I think you'll have a better take on what's going on and can use that information to your best advantage.
August 24th, 2014
What Hugh Howey Won't Talk About (but Should). But Hugh is Getting It (a .6 Release)
I've just finished reading the latest post up on Hugh Howey's blog and some light seems to be penetrating the darkness which has recently descended on the site. The post is called "Stuff I Want to Know" and it's directed at Amazon. I urge you read it. Publishers in particular should study carefully some of the ideas and speculation on data collection and marketing programs and take notes. There is some good stuff there.
However, some of these questions require Hugh to perform a 'physician, heal thyself" exercise. For example, Hugh wants to know:
+++ I want to know why you all haven’t come out and explained that the 70% cut we make on ebooks priced in a certain range aren’t really royalties. (See #5 of this list for an example of improper usage of the term). When they’re called royalties, the 70% seems exceedingly generous. Because publishers pay a lot less. But publishers provide other services, like editing and cover art. We are handing you a finished product. As a distribution fee, you taking 30% (plus more for delivery fees) sounds less crazy-generous. It seems downright reasonable, in fact. Or even an area where you all could afford to give a little more.+++
One of the reasons that Amazon hasn't told people this is that, to date, Howey's site has done a great deal to reinforce this misapprehension. For example, on August 1st, in his Friends and Corporations blog post, he told us:
"Amazon pays roughly six times the royalty rate that Hachette pays."
Also, in last week's article, I pointed out a post by Shelagh Watkins, who repeated the Amazon 70% royalty rates myth and no one at the time, including Hugh, told her she was mistaken in her beliefs and calculations. But, it's certainly a very good thing that Hugh has learned in the ensuing 23 days that Amazon does not pay anyone a dime in royalties when you upload your book to its servers and pay your 30% retail usage fee.
It needs to be pointed out that the greatest source of the confusion about royalties vs. retail usage fees is Amazon, which describes the 70% left over once the fee has been paid as a royalty. Amazon should stop using that word and Hugh and other writers should call on them to do it. I just have. I hope Hugh does also.
It's also refreshing to see Hugh, for the first time, take a closer look at that 30 point retail usage fee. However, I disagree with him, in so far as indie authors are concerned. I don't think it's reasonable. I think it's way too high. As I've already pointed out in this blog, close to 30 points net margin is a license to print money in channels. Later in this series, I'm going to post up a "what your time is worth" analysis that will help you visualize how that 30 point fee makes earning money on your book an even harder task than it already is. It will also help bring the pricing issue into sharper focus.
Hugh also wants to know about this:
Why the 70% price cut-off? In a recent announcement about ebook prices, you all admitted that there are occasions when ebooks deserve to be priced higher than $9.99. I agree. I’d love to package my entire Silo Series trilogy together and sell it for $12.99. That would be an amazing savings to the reader, a great value to your customers. But you all treat every ebook product the exact same, which means my royalty rate would drop from 70% to 35%. That’s not good. I’d love to know why you all can’t make exceptions for certain products. In fact, indies are unlikely to EVER price their ebooks above $9.99, so why not drop the KDP price ceiling altogether. I promise you we’ll be more reasonable than other business partners you work with.
It's also a fine thing that Hugh has started to realize that Amazon's 35/65 retail usage fee is ridiculous. I kind of wonder what took him so long to see the problem in terms of bundling. And there are other aspects of the issue he's missed to date.
But the reason for the fee isn't hard to figure out if you understand what's going in the Hachette vs. Amazon battle. It has almost nothing to do with the welfare of the authors and almost everything to do with the desire of two industry forces to change the balance of power between them. If you haven't worked in and researched channels, the motivations of both can be obscure. If you have (I have), it's nothing that new. Suppliers and channels are always duking it out. Unfortunately, Hugh so far has failed to understand this and has not provided dispassionate and accurate analysis on the struggle.
Later this week, we'll be providing just that. I'm not sure Hugh will read the post (though it feels to me like he's read the previous ones), but when you read it, I think you'll have a better take on what's going on and can use that information to your best advantage.
I've just finished reading the latest post up on Hugh Howey's blog and some light seems to be penetrating the darkness which has recently descended on the site. The post is called "Stuff I Want to Know" and it's directed at Amazon. I urge you read it. Publishers in particular should study carefully some of the ideas and speculation on data collection and marketing programs and take notes. There is some good stuff there.
However, some of these questions require Hugh to perform a 'physician, heal thyself" exercise. For example, Hugh wants to know:
+++ I want to know why you all haven’t come out and explained that the 70% cut we make on ebooks priced in a certain range aren’t really royalties. (See #5 of this list for an example of improper usage of the term). When they’re called royalties, the 70% seems exceedingly generous. Because publishers pay a lot less. But publishers provide other services, like editing and cover art. We are handing you a finished product. As a distribution fee, you taking 30% (plus more for delivery fees) sounds less crazy-generous. It seems downright reasonable, in fact. Or even an area where you all could afford to give a little more.+++
One of the reasons that Amazon hasn't told people this is that, to date, Howey's site has done a great deal to reinforce this misapprehension. For example, on August 1st, in his Friends and Corporations blog post, he told us:
"Amazon pays roughly six times the royalty rate that Hachette pays."
Also, in last week's article, I pointed out a post by Shelagh Watkins, who repeated the Amazon 70% royalty rates myth and no one at the time, including Hugh, told her she was mistaken in her beliefs and calculations. But, it's certainly a very good thing that Hugh has learned in the ensuing 23 days that Amazon does not pay anyone a dime in royalties when you upload your book to its servers and pay your 30% retail usage fee.
It needs to be pointed out that the greatest source of the confusion about royalties vs. retail usage fees is Amazon, which describes the 70% left over once the fee has been paid as a royalty. Amazon should stop using that word and Hugh and other writers should call on them to do it. I just have. I hope Hugh does also.
It's also refreshing to see Hugh, for the first time, take a closer look at that 30 point retail usage fee. However, I disagree with him, in so far as indie authors are concerned. I don't think it's reasonable. I think it's way too high. As I've already pointed out in this blog, close to 30 points net margin is a license to print money in channels. Later in this series, I'm going to post up a "what your time is worth" analysis that will help you visualize how that 30 point fee makes earning money on your book an even harder task than it already is. It will also help bring the pricing issue into sharper focus.
Hugh also wants to know about this:
Why the 70% price cut-off? In a recent announcement about ebook prices, you all admitted that there are occasions when ebooks deserve to be priced higher than $9.99. I agree. I’d love to package my entire Silo Series trilogy together and sell it for $12.99. That would be an amazing savings to the reader, a great value to your customers. But you all treat every ebook product the exact same, which means my royalty rate would drop from 70% to 35%. That’s not good. I’d love to know why you all can’t make exceptions for certain products. In fact, indies are unlikely to EVER price their ebooks above $9.99, so why not drop the KDP price ceiling altogether. I promise you we’ll be more reasonable than other business partners you work with.
It's also a fine thing that Hugh has started to realize that Amazon's 35/65 retail usage fee is ridiculous. I kind of wonder what took him so long to see the problem in terms of bundling. And there are other aspects of the issue he's missed to date.
But the reason for the fee isn't hard to figure out if you understand what's going in the Hachette vs. Amazon battle. It has almost nothing to do with the welfare of the authors and almost everything to do with the desire of two industry forces to change the balance of power between them. If you haven't worked in and researched channels, the motivations of both can be obscure. If you have (I have), it's nothing that new. Suppliers and channels are always duking it out. Unfortunately, Hugh so far has failed to understand this and has not provided dispassionate and accurate analysis on the struggle.
Later this week, we'll be providing just that. I'm not sure Hugh will read the post (though it feels to me like he's read the previous ones), but when you read it, I think you'll have a better take on what's going on and can use that information to your best advantage.
August 19, 2014
Are We, Are We Ourselves? A Review of "Second Chance" by Dylan Hearn
Second Chance by Dylan S. Hearn
Publisher: Wet Feet Publishing; 4 edition (January 22, 2014)
Form Factor: Kindle
Language: English
ASIN: B00I0945TA
Available: Amazon
Goodreads link
Because seen through these eyes
We lead a double life
No one will know
So check it out steppin' out here I go
Are we, are we, are we ourselves?
Are we ourselves and do we really know?
Lyrics excerpted from "Are We Ourselves," The Fixx
For the last twenty years of so, I've been following guys like Ray Kurzweil and Bill Joy, prophets of the singularity and the melding of machine and mind. Ray Kurzweil thinks we'll be uploading our brains into boxes in the 2040s and is all over YouTube pushing the idea. He doesn't actually tell us how we're going to do it, but that's OK. That's what the imagination is for. One semi-serious concept I have read about involves removing your grey matter, slicing it up into sashimi layers, mapping your exposed neuronic net, and transferring it into a virtual mind. I can just imagine the title of a book based around that approach. " The Baklava Conspiracy. " Yuck.
The movie and TV industry has also been fascinated by the concept, but the quality of the work dedicated to the topic varies widely. Mind/machine melding inspired the writers of Star Trek to write the worst episode of the series, Spock's Brain. (Don't start. The Omega Glory was NOT worse than Spock's Brain.) On the the other hand, two Arnold Schwarzenegger movies on the topic, Total Recall and particularly The Sixth Day, were intriguing.
Regardless of how we (theoretically) get there, the mind in a machine concept is pure catnip fo Sci-Fi writers. I know because my own book, Rule-Set, uses mind uploading as a major plot point and target for dispute. I have to admit, I'm a bit skeptical about the idea. In the 80s I used to do hobbyist programming in languages such as Lisp and Turbo Prolog and watched the AI Winter descend over technology. You didn't have to be a genius coder to realize that you weren't going to build HAL 9000 with Lisp machines. By chance, I'd also read Hubert Dreyfus's What Computers Can't Do and the sequel, What Computers Still Can't Do and though at the time I thought the man lacked imagination, the fact is he nailed it. It was sad. Every geek and dope smoker went to see 2001: A Space Odyssey in 1968, and while no one could figure out the last twenty minutes of the movie, we all agreed that HAL and his friends would be around and barking out orders to us meat bags by the beginning of the next millennium.
But HAL never showed up. (But we're all still hoping that he does. And maybe stars in a better movie than the "meh" 2010 sequel.)
I've thought a great deal over the years about why we've failed to build sentient AIs and have come to the conclusion that it's not just a matter of bits, bytes and switch connection density. I also think there's a context problem. I describe the issue this way in Rule-Set .
"Let’s go back to the rose and thorns. We feel pain because our bodies have evolved in concert with those thorns to warn our brains we are experiencing physical damage. This is important because we if we lack that warning, our bodies may be destroyed. But how do you model pain and feed it to a neural net in a way that’s relevant to the software? Never mind distinguishing pain from the sensation of tickling vs tingling vs burning and so on? How does a stream of electrons moving through wires or superpositioned in a qubit ever ‘feel’ pain or find it relevant in any way? AI has spent the last forty years or so discovering that Bishop Berkeley was wrong. It’s not all about what’s in your head. It’s all about what’s in your head and what’s outside it.” Myrdin pointed to his temple, then waved at the interior of the control room. “It’s a unity.”
Thus, when the opportunity to review Second Chance by Dylan Hearn appeared, I took it. Dylan's another writer who can't stay away from mind/machine catnip and I wanted to see how he played with the meme.
Second Chance, the first book in a projected series, is set in a future, post-dystopian world where a mysterious corporation, Re-Life, has perfected the technique of transferring your mind to a computer-based brain simulation, then copying the stored entity into a clone. From a scientific standpoint, this is quite plausible when you study such efforts as the French Blue Brain project, work being done at IBM and other efforts to model our brains in software. (Though no one is quite ready to discuss the actual transfer process.)
Second Chance uses a third party narrative and shifts its viewpoint among several key characters. The main dramatis personae are Stephanie, a newly elected "Delegate" to the British legislature, Randall, an "information cleanser" whose job is to monitor the datasphere (an Internet replacement) and remove and obfuscate data, Nico, a private/public crime investigator who gets a cut of every malfeasance he solves, and the Technician, a shadowy figure connected to Re-Life's past who's constantly running about doing fishy things with body parts, clones, and very advanced computers.
The lives of these characters intersect when Jennica, a young Re-Life researcher, goes missing after discovering that there's something not quite right about how the Re-Live process works. The problem has something to do with data. Something to do with what happens to the mind when we bid adieu to one body and say hello to another. Perhaps something is not...quite...right?
And off we go.
Now, I need to get a couple of things out of the way. The first is that the first 10% of the book is a bit slow going to an American audience. Author Hearn is British and brings a Euro sensibility to the book. Said sensibility encompasses:
Predictions that the UN will run the world. Americans believe the UN is about as capable of running the world as their local PTA. Only your local PTA doesn't have members on its governing board who provide the schools under its jurisdiction with ground to air missiles that blow Canadian jetliners out of the sky. This might make after school meetings more interesting, but it still wouldn't convince Americans that the PTA should run the world.
The British parliamentary system. Americans are aware that the UK has a prime minister and a parliament. To an American, your prime minister is a president and your MP is a member of Congress. After that, no real clue. In Second Chance , the Speaker is the "Chief Placater," Members of Parliament (MPs) are now Delegates, and the Prime Minister is the "Prime Delegate." It sounds like a good cut of steak. It's too much inside cricket to no real purpose, though perhaps a British audience thought mixing it up was interesting. I side with Mr. Spock. "A difference which makes no difference is no difference" and the exercise just distances an American audience perhaps further than necessary.
Global warming. In Second Chance, global warming is the dystopia from which the world is recovering. Americans are very tired of global warming. And muy skeptical. I'm from the Bronx (New York) and ten thousand years ago the place was buried under a mile of ice. I'm in favor of global warming. In Connecticut, it's August and it feels like October. Everyone here is happy with climate change. Writers, it's time for a new dystopic future. Zombie Dinosaurs from Outer Space. Radioactive Leeches from Beneath the Earth's Crust. Mutant Atomic Algae. Move on, move on.
Another problem with Second Chance is that the post-dystopic future sometimes sounds too much like the present hot mess we all live in. For example, in this new and better tomorrow (the result of a seminal socio/political upheaval referred to in the book as "The Miracle") politicians are obsessed with polls, are constantly checking the Internet -- errr datasphere -- to read what people are saying about them, break their promises on key positions when it's in their interests to do so, take sexual advantage of their employees, and stab each other in the back with a vigor and regularity that would make Titus Andronicus proud.
And what's changed is?
OK, enough quibbling. Ignore the speed bumps at the beginning of story and you'll be rewarded. At its core, Second Chance is a twisty, fascinating story that draws you further in as its narrative unfolds. The plot links together puzzle box fashion so read carefully. One of the most intriguing concepts the author introduces is the promise of true physical immortality for the entire populus, not just the elites, who are already enjoying its benefits (but at what cost)? It's the Jehovah's Witness version of heaven, a vision of absolute eternal comfort paid for by absolute eternal control.
Just as interesting is the speculation in the novel that begins to swirl around the Re-Life process. The arguments about mind vs soul have raged since Descartes kicked off the era of modern philosophy. Advances in quantum physics have raised even further questions as the possibility of quantum teleportation, however unlikely now, looms as a physical possibility in the future. When/if we succeed in cutting the bonds between our physical bodies and the various electronic afterlives and simulated heavens waiting to debut in the future, will anything be left behind when the ghost leaves the shell?
Second Chance begins to probe these questions in the first book and promises to explore further in the sequels. I'm looking forward to reading them.
August 14, 2014
What Hugh Howey Won't Talk About (but Should). You, the Publishers, and the Channels. Part III of Several Parts
There are three possible tiers of distribution in contemporary publishing, and you. Let's deal with you first.
You May Have Built That but Now You Don't Own It
In the current publishing model, you aren't part of the distribution chain. That's because when you sign a publishing contract you transfer limited ownership of your writing to a third party in return for a defined form of renumeration, mainly, royalties. (There are fixed payment deals and many variants on the basic model, but I won't cover them.)
The limits of the ownership transfer can vary. In some cases (becoming more rare but still very common), you transfer all your rights indefinitely. In many cases, you also transfer your rights to works directly derived from the original, such as a sequel, even if you never write the sequel. This transfer can cover paper, audio, electronic, Braille and form factors yet to be developed (direct rendition of text to your frontal lobes via biometric inputs, for example. Don't laugh. That's not as Sci-Fi as it sounds. Give it ten years or so).
Other limitations can include:
Duration of ownership (the publishers always push for "end of time").
Territories (overseas sales). For example, your contract may cover only the US. The publishers always push for "the cosmos."
Form factor. We've already covered this.Cessation of marketing and sales efforts by the publisher leading to the termination of ownership. Publishers avoid adding this clause and claim they never cease marketing and selling your book. E-books enable to them to support this claim indefinitely.Failure to pay royalties. This is by far and away the most common reason for the transfer of ownership back to the author.
These are other ownership limitations, but in today's world, the above are the most relevant.
Before going further, please hammer home the concept of "transfer of ownership" into your noggin. The US court system is quite comfortable with the idea and judges and juries will be unsympathetic to the argument that since you wrote it, you still "own" your book after you have sold it. I'm sorry, you don't own it anymore. The words, characters, plot, etc. are now owned by a third party with the exceptions of any specific limitation clauses built into your contract.
By understanding the critical concept of the transfer of ownership, you will avoid creating this type of pathetic post that appeared on Hugh Howey's blog on August 12th (and which no one bothered to correct). Reading this is equivalent to watching a toddler wander into rush hour traffic on the Cross Bronx Expressway:
Amazon explained that midlist authors benefit from the increased sales of lower priced books. A $14.99 ebook in the KDP program has a 35% royalty rate. That’s $5.25 for the publisher and $9.74 for Amazon. A $9.99 ebook has a royalty rate of 70%. That’s $6.99 for the publisher and $3.0 for Amazon, which seems like a poor deal for the retailer (a loss of $6.74 on every book sold at $9.99 compared to $14.99), but $9.99 ebooks outsell $14.99 ebooks by a ratio of 1.74: 1. For every 1.74 ebooks sold, the retailer makes $5.22, $12.17 goes to the publisher and there’s a saving of $5/ebook for the reader.
Shelagh Watkins
Poor Shelagh (though, in her defense, Amazon is promulgating the myth that their retail usage fee is a royalty) believes that after she uploads her book to Amazon with a $9.99+ price tag she will be receiving "royalties." This is wrong. Uploading her book simply means it can now be listed and purchased on Amazon. At no time will she have ever transferred ownership rights to her book during the process of uploading it to the Amazon servers. She will never receive a penny from Amazon in royalties. Amazon will take 65% of the sale while providing no publishing services and minimal marketing programs. All she will receive is 35% of the income of the sales of her book. The rest of the money will now rest comfortably in Jeff Bezo's pocket.
(If you jump to the complete post, you'll quickly find it's mathematical gibberish because its entire premise is based on an erroneous presumption. Shelagh has zero understanding of the concept of retailer margins and markup but you don't.)
You and the Publishing World of Tomorrow
Before going further, if you, as an indie author, decide it is your best interests to sign with a publisher, I strongly suggest you not sign a traditional publishing contract unless they're offering you an obscene amount of money to do so. Definitions of obscenity vary, but even if you've led a G-rated life, I doubt you're going to see a giant advance. (If you do, don't write to tell me; I'll just hit you up for a loan.)
Assuming you do move ahead with a publisher, your contract should incorporate:
Limitations on the duration of ownership. I think publishing deals that limit transfer of ownership to periods of five, seven, ten and X number of years will become far more common. Under no circumstances sign deals that transfer ownership indefinitely!
A more equitable royalty split (assuming that model survives. I can see it being replaced or agumented by time-limited joint marketing and sales models which bypass transfer of ownership). What will the median split be? Dunno. 40%/40% sounds right to me, with Amazon's (and the other retailers') huge 30% margin cut down to an more reasonable 20 points. Remember, again, none of these retailers are publishers. Their retail service charge comes right off the top.
Far more limited restrictions on the use of alternate form factors. Though within five years paper will be largely gone and digital will be the standard. That means you negotiate your paper rights separately in the context of how the market will exist in that time.
Pay for performance requirements. In other words, publishers will be expected to meet revenue and marketing goals and benchmarks for your book in order to retain ownership.
More quantified information on the value and type of services that publishers must provide writers in return for the retention of rights of ownership. One wonderful thing about the collapse of the current model is more transparency in the relationship between authors and publishers. The departure of paper is particularly welcome in this regard. Now, when asking why you're getting 25% royalties instead of 30%, you won't have to listen to how the Thai wood borer beetle has led to a worldwide shortage of paper and the cost of producing your book has doubled. Or tripled. Or whatever number seems to work. (I know an author who was once told the cost of printing had risen sharply because of a shortage of "red ink." I'm not sure the irony was intentional.)
Guaranteed access to and effective execution of different classes and types of marketing and sales programs. X number of micro-targted direct mail campaigns on behalf of your book. SEO programs that promise top ten positioning in keywords identified as being attractive to your audience. Review management and placement. Interviews. Online show appearances. Blog tours. Video trailers. Cross promotions and endorsements with other authors in your genre. Integrated communities built into your book (not Sci-Fi. I did this in 2001). Website creation and management. And so on.
It's Not All About the Price. It's About the Data
Let's examine that last bullet point in greater detail. In all the sound and fury surrounding the Hachette vs. Amazon struggle, the most critical point has been ignored. And that is publishers are traditionally supposed to be able to sell and market your books, but in the world of E-books, they can't.
Why? Because they don't know who their buyers and readers are. Amazon, Kobo, Smashwords et al do.
In the vanishing world of paper, publishers marketed their products primarily by putting them in places where people went to buy books. The model allowed them to know how many books were sold and where, but it never informed them of who bought the books. To this day, none of the major publishers have good information on their readers. They're starting to obtain that information via their own direct sales operations, but the data is fragmented across divisions and platforms. I doubt if any of them have a handle on their E-sales or have good analytics systems in place. That kind of geek stuff is not what they've been trained to think about.
This means that major publishers are seriously handicapped when it comes to providing the publishing services of tomorrow. While I don't know how the current H vs. A imbroglio plays out, I do know what will happen if publishers don't learn to identify their readers and put together effective marketing programs on behalf of writers.
The retailers will. And believe me, they are thinking about it. I'll shortly be writing about MDF (marketing development funds) programs in this series and the part they play in channels. It will be informative.
But in the meantime, if the big publishers are smart, they'll buy Kobo, or Smashwords or Oyster or someone and use that as a start to create a counterweight to Amazon and a data analytics hub for their own marketing purposes. Because if they don't, they are truly doomed. The channel will devour them whole and they'll deserve their fate.
You May Have Built That but Now You Don't Own It
In the current publishing model, you aren't part of the distribution chain. That's because when you sign a publishing contract you transfer limited ownership of your writing to a third party in return for a defined form of renumeration, mainly, royalties. (There are fixed payment deals and many variants on the basic model, but I won't cover them.)
The limits of the ownership transfer can vary. In some cases (becoming more rare but still very common), you transfer all your rights indefinitely. In many cases, you also transfer your rights to works directly derived from the original, such as a sequel, even if you never write the sequel. This transfer can cover paper, audio, electronic, Braille and form factors yet to be developed (direct rendition of text to your frontal lobes via biometric inputs, for example. Don't laugh. That's not as Sci-Fi as it sounds. Give it ten years or so).
Other limitations can include:
Duration of ownership (the publishers always push for "end of time").
Territories (overseas sales). For example, your contract may cover only the US. The publishers always push for "the cosmos."
Form factor. We've already covered this.Cessation of marketing and sales efforts by the publisher leading to the termination of ownership. Publishers avoid adding this clause and claim they never cease marketing and selling your book. E-books enable to them to support this claim indefinitely.Failure to pay royalties. This is by far and away the most common reason for the transfer of ownership back to the author.
These are other ownership limitations, but in today's world, the above are the most relevant.
Before going further, please hammer home the concept of "transfer of ownership" into your noggin. The US court system is quite comfortable with the idea and judges and juries will be unsympathetic to the argument that since you wrote it, you still "own" your book after you have sold it. I'm sorry, you don't own it anymore. The words, characters, plot, etc. are now owned by a third party with the exceptions of any specific limitation clauses built into your contract.
By understanding the critical concept of the transfer of ownership, you will avoid creating this type of pathetic post that appeared on Hugh Howey's blog on August 12th (and which no one bothered to correct). Reading this is equivalent to watching a toddler wander into rush hour traffic on the Cross Bronx Expressway:
Amazon explained that midlist authors benefit from the increased sales of lower priced books. A $14.99 ebook in the KDP program has a 35% royalty rate. That’s $5.25 for the publisher and $9.74 for Amazon. A $9.99 ebook has a royalty rate of 70%. That’s $6.99 for the publisher and $3.0 for Amazon, which seems like a poor deal for the retailer (a loss of $6.74 on every book sold at $9.99 compared to $14.99), but $9.99 ebooks outsell $14.99 ebooks by a ratio of 1.74: 1. For every 1.74 ebooks sold, the retailer makes $5.22, $12.17 goes to the publisher and there’s a saving of $5/ebook for the reader.
Shelagh Watkins
Poor Shelagh (though, in her defense, Amazon is promulgating the myth that their retail usage fee is a royalty) believes that after she uploads her book to Amazon with a $9.99+ price tag she will be receiving "royalties." This is wrong. Uploading her book simply means it can now be listed and purchased on Amazon. At no time will she have ever transferred ownership rights to her book during the process of uploading it to the Amazon servers. She will never receive a penny from Amazon in royalties. Amazon will take 65% of the sale while providing no publishing services and minimal marketing programs. All she will receive is 35% of the income of the sales of her book. The rest of the money will now rest comfortably in Jeff Bezo's pocket.
(If you jump to the complete post, you'll quickly find it's mathematical gibberish because its entire premise is based on an erroneous presumption. Shelagh has zero understanding of the concept of retailer margins and markup but you don't.)
You and the Publishing World of Tomorrow
Before going further, if you, as an indie author, decide it is your best interests to sign with a publisher, I strongly suggest you not sign a traditional publishing contract unless they're offering you an obscene amount of money to do so. Definitions of obscenity vary, but even if you've led a G-rated life, I doubt you're going to see a giant advance. (If you do, don't write to tell me; I'll just hit you up for a loan.)
Assuming you do move ahead with a publisher, your contract should incorporate:
Limitations on the duration of ownership. I think publishing deals that limit transfer of ownership to periods of five, seven, ten and X number of years will become far more common. Under no circumstances sign deals that transfer ownership indefinitely!
A more equitable royalty split (assuming that model survives. I can see it being replaced or agumented by time-limited joint marketing and sales models which bypass transfer of ownership). What will the median split be? Dunno. 40%/40% sounds right to me, with Amazon's (and the other retailers') huge 30% margin cut down to an more reasonable 20 points. Remember, again, none of these retailers are publishers. Their retail service charge comes right off the top.
Far more limited restrictions on the use of alternate form factors. Though within five years paper will be largely gone and digital will be the standard. That means you negotiate your paper rights separately in the context of how the market will exist in that time.
Pay for performance requirements. In other words, publishers will be expected to meet revenue and marketing goals and benchmarks for your book in order to retain ownership.
More quantified information on the value and type of services that publishers must provide writers in return for the retention of rights of ownership. One wonderful thing about the collapse of the current model is more transparency in the relationship between authors and publishers. The departure of paper is particularly welcome in this regard. Now, when asking why you're getting 25% royalties instead of 30%, you won't have to listen to how the Thai wood borer beetle has led to a worldwide shortage of paper and the cost of producing your book has doubled. Or tripled. Or whatever number seems to work. (I know an author who was once told the cost of printing had risen sharply because of a shortage of "red ink." I'm not sure the irony was intentional.)
Guaranteed access to and effective execution of different classes and types of marketing and sales programs. X number of micro-targted direct mail campaigns on behalf of your book. SEO programs that promise top ten positioning in keywords identified as being attractive to your audience. Review management and placement. Interviews. Online show appearances. Blog tours. Video trailers. Cross promotions and endorsements with other authors in your genre. Integrated communities built into your book (not Sci-Fi. I did this in 2001). Website creation and management. And so on.
It's Not All About the Price. It's About the Data
Let's examine that last bullet point in greater detail. In all the sound and fury surrounding the Hachette vs. Amazon struggle, the most critical point has been ignored. And that is publishers are traditionally supposed to be able to sell and market your books, but in the world of E-books, they can't.
Why? Because they don't know who their buyers and readers are. Amazon, Kobo, Smashwords et al do.
In the vanishing world of paper, publishers marketed their products primarily by putting them in places where people went to buy books. The model allowed them to know how many books were sold and where, but it never informed them of who bought the books. To this day, none of the major publishers have good information on their readers. They're starting to obtain that information via their own direct sales operations, but the data is fragmented across divisions and platforms. I doubt if any of them have a handle on their E-sales or have good analytics systems in place. That kind of geek stuff is not what they've been trained to think about.
This means that major publishers are seriously handicapped when it comes to providing the publishing services of tomorrow. While I don't know how the current H vs. A imbroglio plays out, I do know what will happen if publishers don't learn to identify their readers and put together effective marketing programs on behalf of writers.
The retailers will. And believe me, they are thinking about it. I'll shortly be writing about MDF (marketing development funds) programs in this series and the part they play in channels. It will be informative.
But in the meantime, if the big publishers are smart, they'll buy Kobo, or Smashwords or Oyster or someone and use that as a start to create a counterweight to Amazon and a data analytics hub for their own marketing purposes. Because if they don't, they are truly doomed. The channel will devour them whole and they'll deserve their fate.
August 8, 2014
What Hugh Howey Won't Talk About (but Should). And Don't Take Amazon's Latest Claims About the Awesomeness of $2.99 to $7.99 Pricing Seriously. Part II of Several Parts (a .5 Release)
Sorry for the .5. I've worked in software for many years and we tend to do that.
Just a quick update on the Hugh Howey stemwinder of August 1st. I thought this was interesting:
So, no one has anything to say about the actual arguments and positions from either side? Is that what I’m hearing? To equivocate between Amazon and Hachette by saying both are corporations is absolutely absurd. Monsanto and Whole Foods are both corporations. So they’re the same, right? No need to look any further?
I’d rather dig deeper than that, if nobody minds.
* Amazon allows anyone to publish. Hachette doesn’t even allow unagented submissions, meaning they require you to pay 15% of your earnings to a third party just to talk to them, no matter how well you can represent yourself.
From the Amazon Publishing Website (This site is dedicated to Amazon's house imprints.)
Submissions
Amazon Publishing does not accept unsolicited manuscripts, proposals, or other submissions at this time.
Just a quick update on the Hugh Howey stemwinder of August 1st. I thought this was interesting:
So, no one has anything to say about the actual arguments and positions from either side? Is that what I’m hearing? To equivocate between Amazon and Hachette by saying both are corporations is absolutely absurd. Monsanto and Whole Foods are both corporations. So they’re the same, right? No need to look any further?
I’d rather dig deeper than that, if nobody minds.
* Amazon allows anyone to publish. Hachette doesn’t even allow unagented submissions, meaning they require you to pay 15% of your earnings to a third party just to talk to them, no matter how well you can represent yourself.
From the Amazon Publishing Website (This site is dedicated to Amazon's house imprints.)
Submissions
Amazon Publishing does not accept unsolicited manuscripts, proposals, or other submissions at this time.
August 6, 2014
What Hugh Howey Won't Talk About (but Should). And Don't Take Amazon's Latest Claims About the Awesomeness of $2.99 to $7.99 Pricing Seriously. Part II of Several Parts
In part I of this series we took a close look at Amazons' 30% retailer markup and analyzed why the company is benefiting handsomely from its model. Again, no criticism of Amazon is implied. Amazon is a channel company (yes, I know that they create some of their own content. Macy's has house brand shirts that they contract to be produced. We'll discuss that later). As a channel company, Amazon worships margins. That's what channel companies do.
(A quick aside. In its public tussle, Amazon offered to return to Hachette authors the "proceeds" from the sale of their books on Amazon. Please note that this offer did not include Amazon's 30 point markup. That, they keep. Channel companies give up margin with the same alacrity as the head lion of a pride gives up a dead zebra he's just stolen from the hardworking ladies of the group.)
The Other Amazon Retail Markup Schedule
To date, most of the conversation has focused around Amazon's 30% retail markup for books sold under $9.99 and over $2.99. But Amazon also has another retail markup schedule. That's a 35% you /65% them retail markup schedule. For some reason, Amazon advocates such as Hugh Howey do not discuss this alternate schedule. They should. The reason is that this markup is not connected to any sort of economic reality. You cannot make money on your book when you give away 65% margin points to a channel. Thus, for all practical purposes, Amazon has thrown tens of thousands of authors out their system.
These are many authors and publishers of niche books and limited editions aimed at small audiences. In many of these markets (including one I write for, software and SaaS companies. I also write for the great fantasy/Sci-Fi-book-you-just-can't-put-down-and-should-buy-right-now segment.) the number of customers for books that cover topics of relevance to this market is small, numbered perhaps in the mid thousands of readers worldwide. There will be no hope of generating sales volumes large enough to make the time and effort of writing such a book worthwhile. Titles that discuss such things as SLAs and their place in the business model of an online software firm seem to lack the broad appeal of a JK Rowling offering. Therefore I and many others, at least in regards to these types of books, are locked out of Amazon. This is not a complaint, simply an observation. It is fair to note however, that Amazon has loudly proclaimed it's pricing is in the best interests of authors. If you're selling a novel about alien invasions or the latest zombie apocalypse, this may be true. For other categories of books, their 35/65 pricing isn't.
Another factor to consider is that at the punitive 35/65 split, you are also blocked from using a publisher if you decide you want to go down that road. There is no margin left in the sale of the book to attract a good publisher (in other words, one that will really work to get you book reviews, execute effective SEO, build or provide E-mailing lists, back that up with social media, etc.)
The final result of Amazon's pricing schedule is that if you want to make money, you are stuck in a $7.00 pricing box. In its most recent proclamation on the topic, Amazon claims this is a good thing and they say they have the numbers to prove it:
+++ It's also important to understand that e-books are highly price-elastic. This means that when the price goes up, customers buy much less. We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000. +++
This is an impressive bit of text and at first glance, a strong argument in favor of Amazon's pricing policies, though I do find Amazon's attitude somewhat authoritarian:
+++ Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. +++
I would think the market would be the best arbiter of pricing, not Amazon. But, after all, it is their store and they're entitled to their opinions. But a quick analysis of the Amazon's statement reveals their claims are incomplete and also nonsensical in certain respects.
The first problem is it lumps all books together into one big pot leading to what I call a median stew. Let's take a look at a single example, author Stephen King, whose pricing I will defend even though he did write Insomnia . (Don't ask. Just...don't ask.) Stephen has lots of books available on Amazon at different price points. I see The Stand is on Kindle for 5.17. The Shining for $1.99. And here's his latest book, not yet released, The Revival, $14.99 on Kindle. God, what a fool Stephen and Simon and Schuster are. First, the 35/65 split. Oh, wait. I'll bet real American dollars that Simon and Schuster isn't paying 35/65. That's for the little people. The split is more likely 75/25 or even 80/20. King's got clout in the business.
Also, I don't think Stephen King is losing ".74" copies at that $14.99 price because Stephen King is a brand. There are lots of people who can't wait to get their hands on his books and will happily pay an extra five bucks to get them as early as possible during the novel's roll out period, probably sixty days. After that, it might make sense to drop the price back to $9.99 or whatever careful testing indicates is optimal. Certainly, over time, the price will continue to decrease and to give Amazon all credit, I'm sure King has seen increased residual sales of his earlier works because of the long tail effect.
But the reality is at $9.99 during the launch, King will be leaving money on the table. The revenue generated by the increased number of people who will buy more copies at $9.99 will almost certainly not be offset by the money lost by not satisfying the market desire of a significant number of readers to get their hands on the book ASAP and who will willingly pay a premium for the privilege. That's the power of a brand and you should all strive to become one.
Or consider book publishing's biggest brand, JK Rowling. Imagine she's just announced a new Harry Potter book. Harry Potter and the Adventure of the Golden Franchise. Think those millions of fans out there wouldn't shell out a few extra bucks to get their (virtual) sweaty palms on the latest tome about the boy wizard? And if you want to see what real clout does for you in the book business, go click on her E-book links on Amazon. Welcome to "Pottermore." (Somewhere, Jeff Bezos is weeping.)
BTW, if Amazon wants to dispute the above analysis, it can easily do so. But it won't. The company possesses huge amounts of data and can provide all kinds of detailed analyses on price points for highly branded authors, unknowns, niches and special markets. It does not do so. If it did, its current argument would immediately fall apart as you looked at different scenarios, markets and promotional strategies.
So the question is why the current Amazon pricing model? That's all about power and the future. We'll dig even deeper in the upcoming parts of this series.
(A quick aside. In its public tussle, Amazon offered to return to Hachette authors the "proceeds" from the sale of their books on Amazon. Please note that this offer did not include Amazon's 30 point markup. That, they keep. Channel companies give up margin with the same alacrity as the head lion of a pride gives up a dead zebra he's just stolen from the hardworking ladies of the group.)
The Other Amazon Retail Markup Schedule
To date, most of the conversation has focused around Amazon's 30% retail markup for books sold under $9.99 and over $2.99. But Amazon also has another retail markup schedule. That's a 35% you /65% them retail markup schedule. For some reason, Amazon advocates such as Hugh Howey do not discuss this alternate schedule. They should. The reason is that this markup is not connected to any sort of economic reality. You cannot make money on your book when you give away 65% margin points to a channel. Thus, for all practical purposes, Amazon has thrown tens of thousands of authors out their system.
These are many authors and publishers of niche books and limited editions aimed at small audiences. In many of these markets (including one I write for, software and SaaS companies. I also write for the great fantasy/Sci-Fi-book-you-just-can't-put-down-and-should-buy-right-now segment.) the number of customers for books that cover topics of relevance to this market is small, numbered perhaps in the mid thousands of readers worldwide. There will be no hope of generating sales volumes large enough to make the time and effort of writing such a book worthwhile. Titles that discuss such things as SLAs and their place in the business model of an online software firm seem to lack the broad appeal of a JK Rowling offering. Therefore I and many others, at least in regards to these types of books, are locked out of Amazon. This is not a complaint, simply an observation. It is fair to note however, that Amazon has loudly proclaimed it's pricing is in the best interests of authors. If you're selling a novel about alien invasions or the latest zombie apocalypse, this may be true. For other categories of books, their 35/65 pricing isn't.
Another factor to consider is that at the punitive 35/65 split, you are also blocked from using a publisher if you decide you want to go down that road. There is no margin left in the sale of the book to attract a good publisher (in other words, one that will really work to get you book reviews, execute effective SEO, build or provide E-mailing lists, back that up with social media, etc.)
The final result of Amazon's pricing schedule is that if you want to make money, you are stuck in a $7.00 pricing box. In its most recent proclamation on the topic, Amazon claims this is a good thing and they say they have the numbers to prove it:
+++ It's also important to understand that e-books are highly price-elastic. This means that when the price goes up, customers buy much less. We've quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000. +++
This is an impressive bit of text and at first glance, a strong argument in favor of Amazon's pricing policies, though I do find Amazon's attitude somewhat authoritarian:
+++ Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. +++
I would think the market would be the best arbiter of pricing, not Amazon. But, after all, it is their store and they're entitled to their opinions. But a quick analysis of the Amazon's statement reveals their claims are incomplete and also nonsensical in certain respects.
The first problem is it lumps all books together into one big pot leading to what I call a median stew. Let's take a look at a single example, author Stephen King, whose pricing I will defend even though he did write Insomnia . (Don't ask. Just...don't ask.) Stephen has lots of books available on Amazon at different price points. I see The Stand is on Kindle for 5.17. The Shining for $1.99. And here's his latest book, not yet released, The Revival, $14.99 on Kindle. God, what a fool Stephen and Simon and Schuster are. First, the 35/65 split. Oh, wait. I'll bet real American dollars that Simon and Schuster isn't paying 35/65. That's for the little people. The split is more likely 75/25 or even 80/20. King's got clout in the business.
Also, I don't think Stephen King is losing ".74" copies at that $14.99 price because Stephen King is a brand. There are lots of people who can't wait to get their hands on his books and will happily pay an extra five bucks to get them as early as possible during the novel's roll out period, probably sixty days. After that, it might make sense to drop the price back to $9.99 or whatever careful testing indicates is optimal. Certainly, over time, the price will continue to decrease and to give Amazon all credit, I'm sure King has seen increased residual sales of his earlier works because of the long tail effect.
But the reality is at $9.99 during the launch, King will be leaving money on the table. The revenue generated by the increased number of people who will buy more copies at $9.99 will almost certainly not be offset by the money lost by not satisfying the market desire of a significant number of readers to get their hands on the book ASAP and who will willingly pay a premium for the privilege. That's the power of a brand and you should all strive to become one.
Or consider book publishing's biggest brand, JK Rowling. Imagine she's just announced a new Harry Potter book. Harry Potter and the Adventure of the Golden Franchise. Think those millions of fans out there wouldn't shell out a few extra bucks to get their (virtual) sweaty palms on the latest tome about the boy wizard? And if you want to see what real clout does for you in the book business, go click on her E-book links on Amazon. Welcome to "Pottermore." (Somewhere, Jeff Bezos is weeping.)
BTW, if Amazon wants to dispute the above analysis, it can easily do so. But it won't. The company possesses huge amounts of data and can provide all kinds of detailed analyses on price points for highly branded authors, unknowns, niches and special markets. It does not do so. If it did, its current argument would immediately fall apart as you looked at different scenarios, markets and promotional strategies.
So the question is why the current Amazon pricing model? That's all about power and the future. We'll dig even deeper in the upcoming parts of this series.
