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.
No comments have been added yet.
