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.
No comments have been added yet.
