As you might imagine, I am still dissecting the past few months, and today I want to focus on business model. Some of this might seem antithetical to how publishing does business (I actually don’t think so, not if you think about it). It will definitely make some people uncomfortable because it links the actual success of a book to aspects of compensation. Not every part of the model needs to be applied in every instance, but it’s worth considering the merits and possibilities, even if you ultimately choose another path.
Successful digital publishers have been largely limited to genre fiction, romance in particular (to the best of my knowledge, and I know I’ll be corrected on this point!) because there is a significant portion of the readership that is comfortable being an early adopter of technology. The business model has worked because the participants involved understand the risks and rewards. As I’ve noted more than a few times, this model has been evolving for well over a decade, and will continue to evolve. And, as you’ll see when you get to my final point, it’s undergoing the same sea change the rest of the industry faces.
Over time, there have been failures big and small in this marketplace. The reasons vary. The successes all have elements and principles in common. Not surprisingly, most of these principles have to do with cost effectiveness and economies of scale. I’d like to thank Angela James, who has, over the years, written and spoken extensively on this topic. Some of my thoughts and conclusions may vary from hers, and I defer to experience.
No/Low Advances — Cash flow, especially in the beginning, will be tight. And while there is a strata of author who will not work with you if you don’t pay advances, there are many excellent authors who, for various reasons, including creative expression, will. But the publisher needs to keep some key promises, outlined below.
By the way, over the years, I have heard every argument under the sun for and against the no-advance model. I’ve seen authors refuse to consider this alternative (while spending years trying to sell a manuscript that traditional publishers won’t touch, and not because of quality or talent). I’ve seen an organization engage in an at-least annual battle over this stance. And I’ve seen authors succeed, to the point where traditional publishers with fatter checking accounts are not necessarily enough to convince the authors to give up the benefits of writing for a digital publisher (and yes, most compromise by writing for both).
I believe every author should weigh options and make the right decision for his or her career.
Higher Author Royalties and More Timely Reporting — Royalties in this marketplace are generally higher, starting at 35% and increasing. This probably gives many in the publishing industry hives, but it also makes the author an active participant in her book; at the very least, it acknowledges the author’s role in the writing and marketing of the book. Both sides are taking a risk, and both sides share the rewards of hard work.
Just as important, from my perspective, is the shift in royalty reporting. In the 1990s, it was possible to get a manual distribution statement from Djibouti faster than for a traditional publisher to report sales to an author. That is still the case. Semi-annual statements with 60- or 90-day reporting lags are relics of days gone by. In the digital publishing world, royalties are paid, at the latest, quarterly with a 30- to 60-day window. Many are paid monthly.
Part of this is the difference in money flow. If you look at it on a per-book basis, it takes a long time for hard dollars to get back to the traditional publisher. Cash for digital sales (and note my use of cash) gets to the publisher much faster, certain laggardly retailers notwithstanding. Paying authors in the most timely manner possible is part of the compact. Authors note they’ve written, published, and been paid royalties for ebooks in the time it takes to get the second and third tranches of their advances from bigger publishers.
Completed Manuscripts — In traditional publishing, it is not uncommon for a house to go to contract based on a proposal or even idea. At some point, an advance check is written and the waiting game begins. It’s one of those time value of money things. The longer it takes to get a manuscript completed and available for sale, well, you know.
Faster To-Market Time — One of the key reasons authors love advances (other than the it’s guaranteed money that they can’t take away from me not matter how my book does aspect) is that it’s the only money they might see related to their book for years. Publishing is a slow business, and the timeframe from acquisition to book-on-shelf can be stretched beyond the patience of ordinary humans. The digital publishing production frame is compressed.
Shifting Participants — This is going to make some people cringe, and I admit it was one of the harder aspects for me to wrap my mind around. Many digital publishers started as, for lack of a better term, mom-and-pop operations. As they grew, additional staffing was required. On the minus side, these publishers did not have the benefit of fifty-plus years of backlist to finance ongoing operations.
Finding quality editors was a priority, paying them top dollar was not as easy. A few standards emerged, with two basic ideas moving to the forefront: paying per word and/or paying on a royalty basis. Angela James wrote a very good article about editor pay. As with author advances, this is not going to be comfortable for everyone, but it’s worked out quite nicely for more than a few editors. Bonus: fewer meetings, more editing. Minus: unless your book hits big, your hourly rate is, at the end of the day, rather low. Granted, if you’re working in-house at a traditional publisher and already squeezing your actual editing job into your personal time, this might even out in the end. I am, sadly, not kidding
On Twitter and over time, there have been discussions about the disconnect between editorial and sales and marketing and readers. The people who know the book the best, have championed it, worked with it, invested in it, are very often removed from the process of seeing it succeed. To me, that is unaccountably strange. Of course, as noted above, I’m not sure how the modern editor could add one more task to the schedule. Imagine the culture shift involved in holding fewer meetings…imagine the the number of meetings required to implement such a policy!
Over our brief lifetime, I was also contacted by cover artists who were also willing to work on a royalty basis. This was not the approach we chose, but, yeah, getting your foot in the door as an artist is all about taking risks. Again, something to think about, especially when you’re starting up.
Quality Control — Issues of quality have long been a concern of mine, and I’ve been dumbfounded by authors and publishers who refuse to acknowledge this as a legitimate issue. As you can imagine from the above, there are quality risks a publisher takes in this business model. Poor quality in books turns off customers. The first wave of ebook adopters, readers willing to take a chance because they craved something different, were largely repelled due to poor quality control, including production and editorial.
There has been much progress in this area, but those early perceptions remain. Quality will be, I believe, a growing issue in this marketplace. Existing publishers, facing an influx of new-to-ebook readers will be going head-to-head with traditional publishers.
It should make those traditional publishers cringe to know that they are not surefire winners in this battle. I’ve talked before about the appalling quality of ebooks from very big publishers, and I’ve talked about the sheer (only it was spelled shear) lack of editorial attention to some books. Factor in pricing, DRM, and the way online readers connect, and there are definite pain points for traditional publishers.
Print Is Expensive — Building an infrastructure for print distribution, especially in this marketplace is insanely expensive, far more so than building a digital distribution infrastructure. While it leaves out many physical retail outlets, I remain convinced that a smart POD or PTO program is the most fiscally responsible choice a digital publisher can make, at least until there is a solid idea of sales and customer preferences. Doing print wrong is bad for everyone.
Unit Sales Are Lower — This might be one of those “duh” points. Let’s be frank: the vast majority of readers have not yet adopted ebooks. Publishers who have succeeded have done so by leveraging a growing market while keeping costs low. Luckily, breakeven is a lower dollar value. I will note (though surely I don’t have to!) that low unit sales are not limited to digital publishing. As Daniel Menaker reiterates in the article linked at the end of this post, far too many traditionally published books fail to earn out their advances. One wonders how long this will be possible.
Managing Prices — Success comes in many ways, and one is matching consumer pricing expectations. Looking back at my editorial pay thoughts, both payment approaches allow a publisher to better manage certain costs, allowing them more flexibility when it comes to setting prices. Hint: readers are price and word count conscious. As new readers move into the market, they’re going to seek out like-minded readers in their favorite niches. Information will be shared.
Direct versus Third Party Sales — To date, this model has been successful for publishers because they have built a strong (and growing) readership via direct sales. This increases the amount of money flowing to the publisher and author. In order to maintain this advantage, publishers need to use marketing tactics to encourage readers to shop at their website and, above all, make sure formats are well-supported.
However — and if I gave the impression otherwise in my previous post, that was not intended — any digital publisher entering today’s marketplace must factor the increase of third party sales into financial models. They are growing, and they’re going to continue to grow, though estimating the percentage of sales they comprise is a moving target. In a recent post, Mike Shatzkin considers making verticals even more more vertical by aggregating like content, regardless of publisher, aka the tor.com model. This is happening to a degree as eretailers emerge in marketplace and build a solid customer base, but nobody can ignore the hardware/software stranglehold being created by large retailers.
You cannot expect the readers to discover your website. You cannot expect the readers to want to go through the hassle of figuring out files and formats and how to use them. And you cannot (this will sound familiar to all publishers great and small!) expect readers to know about or care about your business model. What you can do is make the idea of buying direct from your website as attractive and easy as possible. If there is a weakness in today’s digital publishing business, it is right there. Buying ebooks is far too hard, and that goes for all publishers great and small.
(Interesting: after I’d written the above, word came via Jane at Dear Author that Ellora’s Cave, a noted hold-out in the Kindle store, may be reconsidering this position.)
The above is not a comprehensive look at the digital publishing business model, but I think I hit many key points. Astute readers will notice that there isn’t anything different in this model, unless you count the more careful aligning of costs to sales. As with new business in any industry, starting a new publishing business is filled with risk. I would posit that starting a small print publisher is far riskier than starting a digital publishing company — both from the perspective of infrastructure and ongoing costs.
I still believe this model is viable, and I’m pleased to see others entering the game despite Quartet Press’s lack of success.
Extra credit reading:
- On Hosting One’s Own Parties and Performing a Bookish Autoposy: Kat Meyer expands upon her thoughts (in the comments below) about digital distribution (warning: she sparked thoughts on my end — we may end up on fire!). Also she mentions the too-fab Peter Collingridge, someone I’ve admired for some time.
- Redactor Agonistes: Daniel Menaker writes about editorial job satisfaction and other issues. His observations support some of my points. Risk, she is everywhere.