The sky is falling… no, the earth is rising

It’s going to a disaster for new authors if the bad DoJ actually prosecutes publishers for collusion and makes agency pricing go away… Of course there is no evidence, and anyway, Amazon is the real badguy… According to Mike Shatzkin

Now it is worth pointing out to you that his business is essentially consulting to legacy publishing before you reach any conclusion. He does his best to stay civil but to quote him “This blog is written from the perspective of professionals in the publishing business and intended *primarily* to help them understand the changing world we’re working in.” The blog comments do seem a little short on input from those professionals. I think however I can safely assume (with as much proof that publishers colluded with Apple to institute the agency model) that his view is acceptable in the sight of his principal clients. His views, broadly are theirs, he knows and is friends with them. This not a view which appears to regard either producers or consumers as items of particular value, or to understand either.

To summarize Shatzkin as best as I can: If agency pricing goes it will be bad for everyone except Amazon, especially independent newbies, because they will lose their price advantage. Wicked Amazon will price bestsellers low, as loss leaders, and no one will bother with Dave Freer or Fanny Newgirlonnablock. And Amazon will go on to become a monopoly AND the (BIG BOGY_MAN MUZAK) they’ll stop paying independents such high royalties, and squeeze everyone…

Oh and a little later in his comments he reaches the interesting conclusion that book buying is governed by the number of books readers can/want to read, and not by a budget.

Oh… dearie me. Dearie dearie me.
Let’s play through from a minor author’s point of view these terrible fates. Let’s start with the squeeze… quite plausible. At the moment they’re paying 70% of gross. Publishers are paying… 25% of Net. Or, to take the deceptive terms out and allow comparison of frink-fruit with frink-fruit, a gross (after agent’s commission) of somewhere around 14.5%… That’s a LOT of squeeze before it gets that low. And a lot of gap for competitors.

Shatzkin admits that the the industry is probably paying too little at 25% of net, but then goes on to say that it’s pretty irrelevant as most authors will never earn out their advance. Hmm. Let’s think this one through, as we know that advances are pretty blooming low anyway, and have dropped from 5K to 4K and falling…. (if this reminds you of the improbability drive, that’s because that is what is.) Let me run this one past your logic circuits: If the buyer of your patented new mousetrap offers you a royalty of 5% and advance of $4000… and somehow you never earn back that $4000 in royalties, let alone any additional royalties, and the mousetrap manufacturer has shall we say, opaque accounting practices… But when you offer him your newest mousetrap design, he sighs and says that out of the kindness of his heart he’ll take that off you for $3500… and that he’s bought seven other new mousetraps and none of them ever earned his advance… do little warning lights come up? Does the circuit that alerts you to improbable events say that the chances of someone paying MORE than the item is actually worth, repeatedly, are several million to one, against?

Now, of course, if you have terminal Stockholm syndrome you’ll tell me it’s because they’re supporting literature! And your poor little work was worthy of nourishment and they did it because they LOVE you.

And I will try not to be sick in my mouth.

Please believe me, I hate the taste of my own vomit and that is just too nauseating : The ONLY way all of this happens is if you’re being ripped sixteen ways to breakfast.

I think that puts that one where it belongs, in the paddock being eaten by dung beetles. Pay some small attention to it because it is relevant to the next part of the story.

Agency publishing will be a disaster for the independents because Amazon has deep pockets, and can afford to run bestsellers as loss-leaders thereby destroying independents price advantage. This is called ‘publisher think’ and it’s something like ‘military intelligence’. You see Shatzkin is thinking like a traditional publisher, and assuming independents work work the same way. He’s confusing the world he knows and works in with reality. At $2.99 for Joe Bestseller’s e-book, Amazon (and probably his publisher, and possibly Joe) are eating a vast loss, with every book sold. At $2.99 Dave Freer is taking home $2.08 and that is NEARLY 400% MORE than I made if the traditional publisher sold it as a paperback. I can afford to discount to the point where I take home 64 cents and I’m STILL doing just as well as I was, scraping by with my traditional publisher. I haven’t made a loss yet. I can afford to compete, as an independent, on price. I’m not carrying vast overheads that add nothing at all to the value of the product.

On the other hand, traditional publishers… have a list of books coming out each month. Bestsellers, being discounted get a boost in sales numbers, but the reality is Amazon will demand discounts to cover some of the discount they offer. And their other marketing channels will do the same. So some more sales… but huge advances (and here they REALLY are more than the book may earn, but that’s oK, because they’re cross subsidized by those other ‘ acts of generosity’ and the vast overheads of the NY office and lots of other guff that adds NOTHING to Fred Midlister’s book sales.

Except… They can’t discount Fred Midlister’s e-books… because heaven help them, that is actually paying the bills. SO, Dave Independent and Joe Bestseller can discount. They can slug it out more or less equally priced, although Dave can still cut, and still make a profit, and so he will do it more, until his brand (his name) sells as much Joe’s or at least enough to make him happy and wealthy.

Meanwhile… remember that Fred Midlister was the lucky fellow that was having his advance (that he never earns) cut. Because his publisher LOVES him and values literature, and wants to buy the next one out of the goodness of his heart. This means less sales for him, and probably even less pay. He also happens to be a friend of Dave Independent, who, when his friend is moved to living under a bridge by the overwhelming generosity of his publisher will point out that he could go independent, discount his books and still earn more.

So I’m guessing the loser might be the publisher, because without the newbies and midlisters to be overwhelmed by generosity – and to carry the cost of the stuff they get almost benefit from – they have to rely on the discounted bestsellers… and trust me on this too, I’ve done the math. Short of black swans, they haven’t a hope. Bestsellers are vastly profitable, BECAUSE the cost (including the huge advance) is also carried by the rest of the list. Of course Shatzkin and the trad-publishers don’t quite see it that way, but it is, the way Mount Everest is 🙂

And now for our little surprise test… well, more of a survey. Who here’s book buying habit is governed by the number of books they can/want to read, and not by a budget? If you had $15 to buy books with, and the must-read DOG & DRAGON was $4.99 and not $14.99 would you spend the other 10 bucks on books or something else? and would you be prepared to venture 99 cents on a noob?

Tell me about it.

31 Comments

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31 responses to “The sky is falling… no, the earth is rising

  1. As it happens I already paid $15 for the Dog & D eARC and consider it money well spent… but for the most part the cheaper each book the more I buy.

    To answer your question. I do have a notional budget for books each month and do tend to limit my spending if I come up against that number. However if my budget (remaining) were $15 I’m not sure that if I want book A and book B and they cost (together) say, $10 instead of $15 I will necessarily spend the entire $5 remaining on another book but I might and would certainly take a chance at a $3 book because really, $3 isn’t worth worrying about if it turns out to be a horrible book.

    • Yeah, my reaction too, Francis. I will also go OVER budget if I feel I’m getting a bargain – budget max 50 dollars (two paperbacks, Australia!) Ooh look, they’re only $7… Hell, I’ll buy 10. But if the books cost $23 – NO WAY am I buying a third one (although that is less than I would have spent had they been $7).

  2. Unfortunately Dave, that .99 ebook from a newbie will need to “really grab me” before I’d buy it.

    The .99 ebook “yells” self-published and unless I know the author or have heard good things about the author from people I trust, “self-published” still comes across to me as “junk writing”. IE only the author’s mother would like it. [Sad Smile]

    • You make a good point Drak. But Shatzkin’s argument was all these people had going for them was the price-point and that was why they had succeeded. So if 99 cents says ‘rubbish’ it’ll say rubbish for any author I haven’t heard of (and that includes a lot of previously trad-published too)

  3. Dave, I apparently live in a different world from Shatzin and am glad I do. Reality may suck at times and change is often hard to accept, but it beats clinging onto the small piece of increasingly waterlogged wood in the middle of a toxic ocean–which is exactly what legacy publishers are doing. Some of the comments to Shatzin’s post literally left me shaking my head. And yes, I see another blog post coming based just on some of those comments.

    As for your question, I’d be living under a bridge somewhere if I bought books based on the number available/number I want to read. Budget drives my buying habit. I quit buying hard covers years ago (with a very few exceptions) because of increasingly high prices. I don’t buy every e-arc that comes out (of course, there is a certain simian as well as another member of the blog whose e-arcs I race out to find). And I find myself being more discerning about what e-books I buy. Very rarely do I buy a legacy publisher’s e-book, especially one priced more than $9.99. Those tend to be non-fiction. I can count on less than three fingers the number of times I’ve paid more than $9.99 for a fiction e-book.

    So, to answer your question. Yes, if Dog and Dragon were $4.99 and I had another $10 left in my book budget for the month, I’d go see what else I could get. I would also see how much I could get for that price. After all, three books will last me longer than one.

    • Spoken like true book addict :-). What Shatzkin and his ilk don’t get is that reading begets reading. The more books people get the more they’ll want, but they have to live within certain limits. Just as the high price of cigarettes didn’t stop people smoking… it sure as hell slowed the consumption down. And it’s a lot easier to quit a 5 a day habit, than an 80 a day habit.

  4. Let me see — as an author I prefer to buy books new, to support other authors. HOWEVER I’ve long since stopped being able to buy paper books. Somewhere around the time that trad publishing advances became more irregular and smaller which affected my budget, which…
    The fact paper books are now somewhere near $10 for a paperback and that I have at least a 5 to 1 discard-before-finishing rate doesn’t help. So I moved to all but a few authors I love and for whom I’ll pay a premium and buy in hard cover, soft cover and ebook (Pratchett, for ex) to ALL used books for paper. The new book buying I still do is in ebooks where I”m discovering entire mystery series I never saw in stores at all, and which the authors are now putting out for 2.99 a piece. I discovered one yesterday, but the publisher (not the author) is releasing the backlist at 7.99. I loved the first one, but buying the second WILL have to wait till I lose my mind and can justify it to myself. If it were $4.99 even, I’d probably already have bought/read three or four more.
    This whole thing reminds me of an argument with a friendly editor (and one of the brighter ones, now no longer in the field, at least not in that capacity) who SWORE to me that if they cut the price of books (I pointed out they had massive efficiencies in typesetting in the electronic age and therefore COULD) people would think they were “cheap” and “lower quality” and not buy them. She swore to me they’d done “tests.” It never occurred to her the fact these books had horrible covers (yes, I knew the line) and cheap paper AND were not pushed, therefore hardly anywhere on the shelves, had more to do with the experiment failing than the fact that they were offered at 4.99. Go figure.

    • “I prefer to buy books new, to support other authors.”
      Sarah, I get that a lot here, where paperbacks can retail for AUS$ 25 – which has approached = US$ 27.50 – to scare the hell out of you. People come up to me saying “I bought your book!” With the subtext ‘I’m a friend of yours. I’ve just supported you financially quite substantially. Aren’t I generous nice guy.’ Most of them mean it well, but sometimes there is quite some resentment at me being such a greedy gouger. Then I tell them it’s a pity they did it, as I could have given them a copy. Inevitably that makes them start a little. “But doesn’t that do you out of money?” At which point I say “Yes. But only about 50 cents.” ” But it’s a great big think book.” “Oh one of the Shadow of the Lion ones? I only get 14 cents of those.” At which point they tend to stop resenting ME being a gouging bastard and sympathize with me for shafted and regard, correctly, the rest of the chain as lovely people. Works for me. And the more this gets known the less likely others are to try it. Amazon too.

  5. I’d buy Joe Newbie for up to $4.99 ebook. Why? Because someone out there did the same thing for me.

    Shatzin must live in a really nice alternate dimension. Sounds like a great place to be a stodgy old publisher who is terrified that every single writer out there might leave them in search for greener pastures.

    I’m glad I don’t live there. I don’t think I could stomach the thought of being a burden on a publisher and them publishing me out of the kindness of their hearts.

    • (What kindness?)

      The other thing not taken in account is that you don’t buy books for the kindle sight unseen. Take this weekend — I downloaded twenty samples. So far I’ve bought two books. (I started on eight.) There remain twelve I MIGHT buy, but it will probably net another two or three. Do I give a hang who published them? Nope. Actually most of the “rejects” are from major houses, or were ten years ago. The books I bought had to fulfill the following criteria: less than ten dollars (I know, but I refuse to spend more than $20 for a weekend’s entertainment, and yes, would prefer $10 or less for two), historical mysteries about an era I don’t find repulsive or opaque, good enough grammar/spelling not to distract me, no political screeds in sample pages, well told enough to keep me reading — and the final burden “be something that grabs me on that particular day” (This changes, and one sample I’m keeping because I THINK I might like it when I’m not so tired.)
      Amazingly six books, five of them by big houses failed the first basic criteria. I’m shocked. You?

    • I think the most terrifying part is authors REALLY manage to get themselves to believe the kindness and for literature stuff. I asks yer wid tears in me baby blue peepers. How can people be so stupid so often?

      • Kate Paulk

        Dave, Dave,

        Stupid is the normal condition of humanity. Most people don’t like to have to think, and will do damn near anything to get someone else to think for them. All you have to do is have the properly authoritative tone and you will have your sheeple all lined up ready to do anything for you.

  6. Stephen Simmons

    I don’t have the handicap of ever having dealt with a traditional publisher, thankfully. But I am utterly certain that while Amanda actually does love both me and literature, she would NOT have bought any of my work if she didn’t expect it to make money for both of us. I know, because the stuff that wasn’t up to snuff came back with advice for what might help make it saleable. And despite having coined the phrase “collective gullibility”, I’m not dumb enough to think those traditional publishers pay those exorbitant NYC leases by habitually losing money on their primary stock-in-trade.

    • Well… i suspect that, as Shatzkin displays (a bitter comment or three about the fact that although the one political party might make his problems go away, he still won’t support them. I am outside your political system and suspect all of them), they do lose money for ideological reasons. BUT they don’t do that with the little cannon-fodder, who get no support. No, their ideals, politics and world-view pushing books get everything they can give.

  7. Laine

    I totally believe The Bug 5 stuffed up.

    Before the fiasco I used to buy at least 5 books a week from Fictionwise for my Hanlin.
    After the big publisher dummy spit I now buy from Harlequin, Regency Reads, Baen and Smashwords etc And the few big name authors I get from AMAZON and I have a kindle now.

    If they wanted to stop Amazon from taking over they’ve done a very poor job.

    And I’ve discovered there are plenty of authors worth risking $3 – $5 on.

    • Indeed. I think they’ve forgotten how to compete. Their whole marketing drive was focussed on pleasing distributors and booksellers. Not customers. Amazon – whatever else you can say about them – focus on customers.

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  11. I keep buying books by some guy named Freer when I run across them on Amazon. No matter what the price.

    I’ll buy books from an unknown if somebody I trust recommends them: a trusted reviewer, a trusted source, a trusted friend, somebody I trust at Baen’s Bar, etc. Not because the publisher published it.

    • Fred, other than books from Baen, I’d be hard-pressed to tell you who published a certain author. Most people I know are the same way, especially when it comes to e-books. They look at the name of the author, the title of the book and book description, not what company’s logo is on the cover/spine. As for quality, the last two e-books I read from legacy publishers were so poorly copy edited and proofread, not to mention formatted, that it made them difficult to read. The sad thing is, other than the formatting of extra space between paragraphs and no first line indents, the issues I had with the e-books were also present in the printed version. And they want customers to pay at least $12.99 for the e-book and more than $28.99 for the hard cover. No thank you. I’ll stick with recommendations from friends I trust.

    • Yeah, we really need to work on this ‘trusted source’ thing. It’s the key, I think.

  12. Geoffrey Kidd

    Back before the great Amazon-Publisher War, I regularly bought a heckuva lot of books at Fictionwise. One of the things they used to do before the wonderful Big Six forbade it, was to offer heavy rebates on new releases, sometimes as much as 100% of purchase price. Which meant that I could pay $20 for a new bestseller in eBook format, and *still* have $20 in store credit with Fictionwise to buy more books. Think of it! Paying *hardcover* price for an eBook! And I could put up with it because I knew that I’d just spend the money on, *gasp*, OTHER BOOKS!

    Last I looked, it was called “win-win.” Can’t do it that way these days, though.

    So these days, I still buy open-format (0-DRM) books from Fictionwise, the occasional Harlequin, and everything Baen the Blessed brings out. (Hi, Dave!) and *very* little else. Period.

    My big question is how much did the Big Six’s antics encourage people to consider “shopping” in places usually tagged “Tortuga” or “Port Royal”?

    • A lot, I think. Look the wealthy exec in a publishing house just has the wrong world view. Like Shatzkin he assumes we (beneath his notice peasants, whose job it is to buy what he tells us, at the price he dictates, and he’s disgusted with us for doing it so badly) have so much spare cash that we buy all we can possibly want read, regardless of price. Yes, none of us have budgets and pretty little spare cash. And most of us like more rather than less, and most of LOVE deals (buy one Weber, pick any of these free/ for a dollar or something like that, for example)

      • Geoffrey Kidd

        While I was reading “1636: The Kremlin Games” recently, I came across the following:

        “…he thought like a nobleman. Lowry believed, deep inside, that he deserved more and better than anyone else.”

        If that’s not a capsule description of the people running the “intellectual property” industries, I’ll eat my keyboard.

        Without salt.

  13. I’d probably be spending at least half of it on books, and would be much more likely to be giving that 99¢ noobie a try.

    BTW, thanks for another great post.

  14. Ferd of the Nort

    I was looking at my book buying dynamic when I came onto this blog. And this post on this blog. {shut up editors and grammar nazis, deliberate}.

    I have spent the last 9 years reading on Mars. Or thereabouts. Actually the Canadian arctic. It costs $C2000 to go to a bookstore. Buying books on-line did not attract me as I was having to select things on-line, order, wait 2-3 weeks and get big box of books in the mail. Then came ebooks.

    Oh, I do not buy hard-cover. The churn rate I used to have made hard-cover untenable.

    Baen books had downloadable content I could get on the (essentially) dial-up connection at a reasonable price point. Because of that I explored a LOT of authors and product that I could get hold of for the first time. The ebooks on my computer made sense. BUT

    Not into Amazon. Just did not work for me, and the prices of other (non-Baen) ebooks they had was insane. Kindle and the ebook reader revolution comes along. I am still in the flipping arctic. I eventually got a iPod touch for the mobile entertainment. Stanza worked as the app for me. Portable, fits into my parka on the plane. Multi-fuction. iPad comes along. Does not work for me (too limited for computing). I stick with the iPod and Computer combo. I spend large chunks of vacation in bookstores, finding new authors.

    To explore books, I need a physical space. From the exploration, I can download the author’s other work as ebooks. Pity most of them are ugly expensive (at a price point that makes no economic sense, based on the lack of physical manufacturing, warehousing and transportation, much less retailing expense).

    I just got a MacBook Air. It “peeves” me no end that Apple turns out not to have created a READER component for iBooks that works on their computers. the ability to go from the iPod (still good after 5 years) to the computer would be wonderful.

    The book-buying dynamic is for me: physical browse when I can to expand the base, rely on tried and trusted accessible/affordable content as another element of the base, then go into the back/new catalogue of the author for more. Price is secondary to me. BUT. When an ebook is MORE expensive than the paperback version, that tells me I am being ripped off. Ripping off the customer is not a good repeat customer promotional tactic.

    Book buyers are always repeat customers, unless “peeved”.

    • The problem with most publisher is that readers aren’t customers. Bookstore buyers are. And that is the root of most of their problems.

      And as someone a long from bookstores myself, I wish NY publishing would get out the hot-house and have a try at browsing a bookstore in the back end of beyond

  15. Ferd of the Nort

    Oh yeah. Baen books had Dog and Dragon sample chapters, previous history of reading Dave Freer, took a look. Will be getting the first book and Dog and Dragon this weekend.