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Hyperion CEO: Book Publishing Business Model Is Broken

4 January 2012

An interview from Digital Book World:

Jeremy Greenfield: You’re projecting big digital revenues for fiscal year 2012 and significant digital revenue growth all the way through 2015. Will overall revenues grow along with digital revenues?

Ellen Archer: Digital continues to take a bigger share of the pie.

We’re all going to be watching the first three months of 2012 very closely. We’ve seen huge disruptions in 2011 to the marketplace. With all the tablet devices that will be given as gifts for the holidays, there’s more unknown. What impact will we see on reading and on book acquisition based on people having these tablets?

As for overall revenues, let’s just say, as we move forward, we’re going to have to create new models. This business model, while it’s never been great, is broken; 2012 is going to be about finding new business models.

We’ve been able to provide advances to authors and unfortunately most of those [advances] don’t drive revenue.

What are the new ways of making these deals so that it’s fair to all of us?

JG: Are you suggesting advances will go away in the future?

EA: I’m suggesting that we need to create a “Chinese menu” for deals. There are lots of different ways of how a deal can be structured and we need to explore what those deals could look like.

The one pattern that I have seen is that while there is still big money being thrown around for certain books, there is an awareness that we can’t continue to overpay. Advances are already lowering.

Link to the rest at Digital Book World

Big Publishing, Disruptive Innovation, Ebooks

22 Comments to “Hyperion CEO: Book Publishing Business Model Is Broken”

  1. In other news, the Catholic Church finally admitted that Galileo was right.

    Seriously though, I’ll be keeping my eyes on this. Would be nice to see some genuine adaptation and innovation from players other than Amazon.


  2. Author advances don’t drive revenue… um, she thinks they are supposed to? This statement just flummoxes me. You pay your content providers, so that you *have* product to sell. Or are authors supposed to pay for the privilege?

    • “We’ve been able to provide advances to authors and unfortunately most of those [advances] don’t drive revenue.”

      Someone must STILL be seriously sloshed from the new year.

      If this is how the CEO of Hyperion sees things, they aren’t headed for disaster, they are already there.

      Big publishing has generally been cutting advances and then looking for ways to cut digital royalties. As Anthea already pointed out those advances are a payment) or down payment) on the goods they need to keep their doors open.

      Is it me or does it sound like they feel there will be an unlimited stream of content donaters, waiting for Hyperion to step in like a savior and distribute? Can you be that far out of touch? Can you insult your possible buisness partners any more deeply?

      CONCLUSION: It is not just the buisness model that is broken. Their entire perspective of the playing field is delusional. Content providers, the source of the very life blood of their buisness, are viewed with disdain.

  3. Shorter Jeremy Greenfield: The business model is broken, therefore the first place we must look for money is from our content providers.

    Your business model is still broken.

  4. Advances are needed now because the average length of time from signing a contract until a book is on the shelves is 12-18 months, and writers needed *something* to live on during that long draught. And after publication it’s a year at least until royalties are first paid, and thereafter only every six months.

    Fix *that* entirely antiquated and broken model and yes, advances won’t have to be as high. Faster time to publication and monthly royalty payments are a good place to start (but not a place to stop).

    • Let’s not forget the REAL kicker in that draught: non-compete clauses that keep authors from earning a living in the meantime. Broken is putting it mildly.

  5. It seems to me that they’re shifting the risk to the author.

    • But that sounds almost like…INDIE PUBLISHING! Who’d a thunk it?

      Go to a 50/50 split of gross e-book revenue and I’ll gladly go “traditional”. Otherwise, the returns diminish rapidly.

  6. This Q/A has me flummoxed:

    JG: How will you be evolving the way you staff your organization because of new digital opportunities and challenges?

    EA: That’s a struggle for all of us: Who do we need and how many do we need?

    Right now we have people doing two jobs. They’re doing the print job because that drives most of our revenue but they’re also putting out the e-books and they have to digitize our backlist. Everyone is working very hard.

    In production and pre-production is where the new technologies will come out that will facilitate a speedier process and I do believe those tools will be coming out in six months.

    What on earth does that last sentence mean? Pre-production and production are the core of your business. You “believe” that new technology is coming out in six months? As a tech guy, let me tell you a secret. If there really was new technology coming out in 6 months that would change your business, you would know.

    The only possibilities I see here are;

    1. The quote is garbled.
    2. Ellen Archer is a complete idiot.
    3. Ellen Archer thinks we are complete idiots.

    Option 2 is unlikely, but possible. I’m trying to decide which of the remaining options is more likely.

    • It sounds like it means “there are plenty of tools out there to help make production more efficient, and we’ll probably start actually using them in six months.”

      • I like your translation, Sarah. 🙂

        • Perhaps you ment: “In about 6 months we will finally be upgrading from Windows 3.11 (for work groups) and will be going straight to Windows 2000. In another 6 years we will be upgrading our accounting system so that we don’t have to retype the entire program in BASIC every time there is a power outage”

      • Sounds like there are plenty of tools in the front office as well…

        The only way I can see the advances-as-revenue-generator would be if they could demonstrate it resulted in greater productivity from their authors. I.E. pay me enough to take a 6-month leave of absence from my day job and I’ll present you with a polished MS.

        But as another commenter pointed out, those advances are largely nonexistent except for name-brand authors. And my family enjoys living in a house and eating food.

      • I read it as their internal tools will be ready in about six months. This is a big corporation, they have people to write incompatible and buggy software in Cobol instead of using something off the shelf.

  7. While there is some shift in attitude here (in places), the big things remain the same. The publishers want to take (lower advances) without giving (higher digital royalties).

  8. From the full version (link in original post): “While Amazon and Apple have incredible insight into consumer-buying patterns and habits, I have something else that’s really interesting, which is a bird’s eye view on how to collaborate with media partners to drive discovery and sales.”

    Translation: While Amazon and Apple have market insight, I have something they don’t…a front row seat in watching a ‘media empire’ crash and burn.

    A bird’s eye view is only as valid as what it sees. Amazon has a bird’s eye view of fresh content providers, from which it cherry picks best sellers. Apple has a bird’s eye view of an established walled garden system, from which it can push further products.

    Hyperion has what again? A massive operational cost, steadily declining customer loyalty, brutal contracts that drive new content to competitors, a delusional CEO and a buisness model that cuts itself off at the knees.

    So about that bird’s eye view…perhaps that bird is the one that’s been decorating your car.

  9. The only advances that need to shrink are the huge, never-earning-out-in-our-lifetimes advances they pay to big names. The paltry excuses for advances (which have shrunk more than once over the past 20 years) they pay to midlisters DON’T need to get any smaller. But who’s willing to bet they won’t?

  10. Meanwhile, Amazon keeps updating its business model, adding more and more perks for writers.

  11. I vote for PG as the ‘media-genic’ blogger of the year.

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