Home » Big Publishing, Joe Konrath, Self-Publishing » A Case of the Shatz – Fisking Mike Shatzkin

A Case of the Shatz – Fisking Mike Shatzkin

14 February 2014

From Joe Konrath:

Mike Shatzkin, sounding more and more like an apologist and less like the forward-thinker he’s been in years past,took a stab at poking holes in Hugh Howey’s new www.authorearnings.com endeavor.

In the comments, Hugh gracefully said he agreed with 86% of what Mike said.

I, however, found little to agree with. I’m also not much in the grace department.

I’ll take Mike point-by-point, which begins after a few paragraphs of introduction.

Mike:  Hugh’s latest business inspiration — a call to arms suggesting to independent authors that they should just eschew traditional publishing or demand it pay them like indie publishing — is potentially much more toxic to consume. (The agenda here is unclear. Is Hugh most interested in getting more authors self-publishing or in organizing authors to demand better terms from publishers? It’s hard to tell, but there is an agenda, it would seem.)

Joe: Hugh’s agenda is transparent, both on his blog, and on www.authorearnings.com, and in the email exchanges and conversations I’ve had with him.

He wants authors to be informed so they can make correct decisions.That’s also my agenda.

Your agenda, Mike, is also transparent. As is the agenda of the Big 5, most literary agents, and the Authors Guild. You all earn your living from the legacy industry, and if there is a mass exodus of authors to self-publishing, you all are in deep doo-doo.

I’ll reiterate: Hugh is losing time and money on www.authorearnings.com. He won’t get his time or money back. I could have written a dozen novels instead of blogging these past years. Neither of us charge authors any consulting fees. We do what we do as a public service.

. . . .

Mike: 3. Unearned advances and their impact on author earnings. Unearned advances are a substantial part of author compensation. I know of one Big Five house that calculates that they pay more than 40% of their revenue to authors and another which says that number is in the high 30s. That’s not all digital, some of that is print with manufacturing and warehousing and shipping costs associated with the revenue. How can you compare how authors are compensated if you don’t calculate the benefits to authors, meaning the resulting higher percentage of the revenue they’ve taken, of unearned advances? That relevant data is also not available.

Joe: Mike, could it be the advances are unearned because legacy royalties suck?

If you were a genre author offered a $100k advance earning 12.5% royalties off of the digital list price (25% of net, and publishers sell to Amazon at roughly 50% off their digital list price), and your ebook is priced at $4.99, you earn $0.63 per ebook sold. You need to sell 159,000 ebooks to earn out your advance. And when you do, you’re stuck with 63 cents per sale, FOREVER.

The same ebook, self-published, earns the author $3.49 per copy sold. If they sell 28,653 copies, they made the $100,000. Every copy they sell after that, they make 5.6x more money than they do on a legacy ebook.

Which seems like a better deal for authors?

Also, unless the author is a mega bestseller commanding astronomical advances, guess what happens if the author doesn’t earn out? They don’t get any new deals from their publisher, even though the publisher STILL holds onto their backlist rights.

Publishers can afford advances because they make triple what authors do in royalties. It’s a high interest loan (ridiculously high interest), and even if it isn’t paid pack by earning out, the publisher can still do very well.

. . . .

Mike: 5. Current indie successes where the author name or even the book itself was “made” by traditional publishers. Another factor any author self-publishing has to consider is the likelihood of success, which is much greater if the books are backlist (have some fame in the marketplace) or even if just the author has been previously published. Successes like Howey’s, from a total standing start with no prior writing track record, are quite different from others who have reclaimed their backlists and used them as a platform to build a self-publishing career.

Joe: Mike, reread what you just said.

“others who have reclaimed their backlists and used them as a platform to build a self-publishing career. “

First of all, these backlist books obviously weren’t selling for the legacy publisher, or else the legacy publisher never would have returned the rights.

Second of all, if the authors who got their backlists returned were able to build a career, WHY THE HELL WOULD ANYONE SUBMIT TO LEGACY PUBLISHERS EVER AGAIN?!?

Pardon my yelling, but what you just said shows your absolute inability to understand what’s happening here.

To rephrase what you just said:

Legacy publishers couldn’t sell the same books that went on to make self-published authors successful.

. . . .

Mike: This bias of sample is compounded by the focus on genre fiction. No matter how big a percentage of those niches is served by Amazon, it is important to remember that it is where they are relatively strongest in relation to the big publishers. If we were comparing literary fiction or biographies — both of which have lots of worthy authors too — the chances are the cost of an Amazon-only distribution strategy, or an ebook-only distribution strategy, would be far higher. And the chances of success would be far lower.

Joe: Then publishers should have nothing to worry about. They’ll still get lit fic and biography submissions. Problem solved.

That is, until ebook sales climb in those categories as well.

Hmm, how much lit fic and biographies to publishers actually sell? How big are those pie slices?

I wonder, when the data come in, if those authors also do better self-pubbing. I guess we’ll have to wait and see what Hugh digs up.

Link to the rest at A Newbie’s Guide to Publishing and thanks to David for the tip.

PG would add a quick thought on unearned advances.

Typically, they fall into two categories:

1. Advances paid to big-name authors that neither the author nor the publisher ever anticipate will earn out. The advance is the only payment the author expects.

One of the reasons for these is that many publishers have most-favored-nation provisions in some of their contracts that will escalate the royalty rates of those contracts to match the highest royalty rates the publisher pays to any author.

So rather than directly pay the big-name author a higher royalty rate, the publisher pays an advance that will never be earned out at the lower royalty rate. This effectively pays the big-name author a higher actual royalty per book sold without triggering any most-favored nation clauses in other contracts.

2. The second unearned advance category is for books that didn’t sell nearly as well as the publisher thought they would – business mistakes. As is mentioned in another post today, publishers seldom make a second such business mistake on the same author.

Big Publishing, Joe Konrath, Self-Publishing

35 Comments to “A Case of the Shatz – Fisking Mike Shatzkin”

  1. I’d emphasize — because this point eluded me for a long time — that failure to earn out doesn’t necessarily mean the publisher lost any money on the book. The publisher is collecting several times the author’s royalty on each book, so they could well (and usually do) make back the advance out of their own share of the income. As Joe points out, it’s a loan. (If the book’s a real flop and they massively overdid the initial print run, sure, they could actually lose money. That’s rarer than just not earning out.)

  2. I have this same problem with conservatives and libertarians arguing with left-statists: they get lost in minutiae and leave the principle alone, when the principle alone is dispositive. A slam-dunk.

    I wouldn’t take a tradpub contract into consideration, let alone sign it, if it were the last one on Earth. Not the rights grabs, the abysmal accounting, the non-competes. No. Those are non-negotiable deal-breakers. Whether or not I spend more or less time or money on editing my books or designing my covers is irrelevant. Or whether I make more or less money than my alpha reader (whose first novel (from Tor) earned out of its advance in hard cover in five months — mazeltov). The principle overrides in any case.


  3. There’s another big problem with unearned advances. If your first book doesn’t sell enough, you don’t get the opportunity for a second book. That’s why it’s a common practice to write subsequent books under a penname. Because the B&N buyer looks at the sales of your previous book, and if they weren’t enough, no more sales.

    Even if they do, they tend to buy only the amount that they sold the previous time. If you don’t sell out and they return for #3, they’ll order less, creating a career death spiral.

    There’s no such thing as building a career at a Big 5 company. It’s usually one and out.

  4. I’ve been traditionally published since 1999 and self published since 2011. So far, my self publishing career has hardly taken off, and in 2013 I made more on royalties from trad books published years ago then I did from self-publishing.

    And yet… I am not submitting to traditional publishers. I’m doing educational work for hire for flat fee (have to pay the bills somehow), but I’m not willing to give up my original works for the low advances and lousy royalties publishers are paying. All publishing is a gamble, so I might as well take the one that has a better chance at a high payoff.

    These are the kinds of decisions that traditional publishers are missing. I met with two young adult authors recently, both traditionally published and both considering self-publishing. One of them has sold six books in the last three years, yet she’s had so many frustrations (such as a series first sold in 2006 that has gone through two publishers and still hasn’t released) that the control of self-publishing is luring her away.

    Writers know about “Show, Don’t Tell.” Publishers keep trying to tell us that we’re better off with them, but they haven’t done much to show it.

  5. From the comments:
    Shatzkin’s client list includes:

    – HarperCollins
    – Hachette
    – Barnes & Noble
    – Kensington
    – Penguin
    – Perseus
    – Simon & Schuster
    – Scholastic

    Not saying, he’s all wrong, but guys like him and Maass know that the folks who pay their rent and send their kids to college are reading all these blog posts very carefully. You need to make sure that Big 5 exec or editor still wants to extend your consulting contract or look at your client’s manuscript.

    So you have to think that Mike’s incentive to say and do anything to dismiss Howey’s conclusions is much greater than Howey’s incentive to defend those conclusions…
    And Shatzkin talks of “agendas”?

    • I think you’re right. What is someone like Mike Shatzkin going to do? I doubt he would come out and tell the Big 5 that pay him that they’re screwed (not unless, you know, he’s getting ready to retire). To a certain extent, I think he’s just doing what most people would do. Defending his job because he wants to keep working in the industry. People like him have had it pretty steady all these years and self-publishing, from a distance, looks like a big, scary upset coming to destroy their way of life. Most people don’t react well to things like that.

  6. Oh, I do love a good Konrath fisking.

  7. With regard to unearned royalties, this comment from Mike on his original post absolutely SLAYED me:

    “The “dirty little secret”, if you’re looking for one, is that this means that higher royalties *are *being accepted by publishers, but only for the authors who have agents sophisticated enough to know how the game is *really *played.*”

    Oh, no, it’s not the AUTHORS, whose books are selling hundreds of thousands or even millions of copies, who command these huge advances in lieu of better royalty percentages, but their “sophisticated agents” who know how to play the game.

    I just can’t even…

    • It kills me to because it essentially admits that big publishing conspires to hold down the royalties % to the detriment of its mid-listers.

    • How much sophistication does it take to say “Here’s a list of what I want. If I don’t get what I want, I’ll walk.”
      Really, once you understand what your work is worth, all it takes is guts.

    • Even I figured that out. And nobody ever accused me of being sophisticated.

  8. I’m glad there’s a Joe Konrath in the world.

  9. I wrote a long comment over there that might be of interest to folks who wonder what they can learn from Mike Shatzkin. I find that he’s wrong in the most revealing ways.


  10. Also, I’m glad Joe gets a chance to take on someone in his own (intellectual) weight class. I felt a little sorry for the agents…

  11. http://lunch.publishersmarketplace.com/2014/02/discussion-author-earnings-part-1/

    Much scare quotes and appeals to authority in this Michael Cader piece.

    • That blog is worse than the DBW rebuttal.

    • Well, that was special. But then, it wasn’t unexpected that the PTBs would out-and-out call Hugh and Data Guy liars at some point.

      (D*mm*t, I really need to finish my novella. I should turn off the internet, but this is like watching Crash Test Dummy videos. I can’t stop myself.)

    • Pathetic.

    • It’s amusing that he thinks traditional publishing would be more transparent if Amazon were. Traditional publishing has been scr*wing authors for decades on end. What makes us think they would become transparent now? Their entire business model would fall apart. What’s more, I bet most in the upper tier of the publishing world know this.

    • The piece doesn’t really say much, or give evidence to refute Hugh Howie’s numbers – just some vague implications that Amazon’s website can’t really be trusted.

      This amounts to the fallacy of making the perfect the enemy of the good i.e since the data source Hugh Howie used isn’t perfect, we should ignore it and wait for some ideal data source that will be revealed in the far flung future.

  12. This, from Konrath’s post, surely belongs on a t-shirt.

    “Why aren’t I being farmed? Could it have been something I said?”

  13. i can promise that those who are saying [above] that publishers have been massive low ballers in underpaying many authors while fabulously compensating the few [including themselves]; that pubs have been rampantly dishonest and opaque in royalty agreements, not to mention editors’ salaries– the commenters are correct. I wouldnt even pretend otherwise having seen it, heard it, first hand from some of the highest up in randy peng, harper and BDD before it was swallowed by the behemoth.

    That dishonesty is only a secret from people who have no critical thinking skills. As another person here pointed out, authors lose money left and right not ‘earning out’/selling through, while pubs buy a new housekeeper for their second /third vacation houses in the hamptons– and while publishers tsk tsk the authors not ‘earning out’ relegating them to the bottom of the heap. That is not only dishonest, it’s unethical to mislead others in business in order to feast while the authors are in famine. It is also sotted with malignant greed and envy and pride.

  14. Most of this is somewhat redundant for the straight (non hybrid) indie author. Trad publishing rejects 99.9% of authors, either at the agent or publisher stage. We now understand, and have proof, that this has nothing to do with a book’s potential to attract readers. On top of this new authors will waste months and years submitting mss to gain entry to an unattractive system and most will fail.

    The most important break out for an author now is to get over the idea that you need the endorsement of the trad publishing machine, but to realise that the ms needs to be polished to the same standard; to ensure by your own efforts the work put forward for purchase is the very best you can produce.

    • True, it’s redundant, but it needs to be said over and over again, with hard proof backing it. Because it takes several impressions to change people’s minds. And there are new writers entering the field every day who need to consider these things before deciding on their path.

      So, yeah, at some point the majority of authors will say, “heard that before.” I guarantee it will be used to dismiss future Hugh Howey posts (“Yawn. So publishers screw over authors by hiding their profit and loss figures; tell me something else.”) But that doesn’t make this any less important to learn.

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