Hachette Frenzy vs. Author Earnings

27 May 2014

A lot of traditional publishing and its authors have had fainting spells over negotiations between Amazon and Hachette concerning a new ebook contract now that Hachette is out of the court-ordered lockdown on its price-fixing conspiracy. (Or maybe, as David Gaughran and others have suggested, it’s just a Hachette negotiating tactic in the form of a PR campaign.)

The anguished cries have torn at everyone’s hearts:

– Amazon has been selling Hachette ebooks at Hachette’s list price! 

– Amazon has stopped allowing preorders on Hachette books! (Something indie authors don’t have.)

– Hachette good, Amazon bad!

On the other hand, Hugh Howey and Data Guy have released a new analysis showing that indie authors are making more than tradpub authors selling ebooks on Amazon (a PG simplification of the analysis). And that an author who writes well enough to receive a contract offer from traditional publishing will probably make much, much more money if he/she goes indie than than traditional.

If PG were an author who had just signed a traditional contract instead of self-publishing, the Author Earnings report might elicit some anguished cries from him.

So, here’s PG’s rhetorical question: Which is more dangerous to Big Publishing – pricing negotiations with Amazon or the direction the dollars are blowing for indie authors on Amazon?

PG says it’s the indie author and the dollars they’re earning on Amazon.  While this kind of information has been passed from author to author for some time, the Author Earnings reports demonstrate that it’s not anecdotal data – it’s happening to a large number of authors on Amazon.

The simple fact is that Big Publishing relies on big authors for its profits and its survival. Imagine traditional publishing as an inverted pyramid balanced on a small percentage of its authors and their books. A handful of authors make the difference between a good year and a bad year, between people keeping their jobs or losing their jobs.

Look what E.L. James did for Random House in 2012. With E.L. James, record profits. Without E.L. James, a decline in revenues and maybe a loss on the year. RH will probably receive another great sales bump when the movie comes out. All from one author.

The E.L. James experience isn’t a one-off. It’s pretty much what passes for business strategy in New York. “Find me the next E.L. James!” “Find me the next James Patterson!”

But what happens if the next E.L. James doesn’t answer the email? Or the phone call? What happens if the next E.L. James believes she has a better life and is making more money as an indie author?

In another month or two, Hachette will be old news because it will make a deal with Amazon. It has to. While the agreement will be confidential, PG predicts that Hachette will win Publishers Weekly and Amazon will win the contract negotiation.

The Author Earnings reports, on the other hand, are each another tick of a financial time bomb that Big Publishing really, really, really wants to ignore.

Big Publishing is already missing some big authors and, as time passes, it will miss more and more big authors. A missed author is a missed backlist. As the latest Author Earnings report demonstrates, Big Publishing makes a whole lot of money from the backlist sales of a relative handful of bestselling authors.

When those authors signed contracts for those big books, self-publishing was not a realistic option, so there wasn’t really a choice. Now it is an option. A good one.

Author Earnings is not only pointing out that there is a choice today, they’re saying, to quote a comment from Hugh Howey:

1) For the 1% who can choose [to take a traditional contract because they are offered one], the majority of them should be choosing to self-publish. From everything and everyone we know, these authors would be happier, more productive, and far wealthier if they struck out on their own. They are paying middlemen a fortune to perform a service that is no longer needed. Instead of being saddled with cover art they don’t really like and an editor they didn’t choose, they could have complete control over both for a fraction of the price. (I know I’m singing to the choir here. It’s the agnostics in the pews we’re running these numbers for).

2) Earnings show market potential. If we discovered that only 5 indie authors are earning a decent living, the legacy publishing pundits would be screaming our findings from the mountaintops. Remember when the dialog was all about how 95% of self-published authors don’t sell more than 100 books in their lifetimes? That’s the sort of thing we set out to check. What we are finding instead is that the chances of making a living from writing fiction is likely greater for self-published authors than traditionally published authors. Those findings include enough of a variety of books on both sides to be a meaningful conclusion. If you are weighing how to publish, the numbers from Amazon’s bestseller lists should tempt you into self-publishing.

PG says this is much, much, much bigger news than Hachette/Amazon.

Amazon, Author Earnings/Vanity Presses, Big Publishing, Hugh Howey, PG's Thoughts (such as they are)

70 Comments to “Hachette Frenzy vs. Author Earnings”

  1. Yes. Yes. Yes. A thousand times yes.

  2. Good analysis. I think what might worry some authors as well is the thought of Amazon lowering their royalty rate to authors, which might be easier to do with Big Publishing out of the way.

    • Yep! You don’t want to fight a war on multiple fronts.

    • Even if big publishers were out of the way, there would still be Kobo, Nook, etc. for Amazon to consider. Any one of those could offer better deals to writers, if Amazon cut royalties, resulting in mass movement to these other online vendors. It’s true that people who are invested in kindles will be on the mobi format, but no doubt some company could come up with a way around that, since most Indies don’t DRM their books anyway.

      • And Gumroad, and other direct-to-reader sales options that will probably develop over time.

        • Exactly. Can’t say for sure I guess, but I figure Amazon is well aware of what would happen if they mess with royalties and give the competition a boost.

          Hell, we could all just start selling .pdf’s somewhere if all else fails.

  3. It’s only going to get worse. Hugh Howey took a print-only deal (if I remember right) which makes sense right now (although Dean Wesley Smith and Kris Rusch have shown that it’s not strictly necessary).

    That’s not always going to be the case. POD is getting better, cheaper, and higher-quality by the day. What happens when it becomes cheaper for (e.g.) Walmart to have one POD unit rather than devoting the floor space to racks of books and dealing with the shipping/receiving/return hassle? What is Random Penguin going to say if Walmart says “just send us the PDF or your books don’t go in the store”?

    The recent examples of POD I’ve seen look pretty good compared to the product that’s coming out of the Big 5.5 nowadays. Not as good as a well-made book, but that’s not what the Big 5.5 are turning out. They’re shipping crap bindings that fall apart in your hands after two readings (sometimes one).

  4. A few nights ago on a national channel, in a news break between commercial, the commentator mentioned the negotiation between Hachette and Amazon. The frenzy continues.

  5. Pre-caffeine, I had to stare at this for a few seconds, trying to figure out who PG was quoting (and linking to) before inserting his own comments. Then I realized what I was seeing: an all-PG-analysis post with some Howey supporting material at the end.

    I like this. I like this a lot.

    • Maybe I need to put a trigger warning at the beginning of posts like that, Michael.

      • Nah. My personal list of trigger warnings started with the alarm clock and grew from there throughout the day. Before long, I had a trigger warning for the list itself. I ended up scrapping the entire thing. Now I just embrace the freak-out.

      • I had to look at that a few times, too, PG, just to make sure it was really you, all you. It was as exciting as sighting Kevin in UP. Yeah, that’s my reference.

    • I figured it would be something like that when I googled the article title from the upcoming posts list to try to read ahead and couldn’t find anything. 🙂

  6. Love me some PG analysis! 😀

    • I’m certain that PG has become far more chatty in the last year or so. I think we’ve been a very good influence. 😀

      At any rate, I’d love to see more original PG content when he’s not busy lawyerin’.

      • LOL!

        “…PG has become far more chatty…”

        “Chatty” juxtaposed with the calm, reasoned voice I hear in my head while reading PG’s remarks makes me chuckle.

        But I think you are correct, sir. 😀

        • Mrs. PG can attest that I can be chatty to a fault. She had to rein in my enthusiasm for Lord Nelson and The Battle of the Nile at a restaurant last night.

          • Did you use dinner rolls and salt shakers to show the positioning of the ships, as Captain Aubrey might do?

            • She knew that was coming, so she conducted a quick intervention.

              • Just as Sophie might do. (and by that of course, I mean as Captain Aubrey’s wife might do, for those who don’t know the books).

                • “And this weevil represents Admiral Harte… or maybe Hachette.”

                  Never mind the maneuvers, just go straight at them.

              • She’ll let me go a little way so long as I’m just talking. When I start to move objects around the table, she draws the line.

            • Or the “pieces of fruit,” “variously shaped protein bits,” and bottles of wine and liqueur – “defeated ships eaten” – used by Miles Vorkosigan when courting Captain Tung?

            • Aha, Patrick O’Brian fans coming out of the woodwork. Very apt for the Amazon/Hachette battle being waged right now. Who carries the big guns, and who’s trying to fire carronades in response?

              Hachette are caught between the devil and the deep blue sea and will have to decide which is the lesser of two weevils.

          • “Lord Nelson and The Battle of the Nile at a restaurant last night.”

            I would have listened to that. What do you know about the Battle of Copenhagen?

            You up for discussion of the Battle of the Capes? Or Suffren’s actions in the Indian Ocean?

            Up for discussion of MacDonough’s victory on Lake Champlain? Or the fight of the Essex?

            I’ll bring the scotch.

            • Sounds like a wonderful evening for me, Antares. I don’t know how Mrs. PG would like it, however.

      • I’ll add my thumbs-up to the rest. I like reading your take on things, PG.

      • Here here! I agree. More original content, por favor.

  7. Thanks for the kind words, all.

  8. While the agreement will be confidential, PG predicts that Hachette will win Publishers Weekly and Amazon will win the contract negotiation.

    Heh heh.

    Astute as always, PG. I agree that this is a much, much larger story than the Hachette thing. But it’s such a popular issue to focus on at the moment. It’s distracting from this latest AE report. But as soon as the Hachette waters settle a little, they’ll peek at AE and start freaking out again. Shatzkin will make a blog post about it, all the agents’ blogs will light up with a flurry of “Why you should definitely totally still absolutely work with an agent/traditionally publish!” posts, and maybe this time around, with this report, somebody from a major publishing house will actually admit to some media outlet that they are starting to get nervous over this self-publishing thing.

    …naah. I honestly think that’ll never happen. They’ll never admit it. Those who can adapt to make their businesses more appealing to authors will. Those who can’t will go down, shaking their fists at Amazon the whole time, as if it wasn’t their own exploitation of authors that sunk them.

    • Win the battle, lose the war
      Choice of evils lies before… your feet!
      If you win then you will lose
      Choice of evils yours to choose
      You are standing in the eye of the storm
      Move an inch and you’ll be dead
      You are standing underneath the towers of the teeth
      And the eye blazes red!
      Win the battle, lose the war
      Choice of evils lies before… your feet!
      Retreat, retreat, retreat!

  9. “-all the agents’ blogs will light up with a flurry of “Why you should definitely totally still absolutely work with an agent/traditionally publish!” posts”

    SNORT…my biggest laugh of the day! And I’ve had many making the indie blog-o-sphere rounds today.

    Jeez, what a week!

  10. The Passive Voice has taken the place of a bagel and cream cheese with my morning coffee. Much more edifying with far fewer calories. I agree that PG should spice up the post once in a while with his own words.

    See you in the morning.

  11. Terrence OBrien

    So, here’s PG’s rhetorical question: Which is more dangerous to Big Publishing – pricing negotiations with Amazon or the direction the dollars are blowing for indie authors on Amazon?

    When an economic inefficiency is exposed, and an alternative is available,it is a disaster for those who live off the inefficiency.

    Herbert Stein said, “If something can’t go on forever, it will stop.”

  12. Hachette: They’re coming outta the walls. These indie authors are coming outta the g**d*** walls.
    Penguin Random House: Hachette, meet me at Amazon’s south lock. We’re renegotiating contracts.
    Hachette: Roger.
    Hachette: [to Harper-Collins] We’re renegotiating contracts. I feel safer already.

    Macmillan: Well, somebody’s gonna have to go first. Take one of our standard retailer contracts, go out to Amazon and patch in agency terms manually.
    Simon & Shuster: Oh yeah, sure! With those indies runnin’ around? You can count me out.
    Penguin Random House: Yeah I guess we can just count you out of everything, Simon.
    Hachette: I’ll go.
    Simon & Shuster: Hey, why don’t you go, man!
    Hachette: [more loudly] I’ll go.

    • LOL! First one out the airlock.

    • (small voice)They mostly come out for the profits. Mostly.(/small voice)

      • Hachette: You mean we’ll have to compete for real in seventeen *days?* Hey man, I don’t wanna rain on your parade, but without pre-orders and Amazon discounting our list prices, we’re not gonna last seventeen *hours!* Those readers are gonna come in here, just like they did before…
        Amazon: Hachette!
        Hachette: …and they’re gonna come in here AND THEY’RE GONNA GET US!
        Amazon: Hachette! These little indie authors are surviving just fine with no pre-order buttons and no wholesale pricing.
        Hachette: Why don’t you just put *them* in charge? Game over, man! Game over!

      • Blahahahahahaaaa!!!


  13. Phyllis Humphrey

    Great post. Thanks for coming on board, PG.

  14. I am starting to think that the biggest danger to the rest of the big 5 would be for RHP and Amazon to cut a sweetheart deal. Imagine if the biggest publisher in the world was the only one with access to Amazon. How long would Patterson stay with Hachette?

    • Terrence OBrien

      The last publisher to negotiate should be urging all the others to hold the line.

    • Penguin Random House to Hachette: “Bezos. Very dangerous. You go first.”

      • Hachette: Discounts. Why did it have to be discounts?

        Anonymous, you are the Zen master of repurposed movie quotes. I award you two ears and the tail 😀

        • And I love *you,* random citizen!

          Sabrina, your note-perfect one-line quotes put my longer ones to shame… 😀

  15. This is absolutely true. I am not a huge author name. Most readers probably don’t know me or my books. Yet I made 30k last month, over 20k this month so far, 13k the month before and easily will triple my 6 figure income from last year, this year. All self-publishing and buying back the books I had at a small press. I’ve worked hard, put out a lot of books and marketed well. I know many other mid-list self-published authors doing as well or better than I am. We aren’t interviewed for articles and people don’t know our names in mass, but this is our income, consistently. If we’re doing this, surely there are a LOT of other authors in our position. I’d chose this over a Big 5 publishing contract any day.

  16. Karpov, how does it feel not to be an outlier?

  17. This adds some interest: http://www.kboards.com/index.php/topic,186422.0.html

    Especially this:

    We also take seriously the impact it has when, however infrequently, such a business interruption affects authors. We’ve offered to Hachette to fund 50% of an author pool — to be allocated by Hachette — to mitigate the impact of this dispute on author royalties, if Hachette funds the other 50%. We did this with the publisher Macmillan some years ago. We hope Hachette takes us up on it.

  18. If nothing else the lack of new talent getting locked in to the old system will eventually spell its doom.

    • This. Trad pub has an extensive backlist for established authors that they can put out and use to fuel profits for a while, but the lack of a frontlist as established and new authors choose self-publishing will hit them eventually — and HARD — unless they change the author compensation model. And even then…

  19. PG, I agree with you as usual in this case. The problem really is not this particular deal, but in how Amazon is allowed to deal with it’s “suppliers” in light of the amount of market they control.
    If the Big 5 go under tomorrow, there will be few tears shed here. But if Amazon decides to use the same take-it-or-leave-it “negotiating” tactics with indie authors that they’ve used with Hachette and at ACX (where they slashed indie royalties by 20% or more on new contracts recently), then it will be a whole lot tougher for the next Karpov Kinrade to make it at the levels possible today.
    It’s hard to deny the great debt many indie authors owe to Amazon for making their publishing careers possible. But we’re kidding ourselves if we don’t think they won’t take on indie authors profits eventually.

  20. We are in interesting times right now, and I hope as the publishing gets even ‘wilder,’ we will see more of PG’s post and personal comments, and other chipping in. I really love to read all of your comments, that’s on my to-do-in-the-morning list, just under the morning coffee.

  21. I am still somewhat new to the writing and self publishing game, having only been publishing for three years with no background in writing or publishing before that, beyond a childhood desire to be a writer. At five and a half decades on this fine earth I finally decided to do something about this dream and started writing. I am earning a small but growing income from my books. I explain my background because I am going to ask a stupid question. Why cannot the big publishers just bite the bullet and allow self published authors to submit directly to their sites? They could grab a piece of this ever growing pie and maybe snag a few of these authors for contracts. These few that they decide to invest an editors time with they could have exclusive contracts and label them with a gold star or something in their catalogs, signifying that these are authors that they endorse. I don’t know, maybe it is impractical and wouldn’t work. As I said, it is probably a stupid question.

    • They do do this. However, they do it through shell companies that charge hoi polloi a whopping great fee in exchange for the cachet of a fake publisher name on their books (e.g. Author Solutions, which if you Google for “author solutions scam” will teach you all you need to know about what publishers think of the self-published author.)

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