PG’s Thoughts

American Liar

21 January 2015

From Salon:

Chris Kyle, author of the runaway best-seller American Sniper, was a military hero who killed 160 people during his four tours of duty in Iraq and is now the subject of an Oscar-nominated blockbuster. He was also a fabulist. Before his tragic murder in 2013, Kyle told a number of extremely dubious stories.

. . . .

But it wasn’t these fantastical tales of vigilante justice that got Kyle into legal trouble. It was another, much less exciting story—one that wasn’t just unverifiable, but verifiably false. That tale, conveyed in a mere three pages of American Sniper, has put Kyle’s widow on the hook for $1.845 million in damages. And it may soon make Kyle’s publishers wish they approached the veteran’s claims with great deal of skepticism.

Kyle’s legal difficulties emerged from a subchapter of American Sniper titled “Punching Out Scruff Face.” In it, Kyle describes beating up a former Navy SEAL (“Scruff Face”) after the SEAL claims American soldiers deserved to die in Iraq. Early drafts of the book identified the SEAL as Jesse Ventura, former governor of Minnesota and famed professional wrestler, but Kyle’s publishers removed the name for fear of a lawsuit. Nonetheless, in a radio interview following the book’s release, Kyle admitted that “Scruff Face” was Ventura, and he repeated the claim soon after on The O’Reilly Factor.American Sniper shot to the top of Amazon’s best-seller list, becoming a smash hit for its publisher, HarperCollins, selling more than 1.5 million copies by July of 2014.

There was, however, a problem: The Ventura story wasn’t true, and Ventura meant to prove it. So he took Kyle to trial, suing him—and, after he died, his estate—for defamation and unjust enrichment. In the United States, defamation cases are extremely difficult to win, thanks to the First Amendment. When allegedly defamatory statements pertain to a public figure, the plaintiff mustn’t just prove those statements were false. He has to prove the defendant made those statements with “actual malice”—that is, knowledge that they were false—or with “reckless disregard” for their falsity. Very few defamation plaintiffs can make it over the high bar of actual malice.

Ventura made it. On July 29, 2014, a federal jury returned from six days of deliberations to award Ventura $1.845 million in damages—specifically, $500,000 for defamation and about $1.345 million for unjust enrichment. (In other words, Kyle unjustly profited from defaming Ventura, and so his estate must give Ventura some of that money.)

. . . .

For the Kyle family, then, the legal tribulations surrounding American Sniper are probably wrapping up, and Taya Kyle will likely pay some damages but walk away from the affair with many millions of dollars left to her name. ​(HarperCollins’ libel insurance, in fact, will cover her defamation damages.) But for Kyle’s publisher, HarperCollins, the nightmare is just beginning. Several months after the verdict against the Kyle estate, Ventura brought another lawsuit for unjust enrichment, this time against HarperCollins.

. . . .

During the first trial, Ventura’s attorneys uncovered records of HarperCollins’ negligence in fact-checking Kyle’s book, as well as evidence that HarperCollins specifically touted the Ventura story to drum up publicity. Kyle’s ghostwriters spoke with only one person who claimed to have witnessed the fight, a friend of Kyle’s who told a different version of the story that lacked Ventura’s offensive remarks. No one from HarperCollins contacted Ventura or his representatives to verify the story. And though Kyle claimed Ventura appeared at a SEAL graduation afterward with a black eye—where “everybody was laughing” and asking “Who beat the shit out of him?”—HarperCollins never asked a member of the graduating class whether they saw Ventura’s injury. (A photograph from the event shows a clear image of Ventura—with no black eye.)

It gets worse for HarperCollins. Despite the tenuous source of the Ventura story, HarperCollins quickly saw it as a publicity gold mine. After Kyle identified “Scruff Face” as Ventura in a radio interview on The Opie & Anthony Show, HarperCollins editor Peter Hubbard wrote in an email that the publicity from the story was “priceless.” HarperCollins publicist Sharon Rosenblum described the Ventura kerfuffle as “hot hot hot,” immediately arranging for Kyle to retell the tale on The O’Reilly Factor. Sales of American Sniper—which, up to that point, were fairly modest—spiked dramatically, apparently in conjunction with interest in the Ventura story. After theO’Reilly appearance, Ventura publicly denied Kyle’s accusations. Yet Rosenblum arranged for Kyle to tell the story again on The Opie & Anthony Show, and HarperCollins printed several new editions of the book that still featured the “Scruff Face” section. (It was finally removed after Ventura won his suit.)

Link to the rest at Salon and thanks to Matthew for the tip.

A few points:

  1. Under standard Big Publishing contracts, Kyle would be responsible for paying any and all expenses of HarperCollins in the Ventura suit, including any damages HC pays to Ventura.
  2. If the article is true, it appears that Kyle’s attorney had HC add a provision to the contract that named Kyle as an additional insured under HC’s publisher’s liability insurance policy. This is always a good idea, but something most publishers won’t do without being asked.
  3. Even with the liability insurance policy in place, most such policies include a large deductible – $500,000 – $1,000,000 deductibles are typical. Under a standard Big Publishing contract, Kyle would be responsible for paying the deductible.
  4. Boilerplate in most Big Publishing contracts gives the publisher the right to have an attorney conduct a pre-publication legal review. The author is required to change anything the lawyer finds problematical. PG hasn’t read whether or not such a review was conducted in this case. Given that the book referenced living persons and their behavior, it would be an extraordinarily bad decision for HC not to have conducted such a review. If anyone sees a news account that mentions whether a legal review was conducted or not, please send a link to PG via the Contact Page.
  5. The publishing contract provisions PG mentioned are typically contained in a section called something like Warranties or Warranties and Indemnities. Most authors tend to breeze through such provisions (in part because they’re really boring), but this story demonstrates that every part of a publishing contract has consequences.
  6. In PG’s prodigiously humble opinion, the warranties required of authors in most publishing contracts are among the most unfair provisions in those contracts.

Two Photos

14 January 2015

Casa PG is experiencing winter. Some time ago, PG spent most of winter in Florida.

A couple of contrasting photos seem in order. One was taken yesterday at Casa PG. The other wasn’t.

Up the hill


Sunset with Blue Variation-Unsharp

Holiday Shopping on Amazon

8 December 2014

PG doesn’t like to badger visitors to TPV with constant reminders that he has an Amazon affiliate account.

However, he will make one reminder this holiday season that if you click on the link near the top of the right column (or This Link) to go purchase something on Amazon, PG receives a small commission from Amazon on your purchases.

In Amazon/Hachette deal, ebook agency pricing is a winner

17 November 2014

From GigaOm:

In the deal that Amazon and Hachette Book Group finally reached Thursday after months of bitter negotiations, we don’t really know which side “won,” if one side did. But one survivor — perhaps surprisingly — was agency pricing for ebooks, the practice through which the publisher sets an ebook’s price and the retailer takes a commission.

Hachette said in a letter to authors and agents:

The new agreement delivers considerable benefits. It gives us full responsibility for the consumer prices of our ebooks. This approach, known as the Agency model, protects the value of our authors’ content, while allowing the publisher to change ebook prices dynamically to maximize sales.

That wasn’t a foregone conclusion. In 2010, Amazonwas vehemently opposed to agency pricing, though it ultimately capitulated. Agency pricing was at the heart of the of the Department of Justice’s lawsuit against Apple and book publishers in 2012, in which the DOJ accused Apple and the publishers of colluding to set ebook prices.

The DOJ never actually said that agency pricing was illegal; rather, it alleged that Apple and the publishers illegally conspired to adopt the model at the launch of the iBookstore in 2010.

. . . .

While we obviously don’t know all of the details that Amazon and Hachette agreed on, here are the things that Amazon publicly said about ebook pricing at various times during the negotiations:

  • “A key objective is lower e-book prices. Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book.” [Kindle Forums post attributed to “The Amazon Books team,” July 29, 2014]
  • “This discussion is all about e-book pricing. The terms under which we trade will determine how good the prices are that we can offer consumers.” [Amazon exec Russ Grandinetti to the Wall Street Journal, July 1, 2014]
  • At an ebook price of $9.99, “we believe 35% should go to the author, 35% to the publisher and 30% to Amazon. Is 30% reasonable? Yes. In fact, the 30% share of total revenue is what Hachette forced us to take in 2010 when they illegally colluded with their competitors to raise e-book prices. We had no problem with the 30% — we did have a big problem with the price increases.” [Kindle Forums post, July 29, 2014]
  • “While we believe 35% should go to the author and 35% to Hachette, the way this would actually work is that we would send 70% of the total revenue to Hachette, and they would decide how much to share with the author.” [Kindle Forums post, July 29, 2014]

Here is what we know about the deal announced Thursday:

  • “We are pleased with this new agreement as it includes specific financial incentives for Hachette to deliver lower prices.” [Amazon’s David Naggar, press release] (This is the same thing that Amazon said about the deal itreached with Simon & Schuster in October.
  • “Importantly, the percent of revenue on which Hachette authors’ ebook royalties are based will not decrease under this agreement.” [Hachette CEO Michael Pietsch, press release]

. . . .

Hachette said in its letter to authors that the percentage of revenue on which they take a cut won’t change. But since we know that Amazon is giving Hachette financial incentives to keep its ebook prices low, perhaps Hachette will be penalized with a smaller cut of the sale if it prices ebooks above that previously set ceiling, even if it passes on the same amount to authors that they would have gotten previously.

Link to the rest at GigaOm

Nobody who really knows is talking about the Amazon/Hachette deal, but it appears that Hachette will have the ability to prevent Amazon from doing at least some of the discounting of Hachette’s books that it does now.

Since Big Publishing has attempted to use ebook pricing to protect the sales of physical books in physical bookstores in the past, PG suspects it will continue to do so in the future. If this is the case, Hachette ebook prices on Amazon will be higher than Amazon would set those prices if the folks in Seattle had unfettered pricing discretion.

If PG’s suspicions are anywhere close to correct, it appears that indie authors will continue to be able to undercut the price of ebooks from Hachette while earning royalties from KDP that are much higher than Hachette authors receive.

PG says that indie authors are much smarter about pricing ebooks on Amazon that Big Publishing is, if for no other reason than indie authors are not concerned about anything other than selling the most ebooks possible. Like Amazon, indie authors don’t have any legacy sales channels to distract them from setting an optimum price for ebooks.

Trying to protect a legacy business with legacy margins is a classic mistake that established business organizations make when faced with a technology disruption that allows lower-priced competitors into a marketplace. Doing so allows the lower-priced competitors to survive and thrive. And eventually put the legacy model out of business.

Vook continues ebook publishing consolidation with Coliloquy acquisition

15 November 2014

From TeleRead:

Ebook production and publishing platform Vook has continued its rollup of competitors and complementary ebook players with the acquisition of Coliloquy, the Palo Alto-based “digital publisher of enhanced and interactive ebooks and apps,” which has apparently specialized in interactive and rich media publications on the Kindle and other ebook platforms, currently boasting some 30 titles under its own imprint.

. . . .

Vook is not slow to put forward expansive claims for its own efforts, describing its acquisition of epublishing company Byliner, as “its first step in using technology to rebuild the publishing industry from the ground up – this time, putting authors first.” It was founded in 2009 by Bradley Inman, a West Coast serial entrepreneur with several internet companies in his resume prior to Vook, and appears to be following a classic aggregation strategy of consolidating other businesses around its own platform.

Link to the rest at TeleRead

PG says that, in all likelihood, the authors who had contracts with Coliloquy will now find that Vook owns those contracts.

Vook can be expected to enforce those contracts according to their written terms. Any promises that Coliloquy made to authors that are not included in the contracts will go out the window. At least some of the people who made those promises will probably not be working for Vook any more.

A common response to a request for making a contract change is something like, “We would never do that. That’s not the way we operate.” PG’s standard reply is something like, “Great. Let’s change the contract to fit how you do operate.”

One of the problems with life-of-the-copyright terms in a publishing contract, especially for younger authors, is that in future years all the people who attract an author to sign with a particular publisher will be dead, yet the contract will continue.

Many older authors who signed publishing contracts twenty or thirty years ago find that the publishers they signed with are long gone, sucked into a big media conglomerate, and the values which governed their old publishers have disappeared.

Value in the media industry is moving to the edges, and publishers are in the middle

30 October 2014

From GigaOm:

There’s been a lot of discussion recently about Facebook’s increasing role in how people get their news, and whether or not that is a good thing and/or what to do about it. But one of the smartest things I’ve read on the topic comes from freelance tech analyst Ben Thompson, who writes a blog called Stratechery — and who put Facebook’s dominance into context with a post about how value in the media industry is moving to the edges, and publishers are stuck in the middle.

. . . .

Thompson explains how companies like Largan have gained power, just as chip makers and software providers like Microsoft and Intel did during the rise of the personal computer — leaving the companies who actually assembled and sold computers in the middle, their profit margins dwindling as value moved to the ends: specialized manufacturers on one side, and services on the other.

. . . .

So for example, in the analog world in which newspapers, magazines and other forms of publishing controlled the distribution platform and therefore the channels through which content flowed, they also controlled much of the value. But new platforms have emerged — such as Facebook and Twitter and LinkedIn and dozens of others — and they have accumulated much of the value and market power that used to accrue to publishers and media companies. As Thompson puts it:

When people follow a link on Facebook (or Google or Twitter or even in an email), the page view that results is not generated because the viewer has any particular affinity for the publication that is hosting the link… if anything, the reader is likely to ascribe any positive feelings to the author. Over time, as this cycle repeats itself… value moves to the ends, just like it did in the IT manufacturing industry or smartphone industry.”

. . . .

In other words, Thompson believes that because of the disintermediating effect that the internet has on content, value is moving towards the individual creators of that content — writers, editors, artists, etc. — and towards the platforms that allow for discovery and/or distribution of that content (Facebook, etc.) and away from publishers and media companies of various kinds.

. . . .

So what does the future look like for those media companies in the middle of the “smiling curve?” Thompson doesn’t say, but it probably isn’t going to involve a lot of smiling — instead, it presumably involves trying to squeeze less and less revenue out of a market where they are rapidly losing control, and trying to form relationships with platforms like Facebook without losing even more.

Link to the rest at GigaOm and thanks to Matthew for the tip.

PG says this is one of the principal results of the disruption that ebooks and ecommerce have visited on traditional publishing.

In the old days, the author created the manuscript, the agent sold the manuscript to the publisher, the publisher took the manuscript and, with the help of a printer, turned it into a book, the distributor took a bunch of the books and put them in a warehouse from which smaller bunches were sent to bookstores/other retailers and the bookstores sold the book to readers.

Under this model, the manuscript was of no value to the bookstores and a lot of intermediate steps were necessary before the manuscript became salable to readers. Without the internet and in an era of mass broadcast and print media, an individual author had very few ways of affecting discovery of the book, which, for most books, happened primarily in bookstores and other B&M retailers.

Today, the author creates the manuscript and either converts it to an ebook or pays somebody to do so, Amazon takes the ebook and sells it to readers. Those are the only necessary parts of the ebook/ecommerce supply chain. Discovery of ebooks takes place online at Amazon, Facebook, Twitter, etc. The rest of the old supply chain is obsolete and an unnecessary expense.

The author and Amazon are the only places where significant value is created in the new supply chain.

The fight between Amazon and Hachette is about the dominant players in the middle of the obsolete supply chain trying to remain relevant and capture more of the value that they used to take for granted.

Hachette and Authors United are in a box

21 October 2014

PG is certain that someone has made the following observations, but he hasn’t seen them, so here they are.

The deal between Amazon and Simon & Schuster has put Hachette in a box.

The Amazon/Hachette agreement was critical to Big Publishing because Hachette’s was the first of the court-ordered Price-Fix Six contracts to expire. The new Hachette deal would set the pattern for the other miscreants when their Amazon contracts expired.

By making a deal with S&S two months before the S&S contract expired, the Amazon/S&S contract is the pattern contract for the other publishers. One does not assume that S&S has harmed its authors or itself with its Amazon contract.

Amazon has performed a switcheroo. Now the onus is on Hachette. What’s wrong with Hachette that it can’t get the same contract that S&S has?

Commentators not terminally afflicted with Amazon Derangement Syndrome must now surely conclude that Hachette’s intransigence is the cause of the loudly-trumpeted suffering of Hachette authors.

At some point, Hachette’s public problems with Amazon are going to influence authors’ and agents’ decisions when Hachette and S&S are bidding for the same book.

If another large publisher coming out of lockup signs a deal with Amazon, the game is completely over.

The great Amazon debate: A leading Amazon critic and a self-publishing rock star try to find common ground

21 October 2014

From Salon:

After I wrote a piece calling self-published authors who defend Amazon “no better than Ayn Rand libertarians,” I received a flood of social media high-fives from those within publishing, their frustration with the giant palpable. I also received fierce blowback from the self-published community. The most thorough and entertaining came from Joe Konrath, who has self-published 24 novels (three of them No. 1 Amazon sellers), hundreds of stories, and has sold over 3 million copies of his books.

He, in turn, received a flood of digital high-fives from the self-publishing community for his zingers, the pent-up frustration at what they believe is one-sided media coverage palpable.

I could have left the name-calling to the social media ether, but we rarely ever really engage with those with wildly differing opinions. I reached out to Konrath and we had the following exchange of ideas.

* * *

Hi Joe,

Your “Fisking Salon and Rob Spillman” was the most entertaining thing I’ve read in a long time. If only some of my authors and students had the same bite, humor and energy.

I wanted to engage in a conversation. I realize this may be impossible, but as you have already established that I am a 100 percent Idiot, I thought there would be nothing to lose.

. . . .

As an indie publisher, I have been on the receiving end of Amazon’s tactics.

I don’t want to split hairs, go through each other’s posts line-by-line. I do, however, want to apologize if it seemed like I was dismissing self-published authors or genre writers. That was not my intention, nor is it what I believe. My intention was to point out that Amazon has been a very good platform for a large number of self-published writers, which tend to be genre writers.

One thing I want to make clear: I believe that Jeff Bezos is a genius. He has single-handedly changed the way the world shops.

His hero, Sam Walton, was also a genius. Bezos’s bible is “Sam Walton: Made in America,” Walton’s autobiography. Walton’s legacy is the big box store where very cheap products, many made in China, are readily available. His other legacy is the destruction of small town America and family-owned businesses. When I drove back roads across the U.S. last summer, small town after small town had boarded-up downtowns with a Wal-Mart and perhaps a Costco on the periphery. Those people lucky enough to have jobs were working for half the wages they used to under dehumanizing conditions (you have to purchase a uniform, at your own cost, to begin with). According to your argument, this is just the free market at work. Efficiency. The Walton heirs are now worth more than $100 billion. The U.S. now ranks 93rd in the world in income inequality. The middle class has shrunk dramatically over the past 20 years, with average salaries stuck at 1994 levels while the S&P has more than doubled in value adjusted for inflation over the same time.

. . . .

I believe that Amazon is trying to do Walton one better. With traditional publishing, $10 million in sales required 47 employees. With Amazon, the same amount requires 1 employee. Was the old way inefficient? Perhaps. Maybe I work in an obsolete world of literary fiction, creative nonfiction, and journalism. In my world, editors, copyeditors, proofreaders, book reviewers and bookstores are necessary and vital. Book advances are what fund many book-length nonfiction projects. I am also concerned about local economies being squeezed out by massive, unchecked corporations that do everything legally possible to avoid paying local and national taxes. Again, they are doing nothing legally wrong, but I would argue that there is a greater moral issue at play here.

. . . .

I look forward to your thoughts.


Rob Spillman

. . . .

Hi Rob –

Thanks for the kind, levelheaded email. I’m impressed by your tone, your willingness to engage, and the integrity it took to email a loudmouth jerk like me. Remember, I didn’t say you were a 100 percent idiot. Only that you were getting close to 100 percent in that Salon piece. :)

I read your email with an open mind, and agree with much of what you said, along with the sentiment behind it. I believe you’re sincere.

I also drove across country, signing at more than 1,200 bookstores in 42 states. This was only a few years ago, but I’d guess at least one-third, and possibly one-half, of those bookstores no longer exist. That saddens me. I love bookstores, and booksellers. In my novel “Dirty Martini” I thanked over 3,000 booksellers by name in the back matter.

. . . .

“I am also concerned about local economies being squeezed out by massive, unchecked corporations that do everything legally possible to avoid paying local and national taxes.”

This is where you begin to lose me. I know it isn’t your intent to dismiss self-published writers, but I think there’s a very good argument that Amazon has been a boon to tens (hundreds?) of thousands of authors that weren’t ever given a chance in your world, which you reference above.

. . . .

“But from my POV, it is hard to see how anyone can face off against a company willing to lose $100 million per year just to gain market share.”

A company doesn’t have to compete with Amazon. A company can instead innovate in sectors Amazon doesn’t presently care about. Have large publishers innovated anything? Did they create an online bookstore where people want to shop? Did they invent the e-reading device and app everyone wants to use?

“For me and most of my colleagues, we are being squeezed, and Amazon has massive power and endless resources.”

I actually do understand. But that doesn’t forgive all of the glaring errors and bad logic in your Salon piece. Being squeezed hurts. It’s human to want to lash out, fight back. The trick is to analyze what the best response is.

Sometimes the best response is to move on.

What you’re feeling is no doubt akin to what buggy whip manufacturers felt when Henry Ford came along. When a new tech replaces an old one, people are disintermediated. It sucks, but it’s life.

“What I can’t understand is why you would cheer for Amazon in its fight against traditional publishers. Here comes one of my analogies that you love to pull apart – -it seems like rooting for the lions against the Roman prisoners in the Coliseum.”

I was a Roman prisoner in the Coliseum, being feasted on by lions. Those lions were big publishers. After 20 years, a million written words, and nine rejected novels, I finally landed a book contract. And I worked my ass off and published eight novels with legacy publishers, dozens of short stories with respected magazines, and went above and beyond everything that was required of me, in order to succeed.

And I got eaten. One-sided contracts, broken promises, lousy money. But it was the only game in town. If I wanted to make a living as a writer, I had no choice.

Then Amazon invented the Kindle.

I first self-pubbed in May of 2009. That first month I made $1,500, publishing books that New York rejected.

Those same rejected books have earned me hundreds of thousands of dollars.

I cheer for Amazon because it saved me, and thousands of other authors, from the Coliseum. And I try to show others there is a way to make money from publishing where the terms are better, and the writer stays in control.

“My central argument is that if Amazon crushes us all, it will be able to dictate whatever terms to anyone using its massive platform. What if it suddenly decides to flip terms and only offer you 30 percent, or decide that your books really should be sold for 50 cents?”

Rob, that’s what the Big 5 already do. Except for an elite, tiny group of upper-tier authors, the Big 5 treat 99.9 percent of us badly. Keeping rights for term of copyright? Non-compete clauses? Twenty-five percent e-book royalty on net? I’ve had chapters cut by editors that I wanted to keep. I’ve had terrible cover art. I’ve had my titles forcibly changed. And my experience isn’t unique. I’m friends with hundreds of authors. A few were treated like kings. Most were screwed.

You worry that Amazon might someday offer 30 percent when publishers right now offer 17.5 percent? You must see how odd that is.

Link to the rest at Salon and thanks to Brandt for the tip.

PG will briefly comment on Salon’s point about Walmart because it’s so typical of what happens when big city folk drive through small towns on their way to other big cities. He believes it is also an example of how out of touch Big Publishing is with the lives of readers.

PG grew up on ranches and farms outside of small towns. Small towns were where he went for excitement. While he left the farm for the big city when he went to college, after several years in a couple of big cities, he moved back to a small town for 16 years. He’s lived in cities since then. When he visits his brother or sister, however, he visits small towns.

People from Manhattan vacation in Bar Harbor or Martha’s Vineyard or Carmel and think they’ve experienced the ideal small town. They haven’t. They’ve experienced small down Disneyland for rich people.

Walmart  is one of the best things that has happened to every typical small town where it has built a store. Typical small town retailing isn’t like Carmel. Typical small town retailing is dead-end minimum wage jobs. Typical small town retailing is limited choice and high prices. Typical small town retailing is one of the reasons that graduates of small town high schools head elsewhere as soon as they can. Typical small town retailing is why families who live in small towns travel to the closest city for a better shopping experience..

When Walmart  takes applications to staff a new store, the line of people who want to work there extends way out into the parking lot. The line includes almost everyone who is an employee at the existing small town retailers. Small town Walmarts never have problems filling open jobs.

Why? Because Walmart offers a future. You can start at a cash register and become a store manager and then move up from there. Without being a college graduate. The manager of a Walmart is easily the highest paid retail employee in a small town. He/she makes more money than the owners of all but a couple of small-town retail establishments.

Walmart  is also the very best thing that happens to poor people in small towns. Why? Their minimum wage salary or welfare check buys them much, much more at Walmart than it does at any other retailer in town.

Visitors from Manhattan who venture into a Walmart are always grossed out by some of the customers they see there. Why? Because those customers are poor people trying to make their incomes stretch as far as possible. Even poor people like to have a nice selection of products they can afford in a clean store.

Green Gables

21 October 2014

The PG’s also visited Prince Edward Island during their recent trip.

PEI is the smallest province in Canada both by population and land area. The provincial population is about 140,000 and the island is mostly rural, relying upon farming, fishing and tourism for much of its economy. 25% of all potatoes grown in Canada originate here. The largest city, Charlottetown, has a population of about 33,000, while the second-largest city has a population of about 16,000. The size of municipalities drops off rapidly from there.

Prince Edward Island is the childhood home of one of Canada’s best-known authors, Lucy Maud Montgomery, who wrote Anne of Green Gables, set on a farm on PEI.

Ms. Montgomery was born on PEI. After her mother died during her infancy, Montgomery was sent to live with her grandparents’ on the island. While she was growing up, she frequently visited her cousins at nearby Green Gables Farm.

After she married, Montgomery moved with her husband to Ontario, but frequently returned to spend time on Prince Edward Island throughout her adulthood. She and her husband are buried a short distance from Green Gables.

Green Gables is a protected historical site and locations from the Anne books such as Haunted Woods, Balsam Hollow and Lovers Lane are well-preserved. (click on each photo for a larger version)

House 4a-SM
Green Gables
Bedroom in Green Gables
Green Gables

This last photo is taken at the beginning of the Haunted Wood trail looking back at the house.

Are Publisher Advances Truly Critical?

18 October 2014

From The Digital Reader:

The argument against Amazon seems to rest on the proposition that if trad-pubs aren’t awarded excess returns, over and above the actual free-market value of their products, then there will be no money to pay authors to write “serious literature,” irreparably harming our culture and society.

This is really a very dense proposition with all kinds of unstated and unanalyzed assumptions behind it. It would take a lengthy and complex essay to thoroughly deconstruct all these notions, and few would have the patience to read it. But it’s worthwhile to quickly review some of the main issues.

1. How much “serious literature” do advances truly subsidize?

There isn’t any comprehensive public accounting but from various sources we get a general impression of where advances actually go. A large portion is paid to popular novelists like James Patterson and John Grisham and popular nonfiction authors likeEdward Klein. Another big slice of the advance pie is served to entertainment and sports celebrities who put their names to various books that are supposedly nonfiction. And prominent politicians often get remarkably large advances for memoirs and ruminations. Calling any of this “serious literature” is stretching the term to the point of rupture.

. . . .

2. Why do the publishers have to act as investment banks for books anyway?

The publishers rig the game in such a way that in most cases authors can turn only to them for advance funding, even for books that clearly have major sales potential. They do this for bestseller-potential titles by setting royalty rates so low that there’s little chance that the nominal royalties will ever catch up with the advance. Thus if a bestselling author financed her book from another source she couldn’t make enough from royalties on sales to pay a good return on the investment; the publisher would simply appropriate most of the value of the book. (Big-name authors could push back on royalty terms, but most find it simpler and safer just to go for big advances.)

. . . .

 This is not of course what we hear from Foer or other attempts to justify trad-pub without actually understanding much about the business. It’s only the benign, benevolent publishers who would advance authors money against unwritten books, they claim. This is remarkable nonsense. Players in finance long ago learned how to make good profits by investing money in risky propositions. If the publishers ever paid economic royalty rates there would be no shortage of sources of advance funding for books that had even modest prospects for success. And the financial system would certainly do a better and more efficient job of it.

. . . .

3. Is Amazon threatening the excess profits publishers need?

Trad-pubs need to collect substantial economic rents — excess profits over and above their costs of operations and capital — so they can bestow generous largess on worthy authors. Or so they and their apologists would have us to believe. (Most of them no doubt believe it themselves, as they don’t seem to be very deeply knowledgeable or analytical.)

. . . .

 How does Amazon generate large cash flow? Not by pricing high, but by buying cheap and selling large volumes. The publishers, however, believe it serves their objectives to charge high unit prices. Amazon thinks the publishers lose more through reductions in the number of books sold than they gain by jacking up the price per book — and they know that Amazon does. In the end Amazon believes that both they and the publishers will make more by selling more books at lower price per book, and they have data from their immense volume of book sales to back this up. Data-schmata, the publishers say: they simply want higher net prices per book.

Link to the rest at The Digital Reader and thanks to SFR for the tip.

PG would suggest that Big Publishing is also trying to prop up its physical book store distribution channel which has been shrinking over many years. The Borders bankruptcy happened about three years ago and caused 399 large bookstores to disappear almost overnight. Barnes & Noble is closing about 20 large bookstores per year and another batch will disappear after Christmas.

Amazon-style pricing won’t support the high overhead of a physical bookstore.

For all intents and purposes, Big Publishing and some larger independent publishers have pretty close to a monopoly in distribution to large numbers of physical bookstores where discounting from list price tends to be more limited than in the online world. Smaller publishers often use the resources of larger publishers (for a price) to access sales and distribution channels to physical bookstores.

Big Publishing lacks a similar dominant position in online sales and authors understand that publishers don’t add any material distribution value with Amazon.

BPH-think says that prices have to be forced higher on Amazon so more people will go to physical bookstores.

PG is pretty certain that a great many of the smarter people in Big Publishing understand it is highly unlikely that the decline in the the number of physical bookstores can be stopped or reversed. The inherent economic advantages of ebooks and etailing are simply too compelling to save more than a relative handful of boutique bookstores in major metro areas.

However, as subsidiaries of large international media conglomerates, Big Publishers are servants to quarterly and annual sales and profit numbers. If BPH executives are judged on short-term results, they tend to develop short-term strategies.

If only enough pressure can be applied to Amazon, the decline of sales in physical bookstores can be deferred for a few more quarters and the Armageddon of a book business that is almost entirely online won’t happen quite so soon.

So Big Publishing trots out its pet 1% authors to decry Amazon as part of a marketing strategy to persuade a few more people to shop at Barnes & Noble for a few more months.

To save literary culture.

Oh Yeah.


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