PG’s Thoughts

Digital Arachnid: What Does Author Earnings Say to the Industry?

9 February 2016

From Publishing Perspectives:

In the new February Author Earnings report, released Monday (February 8), things continue to look rosy for self-publishing authors and dire for the trade. But there are also announcements of changes in the approach—not entirely clear changes, mind you but in some ways promising. We’ll look at a bit of that later in this article.

To grasp the industry-political context here, we must remember that many who are skeptical of the efficacy of the Author Earnings effort point to the fact that it is an agenda-driven exercise.

Frustrated with what they said was a skewed and pro-industry picture presented at the Digital Book World in 2014’s “What Authors Want” survey, Mssrs. Howey and Guy set out to find a way to demonstrate that self-publishing is a viable route to earnings potential for authors. The result is the Author Earnings assessments, which many in the self-publishing community have defended as proof that their pathway to publication can be as good or better, financially, as the standard trade publishing route. Those fans, again, will be chuffed.

. . . .

Here’s the news: Author Earnings asserts that on Amazon’s bestseller lists, indie self-published titles account for more than twice the number of Big Five titles.

“What has changed,” the report tells us, “is the degree to which Amazon’s overall Top 20 bestsellers, and even the overall Top 10, have come to be dominated by self-published titles from indie authors—nearly half of which were not priced at $0.99 but rather ‘full-priced’ sales at prices between $2.99 and $5.99.”

. . . .

The most interesting question for us at this juncture is just what the trade publishing management attending DBW will make of this. Can it be that the “legacy” industry is being outclassed so substantially by “indie published” authors—the self-published sector?

. . . .

This is the language of self-publishing as what some of its champions call the “shadow industry,” a creative corps that cares nothing for the customs and concerns of the industry, and yet seems never to tire of carping at the establishment. It’s always worth noting that even some of the most-honored self-publishing bestsellers have taken contracts when offered.

And as anyone familiar with negotiating basics knows, by framing its results in ways that call out “the other side”—in this case, traditional publishing—Author Earnings repeatedly has hobbled its own efforts to widen the discussion. Rather than simply present an interpretation of the market and let that interpretation speak for itself, the material is served on a bed of right and wrong. Eyes glaze over, chips remain on shoulders, collegial exchange seems hard to come by.

. . . .

On the way out the door, Data Guy stops to pop publishing with a towel for agency pricing, of course, which gives us those out-sized prices on trade ebooks and Amazon’s “This price set by the publisher” notes on the pertinent sales pages. It may well be true that the publishers are shooting themselves in the feet with agency pricing on ebooks, perhaps contributing to the slowing of growth in digital reading on some level.

. . . .

Some of the most highly placed operatives in the trade will privately tell you (they’ve told me) that they’ve spent two years scratching their heads over Author Earnings’ digital derring-do. It’s reputed to have several parts:

  1. Sales reported by authors are compared to rankings of various titles on Amazon.com;
  2. A “crawling” of Amazonian sales pages is accomplished (our spider man or woman at work) to “scrape data” on a single day for each report (January 10 in the newest one)—spider goes out, spider comes back with the scrapings;
  3. An extrapolation of the results is made from that date; and
  4. Inevitably, a web of upbeat news for fans of self-publishing is spun from the results.

It might all be searingly accurate, spot on, perfectly right. But we can’t tell that.

And, as I mentioned in some commentary on the last report of 2015 at The FutureBook, what’s probably needed is a full analysis by a completely independent, reputable, capable firm, a unit of Nielsen or Forrester or PWC, KPMG, Deloitte, somebody, anybody. Please!

. . . .

What I’m being told is that a group of more than a dozen authors now makes available to Author Earnings, in some form, its actual royalty statements. The approach thus takes out the second-hand nature of reported sales. This takes us, Data Guy says, past the realm of “volunteered data points” collected and on to more precise observations made “during the precise same time period.” Significantly, Data Guy says that rather than using single-day sales, “this model incorporates sales history and matches Amazon’s true algorithm far better.”

And that’s the crux of the change: it involves the formula Data Guy uses to infer what a sales ranking means, based on what he tells us is now better-sourced actual data on sales provided by authors.

Link to the rest at Publishing Perspectives and thanks to Dana for the tip.

So, we need an audit of Author Earnings by KPMG or some other extremely expensive auditing firm.

PG wonders how often KPMG audits Nielsen Bookscan. Nielsen claims to record 75% of all retail sales of books in the US and is the bible of Big Publishing, controlling the careers of 98% of all traditionally-published authors. How do we know that Nielsen’s numbers are accurate? How do we know that all the retailers are providing Nielsen with accurate numbers?

Author Earnings makes its data publicly available in downloadable form with each new report. Here’s a link to all the data backing up the latest report. It’s a spreadsheet that runs almost 200,000 lines.

All the quote marks surrounding “crawling,” “scraping data” and “spiders” in the OP are breath-taking admissions of technical ignorance. Crawling and scraping data is what Google and Yahoo and Bing and a zillion other web search engines have been doing approximately forever.

To spell it out for the English majors in Manhattan, millions of Google spiders crawl the web 24/7, scraping data about the content of websites around the world. Google started doing this in 1998. But, of course, Big Publishing takes the long view and 1998 won’t happen there for a few more years.

As far as the methodology that Author Earnings uses, in PG’s view, it’s brilliant. He immediately understood it when it was described in the the first Author Earnings report. It’s a version of what Google does applied to book rankings on Amazon. Spidering, crawling and scraping are involved in case you had any doubts.

If Big Publishing employed anyone who knew more about computers than Spell-Check, it could have done the same thing that Data Guy and Hugh Howey did with Author Earnings.

Since Big Publishing has much more detailed information about Amazon sales of the ebooks of many, many tradpub authors, it could have extrapolated a lot more information about ebook sales than Author Earnings did.

But that would have taken more effort than lobbying the Department of Justice to make Amazon stop doing bad.

Unsolicited advice to Data Guy for his presentation at Digital Book World:

  1. Don’t forget a trigger warning for Arithmophobes before you begin.
  2. Include a map on your first slide showing the location of the closest safe space with no numbers. You may want to show the map periodically during your presentation.
  3. No more than three numbers on any Powerpoint slide.
  4. No decimal points.
  5. Don’t forget to mention Excel for Dummies.

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Authors United’s Divisive Stand on Amazon

6 February 2016

From Publishing Perspectives:

Last Wednesday’s (January 27) Authors United event on Amazon and book publishing had a curiously provincial air about it. It was staged at Washington’s New America Foundation, a nonprofit think tank that includes “impartial analysis” in its description of its work. The event’s loaded title, “Amazon’s Book Monopoly: A Threat to Freedom of Expression?”, suggests that New America’s grasp of impartiality may be partial, but the intent here was to state that Amazon’s market position will, as one participant put it, cause “long-term effects on the global book trade.”

The question of whether Amazon technically has a monopoly in the marketplace, of course, is unsettled. It’s something that some of our colleagues find endlessly discussible. And Amazon’s vast size matters here, both in animating this circular debate and in that quality of provincialism. At many points Wednesday, the event—ably webcast live by New America—looked a bit like earnest but presumptive town folk complaining that a rural electrification program might harm the tranquility of the pastures. This is always a risk, of course, when we take on so large an entity as the Amazonian estate.

. . . .

“For the year, Amazon passed $100 billion in revenue for the first time in its two-decade history. It took rival Wal-Mart Stores Inc. 35 years to reach the same mark in 1997, two years after Amazon.com opened for business.”

And contextually speaking, one of the hardest things for some publishing people to do is to keep in focus the fact that Amazon is vastly more than books and publishing. It’s more than lawnmowers and dog beds, too. Its AWS operation, Amazon Web Services, has “a huge lead on rivals in offering cloud-computing services,” Bensinger writes. As a tech company—and that’s what Amazon is—it “easily” outperformed in 2015, writes Bensinger, “other tech giants like Alphabet Inc., Apple Inc. and Facebook Inc.”

. . . .

All of which throws a huge shadow over events like Wednesday’s in which detractors gather to rail at the feet of a colossus.

Authors United, earnestly led by novelist Douglas Preston, was established at the time of the Amazon-Hachette contract-renewal standoff and remains one of the most polarizing efforts in the author camp. It’s seen by many in the self-publishing world as a consortium of bestselling trade authors who place their interests in establishment publishing over the value of opening the market to independent publishing, as Amazon has done. And one of the things that has dogged the United group from the beginning, of course, is that its author-members sell their books through Amazon. In that light, the hand that feeds them looks sorely bitten each time they mount a complaint. Anyone can understand how tricky this circumstance is in such an event as Wednesday’s.

Link to the rest at Publishing Perspectives

PG says this piece highlights how pathetic the Authors United group are and how deeply needy their relationship with their publishers has become.

Remember how AU came into being. After having their hands slapped for a comically inept conspiracy to illegally fix prices by the Justice Department, the business geniuses of Big Publishing moved their price-fixing plans forward one by one as their existing contracts with Amazon expired.

Hachette was first up in the renegotiation of its contract with Amazon. The old contract provided that Amazon would set the price for ebooks, but would pay Hachette amounts based upon Hachette’s list price for ebooks. This provided a direct financial benefit to Hachette and to Hachette’s authors.

For some reason, the aforementioned business geniuses of Big Publishing thought they understood more about pricing ebooks than Amazon did, so Hachette insisted that Amazon must quit selling Hachette ebooks at a discount and, instead, sell them at the price Hachette specified.

Hachette has no problems with Barnes & Noble selling printed books at discount, but ebooks were different – new and strange – like websites.

But the executives convinced themselves over cocktails that they knew the proper price for online digital goods and Amazon didn’t. Besides, they never trusted ebooks even though their accountants patiently explained how much more profit they could make by selling electrons instead of dead trees. The fight went on for awhile and Amazon became nervous about selling Hachette ebooks without a contract in place and either quit or slowed down orders for Hachette ebooks.

The AU folks diligently studied the Constitution and antitrust laws and discovered that the founders of the nation had granted traditionally-published authors a divine right to have Amazon sell their books. Why? Because Amazon is better at selling books than anyone else. So Amazon has to sell Hachette books, contract or no contract.

Eventually, Amazon gave in and Hachette set ebook prices higher than Amazon recommended. All of Hachette’s co-conspirators did the same thing.

To AU’s surprise, instead of increasing, sales of tradpub ebooks declined! Who knew that sales had anything to do with prices?

It’s all Amazon’s fault. First, Amazon would not set ebook prices as high as Big Publishing wanted them set. And authors were harmed. Then, Amazon would set ebook prices as high as Big Publishing wanted them set. And authors were harmed.

The only reasonable conclusion for AU is that Amazon is plotting to harm authors. And books. And the writing life. And culture. And New York. And, probably, baby seals too.

In PG’s dream world, Amazon would quit selling all books published by Hachette and the other antitrust outlaws (computer problems!) until each Author’s Union member traveled to Seattle and kissed each of Jeff Bezos’ toes. Three times. And petitioned the Vatican to have Jeff declared a saint. And built a cathedral in Manhattan named after St. Jeff.

Traditional Publishing, Non-Compete Clauses & Rights Grabs

27 January 2016

From author Kameron Hurley:

When you’re a new writer, you mostly talk to other new writers about craft. Once you publish a book or two, though, you’re increasingly talking to your peers about the business of writing and publishing. You talk about contracts and foreign rights deals and rights grabs and the benefits and drawbacks of self-publishing and being a hybrid author.

One of the big issues we’ve been dealing with the last 15 years or so as self-publishing has become more popular are the increasing rights grabs and non-compete clauses stuck into the boilerplate from big traditional publishers terrified to get cut out of the publishing equation. Worse, these clauses are becoming tougher and tougher to negotiate at all, let alone get them to go away.

. . . .

This reluctance to nurse mid-list careers is bad news for writers who want to go the traditional publishing route, especially as it’s happening at a time when many editors are overworked and marketing budgets continue to get slashed and advances continue to tumble. If you’re a new author in SFF, don’t be surprised to get a first offer of $5,000 that demands your first-born child and everything you and they will ever write, and if you sell just 3,000 copies, well, sorry, we’re done with you and maybe go back to the small houses or come back to us with some vampire erotica we can sell.

. . . .

Non-compete clauses ask a writer to take an advance of $10,000 or $20,000 or whatever and prevent them from having any other novel-length work come out for a full year (or more!) before and after the book is published by that house. Sometimes this is “only” six months before and after. Sometimes it’s “only” novels in a related genre or can be negotiated to “only” novels in the same world. But it’s always awful and you always have to yell hard about it to get it wittled down to something manageable.

. . . .

For authors who write four books, or eight books, or more a year, big houses adhering strictly to this clause while paying advances under $50,000 a book would mean preventing most authors from making a living wage as writers (remove agent’s cut, taxes, and health insurance from that number, and yes, friends, that is what I’d consider an actual living wage, not . . . $20,000.

. . . .

Also of importance is that this clause makes the sort of unreasonable demands on an author that can only be made of an actual employee. You know, someone who gets health insurance and other benefits. By asking authors not to compete against themselves, they’re skirting dangerously close to moving us into the “employee” category that they want to keep us out of.  I have a non-compete clause in my employment agreement at my day job that prevents me from taking on freelancing work that competes with my day job work, and those hold up (mostly) because I’m actually categorized as an employee.

So are we employees or contractors? I’m actually surprised no one has taken a non-compete clause to court, because I think a serious legal inquiry would be interesting.

. . . .

I have some great publishers, and editors who have gone to bat for me to make things work. I have great relationships with the vast majority of them. I know it’s a tough business. I know they struggle with it too

But their parent companies see us as widget-makers, and they make it tougher and tougher for editors to hold out the open palm instead of the fist. Goodwill with your editor, or “my editor is so nice!” does not always translate to the nitty-gritty of the contract. A lot of those things are determined by the parent company up high, and are negotiated not with the editor but with people in the contracts department. Having a super nice editor who wants the best for you is great, but it does not guarantee there will be nothing but roses in your contract.

See, the big corp parent companies prefer the fist. They’d like to legally tie you to them, condemning you to live in poverty or keep your day job throughout your contract. But what editors and writers would certainly prefer is that publishers provide you with more value that helps make you and the work a success. Publishers who do things that make you WANT to do business with them are going to win over those who make it tough.

But that takes time, and effort, and resources. And so many editors are so short on those that it’s criminal. The great ones have done a fabulous job of helping us along, but their parent companies don’t always make it easy.

Clearly the parent companies, like many businesses today, are choosing the cheaper solution first. It’s way easier to serve up awful contracts than it is to invest in more editorial and marketing support. Better to just contractually bind authors to you because they have no other choice and are desperate for a sale.

Link to the rest at Kameron Hurley and thanks to Dana for the tip.

Here’s a link to Kameron Hurley’s books. If you like an author’s post, you can show your appreciation by checking out their books.

Kameron points out an interesting phenomenon in the dynamics of the author/editor relationship.

Authors, especially new authors, often regard editors as powerful deities who exercise life-or-death power over the author’s career. The editor is, of course, the gatekeeper controlling access to the publisher.

However, inside the publisher, except for all but a handful of senior editors, acquisition editors are pretty far down in the corporate hierarchy. Several levels of executives above the editor are the gatekeepers controlling the editor’s ongoing access to paychecks.

The lawyers responsible for a publisher’s contracts typically report through the general counsel up to the big bosses who are high above the editor in the corporate organization.

Life is much easier for the editor if she doesn’t rock the contract boat. While some authors can hire an attorney, who will talk directly to the publisher’s lawyer without going through the editor, new authors may be concerned about legal fees and being viewed as a troublemaker inside the publisher.

The power dynamics are completely screwed up for the new author unless he/she is determined to exert management control over his/her career.

A couple of notes on non-compete clauses that PG has mentioned before, but are worth repeating:

Non-compete agreements are creatures of state law and limitations on them can vary from state to state.

Virtually all Big Publishing contracts specify that New York law will govern the contract. PG is not a member of the New York bar, but his nonofficial opinion is that many of the non-compete clauses contained in publishing contracts would run into problems in New York courts. PG doesn’t believe that lifetime noncompete agreements (the life of the copyright is the length of most publishing contracts) in an author/publisher relationship would be enforceable under New York law, for example.

PG is a member of the California bar, however, and is able to state that California simply makes noncompete agreements unenforceable except for a couple of narrow exceptions that don’t apply to publishing contracts.

With respect to noncompete agreements that specify the law of another state will govern the contract, where a California resident is involved, California courts have, in the past, decided that California law will protect California residents from noncompete clauses regardless of what the contract says about choice of law and venue.

PG is not saying that all authors should move to California to get out of their noncompete publishing clauses. However, if an author is thinking a change of location might be a good idea (Malibu has never had two feet of snow), being able to write what the author wants to write without worrying about publishing contracts might be a factor to consider.

 

‘Sobering Statistics’ About the Effect of Amazon

26 January 2016

From Shelf Awareness:

One of the most well-attended and discussed sessions yesterday at the Winter Institute featured the release of a new Civic Economics-ABA study called The Fiscal and Land Use Impacts of Online Retail, which aims to demonstrate the effects of the growth of Amazon on American towns and cities. The study determined that in 2014, the last year for which it could get full-year statistics, Amazon sold $44.1 billion of retail goods nationwide, which is “the equivalent of 3,215 retail storefronts or 107 million square feet of commercial space, which might have paid $420 million in property tax.” Also in 2014, Amazon avoided collecting state and local sales tax of $625 million. Between uncollected sales tax and the loss of property tax, state and local governments lost more than $1 billion in revenue–about $8.48 per household in the U.S.–the study found.

In 2014, Amazon’s warehouses–65 million square feet of space–employed roughly 30,000 full-time workers and 104,000 part-time and seasonal workers. But including all the jobs lost from stores whose sales Amazon supplanted, Amazon sales “produced a net loss of 135,973 retail jobs.”

Matt Cunningham of Civic Economics noted, too, that in 2014 Amazon book sales were about $5.618 billion, some 11.6% of Amazon retail sales. That amount of sales represents about 3,600 “bookshop equivalents and 40,000 bookstore employees,” which he called “a sobering statistic.”

The study noted that as of the beginning of this year, Amazon is collecting sales tax on purchases in 27 states–soon to be 28–which is helpful for some state and local governments, but that other trends continue to get worse. “The displacement of retail space from communities to the Internet… has contributed to a slowdown in the occupancy and development of commercial space,” the study wrote. “This, in turn, has an invisible but certain impact on an essential source of revenue for most states, cities, and schools: property taxes.” And Amazon’s warehouses and distribution centers “on the peripheries of cities” are valued and taxed at lower rates than the spaces they are supplanting, often in downtowns.

. . . .

At the presentation, Stacy Mitchell of the Institute for Local Self-Reliance emphasized that the study should serve as the basis for “generating a much bigger public conversation about the impact of Amazon,” particularly with government officials at all levels.

Link to the rest at Shelf Awareness

PG says this is a typical tactic of legacy businesses facing an innovative newcomer – lobbying government officials to place the newcomer at a disadvantage or even outlaw what the newcomer wants to do. See taxicabs vs. Uber, for example. Add in the practice of subsidizing city centers at the expense of suburbs.

Let’s consider a hypothetical bookstore located in Oregon, a state which has no sales tax. Powell’s Books would be one example.

If a faithful Powell’s customer leaves Portland for the bright lights of New York City, where the sales tax is 8.875% and decides to phone one of the exemplary Powell’s employees to order a book and have it shipped to New York, will Powell’s have to charge (and pay to the State of New York) New York City sales tax?

PG will assure one and all that it’s well-settled law that Powell’s has no legal obligation to collect New York sales tax unless it has nexus, also known as sufficient physical presence, in New York.

The ability to collect a state sales tax is restricted by the US Constitution. The Due Process Clause requires a definite link or minimum connection between the state and the person, property or transaction it seeks to tax and the Commerce Clause requires an even higher level of connection. The Commerce Clause requires a substantial presence in a taxing state by the entity the state desires to tax.  (See Quill Corp. v. North Dakota, 504 U.S. 298 (1992), a staple of law school constitutional law classes, for the Supreme Court’s ruling on the issue)

So, if Powell’s doesn’t have a legal obligation to collect New York sales tax, does it have a moral obligation to do so?

In PG’s extraordinarily humble opinion, the moral obligation to pay taxes is coterminous with the legal obligation to pay taxes. If an individual or organization has a legal obligation to pay taxes, their simple moral obligation is to pay the taxes due under the relevant statutes and regulations.

If Powell’s decides to make a free will donation to New York City because a former Portland resident lives there (and everyone at Powell’s watches New Year’s Eve on Times Square), Powell’s is free to do so.

New York City might send Powell’s a certificate of appreciation for being such a generous organization. However, PG thinks few people would say that free will donations to New York City are a moral obligation instead of a charitable impulse.

As far as retail stores and retail employees that do not exist because people like to buy things from Amazon, why is Amazon different from Sears & Roebuck? Sears & Roebuck was founded in 1886, and famed for the Sears & Roebuck catalog which offered goods and prices unavailable from the local general store.

From the Sears Archives:

In 1888, Richard Sears first used a printed mailer to advertise watches and jewelry. He illustrated the cover of the 1894 catalog declaring it the “Book of Bargains: A Money Saver for Everyone.” This catalog expanded from watches and jewelry, to include merchandise such as sewing machines, sporting goods, musical instruments, saddles, firearms, buggies, bicycles, baby carriages, and men’s and children’s clothing. At this time Sears wrote nearly every line appearing in the catalog by drawing upon his personal experience using language and expressions that appealed to his target customers.

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Many thousands of stores closed because their customers ordered from Sears. PG doesn’t know whether the American General Stores Association campaigned to increase taxes on Sears or otherwise prevent Sears from selling its products at such low prices or not.

PG says it is a self-evidently foolish idea to promote the freezing of commerce and society into its present form, whether that form exists in 2016 or 1886.

If the American Booksellers Association hired researchers from Civic Economics to poll American consumers and ask if Amazon should be terminated, PG knows what the results would be.

 

 

Amazon: Threat or menace?

17 January 2016

From Chris Meadows via TeleRead:

On J.A. Konrath’s Blog, Barry Eisler and Joe Konrath have a grand old time defenestrating an event announced for later this month by an organization called New America. The event is called “Amazon’s Book Monopoly: A Threat to Freedom of Expression?” which should immediately call to mind the old “Threat or menace?” headline formulation. As Eisler points out, the event title assumes Amazon has a book monopoly, as the basis for asking a question where the question mark is only rhetorical—even though Amazon has never actually been shown to have a true “monopoly.”

. . . .

What I find most interesting is where Joe Konrath chimes in at the end to point out that all the opposition’s ranting and raving about Amazon seems to have had remarkably little effect, because the vast majority of consumers simply love Amazon. Groups like the Authors Guild and Authors United attempt to stir up resentment against Amazon. But as Konrath points out:

But I don’t think this approach works when it comes to Amazon. People aren’t so ready to buy what the pinheads are selling. Today we can have the New York Times, which I believe still has the motto “All the news that’s fit to print”, show such stunning anti-Amazon bias that the public editor has called it out more than once, and the public simply doesn’t give a [darn]. Amazon still gets their approval and their business, no matter how many times David Streitfeld one-finger-types his screeds while busting out knuckle babies with his other hand.

Konrath adds that he would like to think people are too smart to buy into what Authors United and their ilk are selling, but he suspects the more likely answer is that people just like Amazon.

Link to the rest at TeleRead

As PG has mentioned before, these biblioluminaries are reflecting Big Publishing’s fear of Amazon.

One of the reasons Big Publishing is worried about Amazon is that Big Publishing has become worried about self-publishing. Perhaps he has missed it, but PG doesn’t recall anyone in Big Publishing seriously discussing what has happened over the last 9 years with indie authors (Amazon opened beta testing for KDP in late 2007).

Of course, there were some drive-by insults, but no real conversation by an industry that generally loves to talk about all sorts of topics, including bestselling authors. What do successful indie authors meant for the future of Big Publishing? It is the Subject That Must Not Be Mentioned.

Of course, Amazon never endeared itself to Tradpub by its discounting of books either. Amazon was, of course, following in Barnes & Noble’s footsteps with competitive pricing. Big Publishing hated BN before it realized that BN might go under just like Borders did. Now they don’t talk hate on BN much at all.

Suppressed fears have a habit of manifesting themselves in all sorts of strange and illogical ways. Hence Amazon Derangement Syndrome and symposia devoted to the evils of selling a lot of books.

Traditional Publishing: What’s It Good For?

8 January 2016

From Jane Friedman:

When I first started working in publishing, no one questioned the value of a publisher.

Now they do.

When I tell nonfiction writers they need to demonstrate to the agent/editor they have a big enough platform—enough visibility—to sell books without the help of a publisher, they’ll ask, “What’s the publisher for then?”

When I tell fiction writers that their work needs to be compelling, polished, and ready for publication before they query, they’ll ask, “What’s the publisher for then?”

Link to the rest at Jane Friedman

PG suggests an additional question for authors, “How much is a publisher going to cost me?”

PG suggests that analysis of the true cost of a publisher must consider that the publisher will be costing the author money for the rest of the author’s life plus 70 years under typical tradpub contracts.

PG almost created a spreadsheet comparing costs of publishing vs. self-publishing, but decided that would lead down an OCD rabbit hole where he would spend way too much time. If anyone wants to build a spreadsheet and sends PG a link, he’ll probably do another post.

A year of living digital

22 December 2015

From Futurebook:

FutureBook’s top stories reflect a year of transition for the sector as the continuing softening of e-book sales gave way not, alas, to any great new digital innovation, but instead to rising print sales, and a broader but blended future.

At the beginning of the year there was recognition that the e-book plateau first reported in 2013 had become a reality for many trade publishers during 2014, and this was already informing their thinking about 2015.

In January, with numbers provided by all of the big trade publishers, The Bookseller noted that the rate of growth of the big trade publishers continued to fall with volume sales up 15.3% year on year. Some now see the market further dividing as the bigger publishers dust off their agency deals, providing room for the small and nimble. Yet though there remains this growing shadow market of untracked e-book sales, 2015 was also a year when print book sales began to rise again:

Rather than seeing the print book and e-book markets as two countervailing forces, it may be wise to figure out how they are working together. If the big fiction bestsellers are now predominantly being bought digitally, then has this created space within book stores to focus on different books? For journalists looking to report on this sector, the narrative might be how digital has helped revive and reinvent print, rather than the other way round.

Yet, this view also needed to be modified by acknowledgement that the e-book market could still be driven by self-published authors and by stand-alone e-book publishers such as Endeavour, Canelo and Bookouture.

. . . .

In May, the annual Publishers Association’s Stats report provided more background on sales, confirming that consumer e-book sales have softened for most trade publishers, with sales growing just 5.3% in 2014, and in the UK alone by 6.8%. It also confirmed another of the themes of the year: that the bigger publishers may be eschewing volume business for value, an analysis many other commentators later picked up on as the big trade publishers in the US, and latterly in the UK, used their new agency deals to raise e-book prices.

If volume sales are rising ahead of value growth then we can surmise that average prices are shrinking—and that publisher margins are being squeezed. In other words growth comes at a cost. The backdrop to this is the reintroduction of agency pricing in the US (but not yet in the UK), and one might further deduce that while publishers are continuing to experiment with pricing, they are watching the value of their e-book business like hawks—providing further opportunities for those willing to chase volume at the expense of turnover. In the UK, this will only be exacerbated by the imposition of VAT on e-books at the UK rate of 20%. What looked like a high margin business for sometime, now looks like a race for the bottom (agents take note). In fact, since the average selling price of printed books is on the rise, publishers might actually be banking on print to back up their e-book growth.

Yet if straightforward e-book business was becoming tricky, the new models did not rise to the rescue—at least not yet. US subscription companies Oyster and Scribd drew a lot of attention at the beginning of the year, as did European start-ups Mofibo and Blloon. Oyster eventually announced a shut down and move to Google in September, while Blloon admitted in October that it would close (or pivot) its operation. Scribd had its own problems, pulling a number of romance titles from its service, precisely because it could no longer maintain the heavy readers drawn to those titles. It was a fundamental move and recognition of just how tough it will be to make subscriptions work in the book field, which has traditionally focused on heavy readers.

Link to the rest at Futurebook

“The average selling price of printed books is on the rise”

“Consumer e-book sales have softened for most trade publishers”

“Yet, this view also needed to be modified by acknowledgement that the e-book market could still be driven by self-published authors”

PG says when publishers use agency contracts to raise ebook prices, why is anyone surprised that ebook sales soften? Of course, the ebook market is not only driven by indie authors, as Author Earnings has shown us, it’s dominated by indie authors.

Where’s the real growth in the ebook market?  In self-published ebooks. Publishers are seriously overestimating the value readers place on books printed by Big Publishing. Readers are learning that books sold by the authors of those books are just as good and often better than books published and priced in the New York/London style.

Whether publishers like it or not, with the help of Amazon, indie authors are resetting ebook price expectations for readers. And readers who become accustomed to reasonable ebook prices will inevitably resist higher-priced printed books.

Increasing the average price of printed books is pouring gasoline on the same fire that was ignited by using agency to increase the price of ebooks. The corporate “Want more money? Increase prices!” mindset is another nail (or perhaps a big barrel of nails) in the coffin of traditional publishing.

Why is Amazon the world’s largest bookstore and still growing sales rapidly? (Hint: It’s not because they increased prices.)

The biggest question for tradpub in 2016? Will anyone wake up?

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Stop Forcing Authors to Take Unlimited Financial Risks

19 December 2015

From The Authors Guild:

Warranty and indemnity clauses in standard publishing agreements tend to make authors’ eyes glaze over. But these clauses have the greatest potential to damage authors’ financial health. While other unfair terms give authors a raw deal when it comes to how much money they can receive for a book or how much control they can exert over it, far-reaching warranty and indemnity clauses are even more insidious. They can put an author’s entire net worth—or more—at risk.

When authors question these clauses, editors often contend that they’ve been admonished not to change so much as a word without clearance from the legal department. An editor may simply insist that such terms are “non-negotiable due to corporate policy”—an unhappy way to begin what’s supposed to be an amiable relationship.

Let’s look past the jargon to see what that editor is asking the author to sign. A warranty is a promise that something is true. Publishers ask authors to promise that the book under contract does not infringe anyone else’s copyright, does not invade another’s privacy, is not libelous, and, sometimes, does not contain “matter otherwise contrary to law.” If any of those statements turns out to be untrue, the author has breached the agreement.

The indemnity clause kicks in to give the warranties bite by making restitution a clear contractual obligation: if any claim is made for breach of the authors’ warranties, the author has to cover all related costs and liability—whether or not the claim is valid, and whether or not the author knew or should have known of the infringement, defamation, or invasion of privacy.

Sounds fair enough at first glance. But is the author really in a position to promise that her work doesn’t violate the law anywhere in the world? Why should an author absorb the entire monetary hit for all claims, no matter how unfounded, made against the book? And why doesn’t coverage for authors under media liability insurance policies protect authors from these problems?

. . . .

Publishers defend their standard warranty clauses on grounds that may initially not seem specious: It’s the author’s work, after all, so who better to know what the risks are than the author, right? While this may sound reasonable, it essentially makes the author an insurer against any claim that may happen to arise, whether well-founded or frivolous. It also unfairly asks the author to be an expert regarding all sorts of laws around the world; publishers would have to pay authors a lot more than they currently do for authors to be able to afford the legal fees for that sort of review.

. . . .

An easy way to solve this is available: warranties should carry clear limits. For instance, the author might merely warrant that the book isn’t violating any laws to “the best of [an author’s] knowledge.” And because editorial insertions may lead to their own violations, the publisher should offer a warranty regarding any changes it makes to the work. Why don’t publishers offer these very reasonable limits up front?

. . . .

Most publishers refuse attempts by authors or agents to change this language and often impose their own language allowing the publisher to withhold author payments indefinitely to make sure money is available just in case any expenses are incurred from an asserted claim. But withholding royalties for an indeterminable period can unfairly jeopardize an author’s livelihood, especially when a claim is asserted but never pursued.

. . . .

Publishers’ media liability insurance used to solve most of this problem. Roughly three decades ago, the major publishers began paying extra to extend their own coverage to cover their authors, quelling authors’ fears of financial ruin. (Though they did this as a matter of practice, not out of any contractual obligation.) In exchange for coverage, authors were asked to share the cost of the deductible, originally about $10,000 to $15,000. That could be viewed as fair: as we’ve said before, publishing is a partnership, financially and otherwise. Now, with deductibles often running upwards of $250,000, most authors are again placed in the dire position of facing financial ruin. And many publishers don’t include authors in their liability insurance coverage at all.

Link to the rest at The Authors Guild and thanks to Jackie for the tip.

PG has been ranting about warranties and indemnities in publishing contracts since he saw his first publishing contract. See this rant and this one as examples.

A couple of items the Authors Guild piece didn’t mention:

Media liability insurance is certainly very helpful in the case of the claim. As the article mentioned, big deductibles make such policies less protective for authors. However, no media liability insurance or inadequate coverage amounts are even worse.

Media liability language in publishing contracts often neglects to include a mandate for the publisher to continue to maintain such coverage. If the publisher has a bad year and decides to save money by allowing the media liability policy to lapse, there goes the protection. If, as has been happening for many years, the publisher merges with or is acquired by another publisher who doesn’t want to pay policy premiums, adios to insurance for the author.

PG hasn’t seen any publishing contract that mandates the amount of coverage the publisher is required to maintain and specifies the deductible amount.

A media liability policy with a limit of $100,000 for any claim won’t do much good for an author. If the policy includes a $50,000 deductible, it does even less good for the author.

Another problem with most media liability policies with which PG is familiar is that their coverage limits apply to the total claims made against the publisher each year. For example, policy limits may be $1 million for any claim up to a maximum of $2 million total for any year. If your claim arises in the same year the $2 million policy limit has been used for other claims, you may be out of luck. (This is a simplification because some liability policy limits are based on when the claim originates, others on when claims are paid or a combination of the two.)

Setting aside the issues arising under liability policies, if there is an uninsured loss, every publishing contract PG has seen makes the author pay 100% of any losses. The AG article discusses the failure to consider whether a publisher’s editorial process contributed to the liability. That is one way in which a publisher may contribute to an author’s liability.

PG suggests that the mere fact that an author has published a book with a large corporation substantially increases the likelihood of a suit if anyone is upset by the contents of a book.

Why? Because a big publisher is a big target for attorneys who take cases on a contingency fee basis.

Contingency fees are permitted for many types of damage claims in the US, but not permitted in some other countries. Under a typical contingency fee arrangement, the attorney receives a percentage of the total recovery as the attorney’s fee. If there is no recovery, the client doesn’t owe the attorney any fee.

Rule #1 for contingency attorneys is to never take a case where you can’t clearly see someone with the ability to pay a big judgment or a big settlement. A big publisher, with or without a big insurance company, will have the ability to pay a big judgment. A little author who self-published will only attract very stupid contingency fee attorneys (who exist, but don’t stay in business for very long).

A book published by Randy Penguin? Let’s head for the courthouse. A book published by Jane Doe? Forget it.

The increased chance of an author being sued is an additional risk associated with traditional publishing that PG hasn’t seen anyone mention.

Here’s a humble proposal that might balance the risks for an author: The author and the publisher share liability in proportion to the amount of money each receives from the sale of a book.

If the author receives royalties of 25% of the amount a publisher receives from the sale of a book, the author is responsible for 25% of uninsured claims and the publisher is responsible for 75%. (Adequate insurance is almost always the best solution for liability claims.)

Since royalties for different types of books vary, a blended percentage based upon sales-weighted money earned from hardcover, softcover, ebooks, etc., could be calculated to divide claims between the author and the publisher.

If the publisher has 80% of the upside, the publisher should pay 80% of the downside.

Yes, the publisher has made a substantial investment in editing, printing, distributing, etc., each book. The author has also made a substantial investment in each book unless the publisher regards the author’s time as absolutely worthless.

But what does PG know? He’ll look forward to comments on this post.

Authors Guild Files Brief Affirming Benefits of Competitive E-book Economy

3 December 2015

From The Authors Guild:

The Authors Guild, the nation’s largest and oldest society of professional writers, discussed the benefits of competitive e-book pricing in a friend-of-the-court brief filed today with the Supreme Court of the United States.

The brief, filed jointly by the Authors Guild, Authors United, the American Booksellers Association, and Barnes & Noble, bolsters ongoing advocacy efforts by the Authors Guild and Authors United and asks the Supreme Court to review a decision by the Second Circuit Court of Appeals in U.S. v. Apple, which found that Apple violated antitrust law by coordinating with major U.S. book publishers to influence the price of e-books. In the brief, the author and book industry groups argued that the government’s focus on Apple’s allegedly anti-competitive activities was misplaced, because Apple’s conduct, in fact, enhanced competition by increasing e-book output, the number of e-book titles, and the number of e-book distributors, which led to technological improvements in the e-book market and enhanced freedom of expression and access to e-books.

In U.S. v. Apple, the Department of Justice brought a lawsuit maintaining that the publishers and Apple—by striking a coordinated deal to establish agency pricing for e-books—exhibited anticompetitive conduct by conspiring to fix prices. The publishers and Apple, on the other hand, maintained that Apple’s entry into the market actually increased competition, as demonstrated by the fall of Amazon’s market share from 90% in 2010 to around 60% two years later. After a 20-day trial in summer 2013, the trial court found that Apple colluded with the publishers to drive the price of e-books above the $9.99 favored by Amazon. The Second Circuit upheld that decision.

. . . .

In the brief submitted today, the groups sought to highlight the procompetitive impact of Apple’s conduct and the damaging effect on e-book publishing as well as the future of authorship that occurs when e-book distribution is in the hands of a single company. Attorneys with Kirkland & Ellis in New York and Washington, D.C. filed the amicus brief. “Absent correction,” they wrote in the brief, “the lower court’s wooden approach threatens to undermine the very objective of antitrust law—to ensure robust competition.”

“We authors feel strongly that diversity, competition, and the free flow of ideas are key to a healthy marketplace of books,” said Douglas Preston, founder of Authors United. “The numbers unequivocally show that Apple’s entry into the e-book market increased competition and gave authors and publishers greater choice in how content was delivered to the reading public.”

Link to the rest at The Authors Guild and thanks to Joshua for the tip.

PG says The Authors Guild has been making some noise about helping authors avoid the terrible contracts Big Publishing requires of them. Unfortunately, this amicus brief shows where AG’s real sympathies lie.

The actions of The Price-Fix Six could not have been more clearly illegal under US antitrust law. As PG mentioned during the trial, the facts of the lawsuit against Apple and five of the six largest publishers in the US would never have been used as the basis of a question on a law school antitrust exam because the violations were so obvious. A second year law student would instantly recognize them.

The “We broke the law because we wanted more competition” argument is as lame as it sounds. Amazon is permitted to gain a large share of the ebook market if it does so by providing good products and services at lower prices. Antitrust law exists to protect consumers and competition, not any particular group of competitors.

For all his virtues, Steve Jobs didn’t want to compete on price. That wasn’t (and isn’t) the Apple Way. Apple was coming to the ebook market late and didn’t want to deal with a company like Amazon who was all about low prices. Since Big Publishing didn’t like low prices either, Apple found ready allies in a plan to push the prices of ebooks up and keep them up.

Voila! Illegal price fixing.

The suit against the Price-Fix Six was brought by the US Department of Justice antitrust division. However, private antitrust suits are permitted and even encouraged under antitrust law by an automatic trebling of damages paid to a successful plaintiff. While Big Publishing has tried and failed to interest the DOJ in filing suit against Amazon, if Big Publishing really believes Amazon has violated antitrust laws, they can file that suit themselves.

Antitrust litigation is not cheap, but the big international media conglomerates that own all the big publishers have deep financial pockets. The fact that no private antitrust action has been filed is a huge indication, for PG at least, that Big Publishing’s lawyers are telling their clients that Amazon would win such a suit.

End the Discount Double-Cross

16 November 2015

From The Authors Guild:

In our last installment of the Fair Contract Initiative, we detailed how publishers’ outdated accounting practices consistently delay and minimize authors’ royalty payments. But that’s not the end of the story. In another common practice, publishers routinely use contract provisions to slash authors’ royalties to mere pennies per copy sold.

Standard trade royalties are based on a percentage of the publisher’s list price. But publishers have come up with a variety of clever methods to base royalties on the much lower net amounts they actually receive from booksellers and wholesalers. Then they add insult to injury by cutting the royalty rate itself by as much as two-thirds. When an author gets paid on less than half the list price, that’s bad enough. When an author gets paid only one-third the normal rate on that reduced price, the word “pittance” seems appropriate.

So-called “deep discount” clauses let publishers offer titles to booksellers and wholesalers at big markdowns. They stipulate that a publisher’s sale at a discount of over 55%, for example (a number that appears to be the new standard), the author’s royalty suddenly drops from, say, 15% of list price to 15% of the far smaller amount the publisher actually receives. A standard deep discount clause looks something like this: “On copies of the Work sold by the Publisher at a discount of greater than 55% from the publisher’s retail price through channels outside of ordinary retail trade channels, the author will be paid a royalty of 15% of the Publisher’s net proceeds.” (Many smaller publishers, which pay royalties on net proceeds to begin with, often slash the royalty rate in half on discounts from 50–70%, and by 2/3 for greater discounts.) Thanks to that drop in royalty payments the publisher makes out like a—well, the word “bandit” springs to mind.

It seems fair that when a publisher sells a book at a deep discount, the author’s take might be reduced proportionally. But there’s no proportionality in many standard “deep discount” clauses.

. . . .

We’ve seen these discount double-crosses applied for sales to book clubs and book fairs, for “special sales” in bulk outside the usual book trade, for large-print editions, for export editions. Let’s say the publisher sells our sample book in bulk for just $2.00. The discount double-crossed author would get one thin dime per copy, a royalty cut of an astounding 93%—even though the net to the publisher would decline by less than 33%.

. . . .

Even crazier, some reductions can apply even to direct sales from publishers to readers, despite the fact that the publisher gets to keep the share of the transaction that would normally go to a retailer or wholesaler. If anything, an author’s royalty rate on such direct sales should be higher than normal.

. . . .

The documented decline in authors’ incomes stems in part from these unconscionable reductions in royalty payments. Unless publishers begin to see authors as partners rather than patsies, many authors will no longer be able to afford to deliver publishers the quality work the industry was built on.

Link to the rest at The Authors Guild and thanks to Jacqueline for the tip.

PG says some authors get excited when they see their books in Costco. Unfortunately, it’s almost certain that their Costco sales will fall under the deep discount royalty structure, generating only tiny royalties.

Then, there are publishers who sell virtually everything at “deep discount” so the author never receives the royalty rates that are listed first and most prominently in their publishing contract.

PG has mentioned this before, but perhaps it bears repeating. During PG’s legal career, he has helped clients with a wide range of business contracts, including agreements prepared by many of the largest and most successful companies in the world.

Standard publishing contracts from large traditional publishers stand out in the constellation of business contracts for their one-sidedness and, in some cases, outright duplicity for anyone who fails to read them very carefully. The way that Randy Penguin and its cohorts write their standard contracts is not the way that Apple, Microsoft, Morgan Stanley, Bank of America, Disney, Intel, Hewlett-Packard, American Express, Merrill Lynch and similar entities write their contracts.

PG doesn’t agree with many initiatives undertaken by the Authors Guild, but he’s pleased to see their latest efforts to shine a light on some of the most abusive contract provisions routinely employed by Big Publishing.

However, the cynic in PG holds little hope that AG’s efforts will bring about any meaningful reform. Treating authors badly is too much a part of the corporate and cultural DNA of traditional publishing to change. These dinosaurs will die before they evolve.

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