From Kristine Kathryn Rusch:
The indie publishing world remains stunned by the sudden closing of All Romance Ebooks (ARe), an ebook distributor that had looked—at least in the beginning—like it was very successful. Maybe it had been, and had simply been undercapitalized (which is my guess).
But whatever the reason, ARe closed its doors on December 31, 2016, and is now dealing with a heck of a financial fallout.
. . . .
ARe wasn’t the only venture to go belly-up in 2016. A couple of other companies that got their start as some kind of support, or “new” business model based solely on the indie publishing revolution also liquidated in 2016. Another—Booktrope—vanished fast as well, although unlike ARe, Booktrope gave its suppliers a month to handle the loss.
. . . .
So, what are these three intertwining factors that will impact us in the next few years?
They are:
- A gold rush
- An investment bubble
- A business cycle
Each has patterns so clear that a thousand books have been written about those patterns. You can find the patterns by Googling, or (in the case of gold rushes) by watching the History Channel.
Let’s start with the gold rush, because everything starts when someone discovers a shiny hunk of metal hiding in plain sight.
The ebook revolution wasn’t a literal gold rush—there were no creeks, no slipping hands in ice-cold water to shake gold flakes loose from bare rock in a little makeshift pan.
What there was were a few frustrated writers who used Amazon’s easy Kindle interface to upload books that these writers either couldn’t sell to traditional publishers or were too afraid to try to sell. And because the Kindle was such a nifty device and because there wasn’t a lot of content, back in them thar days (nine years ago), these books took off. Writers who had books with bad covers and poor copyediting sold and sold and sold because those writers could tell good stories.
. . . .
Gold rushes follow a pattern. The pattern goes like this:
- The work is so easy that anyone with the desire can do it with little or no capital outlay. It takes being in the right place at the right time with the right set of skills. (In an actual gold rush, the first skill was patience and the ability to touch ice-cold water for hours at a time.)
- The tools improve. They remain easy to use. There’s a capital outlay, but it’s still tiny. Again, right time, right place, right set of skills. (In an actual gold rush, the miners built sluicer boxes that quickly separated the gold from the rock. The work with a sluicer box was faster than work with a regular pan, and much faster than working by hand.)
- Outsiders notice and want in. That’s where the word “rush” comes in. Everyone wants a piece of gold sitting on the ground. It’s easy. Everyone will get rich!
- With the outsiders come the side businesses. These businesses make it “easier” to do the work. Some actually do. Some fill a need—like the general stores that rose up around the mining camps. Others are scams, trying to take gold away from the miners. (Or money away from the writers.)
- The easily attainable gold goes away. Now, it takes some work to make money. In gold mining, the workers actually had to start mining for gold (yes, there were other steps here—establishing claims, etc. They’re no longer relevant to our discussion). It also takes money to do this work, not a lot, by normal business standards, but still more than some people have.
- The operation goes from low capital with small (or no organization) to large capital and big operations. The small workers who started all of this become one of three things:
- big business owners (and rich);
- workers with expertise…for someone else
- retired or bankrupt or moving on to the next crazy idea
- The gold rush is a distant memory but it has changed the landscape forever. New towns exist. New jobs exist. New wealth exists. New businesses exist. Lost in all that newness is the destruction of old businesses and the people who suffered lottery luck. (Lottery luck: they win riches, then spend it all, with no hope of ever having money again.)
- Small business becomes Big Business becomes The Way We Do Things Around Here. You see that in the American West, more than 150 years after the gold rushes of the 19th century. Mining still exists. Heavily regulated, with a ton of problems. States exist where there were only territorial governments before, because of mining. And so on and so forth. Indie publishing is decades away from this one.
. . . .
Here it is, the life cycle of an investment bubble. (If you want to read about this in-depth, go to Investopedia.)
- Displacement: Something happens that changes an industry, something that investors will eventually notice. Introduction of new technology, for example, might make some work easier. Consumers change their behavior for a weird reason. Whatever it is changes the way things are done, and investors start paying attention. Some get in on the ground floor.
- Boom: Everyone wants in. Everyone wants to invest money in this new thing, whatever it is. The increased investment spurs growth, but that growth isn’t natural. There is a natural growth curve, but it’s being masked by the enthusiasm.
- Euphoria: We’re going to be rich! Forever! It only takes a few dollars. Or as a friend said to me during the real estate bubble, parroting what he heard from his (now-out-of-business mortgage broker), Real estate always increases in value. It never goes down. Yeah, right. And I know of this land in Florida…oh, wait! I’m referencing yet another bubble (from the 1920s).
In other words, no one researches anything. Everyone throws money at this hot thing, thinking they’ll make a killing at it. This is different from a gold rush, in that we’re talking about people with money to invest, not people who will do the actual work. Keep that in mind.
- Profit Taking: Smart investors leave. In fact, some of them left before the euphoria started. But people who have been doing this for a long time recognize the euphoria for what it is and get out at the height of the market, selling their holdings for a profit. Stupid money stays. And believe me, there’s a lot of stupid money in investments.
- Panic: Yeah, you know this one. We’ve all seen the movies about 1929, where people jumped off buildings because they lost everything. (Not that such things actually happened, but they could have happened.) We lived through 2008-2009, which was a panic as well. People want their money now, and they want what they put into the investment, which is no longer possible.
- Never Again: This isn’t on Investopedia but it’s there. A lot of people, burned by the bubble, will never invest in that particular business again, whether that business is stocks, real estate, tulips, or technology. The romance is over, the possibilities are dead.
How does an investment bubble relate to publishing’s gold rush? There are two points of entry for investors into a gold rush. The first is #3: Outsiders notice and want in. Non-writers think they can profit on this growing phenomenon by helping writers with their businesses, by giving loans or doing other forms of investing.
The second point of entry is #6: The operation goes from low-capital to high capital. At this point, the gold rush is established and everyone knows about it. Even investors who don’t read knew what was going on in publishing. I had several angel investors approach me about my writing or WMG Publishing in 2014. I could have had meetings with venture capitalists who were willing to put $10 to $20 million into my publishing business—for 50% of the profits. I didn’t laugh. I made note of where we were in the investment cycle. Then I laughed—and did not take the offers.
. . . .
I’m telling you about the life cycle of a business, not to help you with your writing business (although you can probably see yourself here) but to think of all of those outside businesses that have attached themselves to writers who want to indie publish.
We’ve already seen countless business go out of business because they couldn’t survive the existence phase.
Most businesses that started to augment indie writers are now in the survival stage. This new environment hasn’t existed long enough for the businesses to adequately predict the future. They can only guess.
. . . .
If the writers don’t get rich, then the businesses that are making 10-20-30% off those writers don’t make money. Those businesses are hemorrhaging capital.
If the business managers/owners are optimist types who don’t understand the various bubbles and life cycles they’re in, they’re going to try to get investment. And they won’t be able to get real investment, because smart money left the industry years ago. Stupid money has lost its interest in publishing. And only usury types remain—the kind who give loans at 30-40%. These businesses won’t qualify for anything else.
Survival is all about cash flow, and managing cash flow is an art. The concerns of the business in the survival phase, according to Churchill and Lewis, are pretty simple:
- In the short run, can we generate enough cash to break even and cover the repair or replacement of our capital assets as they wear out?
- Can we, at a minimum, generate enough cash flow to stay in business and to finance growth to a size that is sufficiently large…to earn an economic return on our assets and labor?
Many of these side businesses will soon learn that the answer to those questions is no, because the flood of money is gone. The gold rush is dead, and investors want nothing to do with publishing.
Link to the rest at Kristine Kathryn Rusch
Here’s a link to Kris Rusch’s books. If you like the thoughts Kris shares, you can show your appreciation by checking out her books.
I find Kris unbearably smug at times. I don’t know if it’s my own problem or a personality misalignment. It makes it hard to know how much to take her advice to heart. I don’t really like hearing smug remarks about how she knew what was coming and everyone else was fooled. Sometimes she comes over that way to me, although it might be my own problem not hers. To hear her brag about turning down 10-20 million dollars seems unbearably smug to me. (And it does sound like bragging whether she means it to or not!) The advice might be sound, but I can’t bring myself to read it without gritting my teeth at the tone. Better people than me have been defeated by tone…but that doesn’t mean she knows everything she thinks she does, either. I’m = fed up with the smug experts telling us the sky is falling.
I’d start by wondering who you think as screwed you over, surely not KKR, she’s just talking about trends and cycles.
I spend just shy of seven years at Dell and watched some of their cycles. One fun one was about a two year hiring freeze game they played. They would freeze ‘all’ hiring, even if some departments were in desperate need of more bodies. They make up for the shortage by offering overtime — until they went over their overtime budgets. Then it was just forty hours a week of watching the calls-waiting board climb into the hundreds before they’d allow new hiring. As it was three to six months of training (for our department) to get them on the floor and a few more months before they were pulling their weight it was a long time getting that call-waiting line down. Then they’d do another hiring freeze …
It was funny as the managers who changed departments every 3-9 months couldn’t see what was coming — even after I and other old-timers told them of the earlier cycles.
(Dell server support ’96-’03)
KKR is comparing other trends and cycles to trad/indie/self publishing, no one’s getting screwed over unless they’re betting against the house on how things will progress.
right on Allen. Nothing like being ‘on the inside’ to give accurate perspective
This was the name I chose to discuss losing income from ARe’s convenient collapse. I see now reason to change it since the site remembered my email.
Feelingscrewed: how would you like her to phrase a fact of turning down money so you would be comfortable?
I really don’t care. I just don’t think I’m going to try to read her blog anymore. I’m not getting anything out of it when I can’t read past the smug
I know how you feel Although in my case it’s Remittance girl who rubs me up the wrong way.
Most of the points she makes are insightful, but her smug tone and condemnation of Conservatives and brexiters as uninformed illiterates Really does annoy me.
Wasn’t aware this was a political blog, Anon
I tend to think it’s what the commenters and Ppg make of it.
The BIG THING this article says to me is and OLD THING:
Avoid entangling alliances.
I think it was George Washington’s advice to our young nation, but it applies not only to traditional publishing but to way too many of the author service businesses that have come forth with pick axes and other “essential” supplies.
Or as the sergeant used to say on HILLSTREET BLUES, “Let’s be careful out there….”
One of my challenges is that I’m drawn to write texts for children’s picturebooks and its very expensive to self-publish them, since I have to procure the necessary artwork.
(I have 14 such manuscripts in more or less final form.)
I’m sorely tempted to pursue literary agency for traditional publishing and would welcome alternative ideas, comments, or advice.
🙂
There is a much more basic reason.
Publishers are not needed for the independent novel market. Those who can publish without them have a competitive advantage over those who can’t
The market can get along very well without the firms that publish independents to Amazon. Some authors may want these publishers, but the market doesn’t care what they want.
It’s tough to survive when someone else can do the same thing for a lot less. Low cost producers typically beat high cost producers.
What I appreciate about this is the perspective that comes with years of her business experience. Kristine is able to provide an overarching view of these cycles, giving me, the writer, the ability to understand that everything isn’t collapsing. It’s a cycle that evolves over time. Quick wealth opportunities do come and go, as evidenced by many other passing fads. In this case the decision for me to write and keep writing can be based more on the love of the craft, rather than relying on /hoping for /straining to someday hit the Big Jackpot in the future.
When your book isn’t selling well, there are a lot of people who will advise you that spending (more) money on the cover, the editing, the marketing is the solution.
If your book isn’t selling, I would advise you to write another one and then another one after that and keep doing that until you write one that resonates with readers. Back in the day before indie publishing, I wrote seven books before I finally sold one. I’m thankful all the time that I didn’t give up when those first books didn’t sell. (They’re all on sale now and selling great, btw). You just have to keep trying. More books–that’s the “secret” to success.
And a lot of those people know just where you should spend that money: with them.
The gold rush may be over, but there’s still opportunity in self publishing. It’s going to take even more work and hope, but there will always be readers, and I still think this is the best route for good writers who can tell stories well.
It’s never been really easy for people to make money from writing, but it’s a lot easier today than it was a decade ago, when a few people had control over what readers could choose from.
They’re the ones selling pick axes and pans — and phony maps to where that there gold has been found. 😉
Yes. I’ve never sold more than a few hundred copies of any book, but that’s a lot more sales than I had in a decade of submitting to publishers.
I have more than 80 books selling on Amazon. I should say ‘selling’ as just 20 to 30 titles sell with any regularity.
I don’t think covers/editing/marketing is going to help most of those non-selling books. I’ve actually tried it with the covers and marketing – didn’t do much to help.
Mainly, they’re just not that good. Not very interesting. Weird. Strange. Too far out there.
A lot of the time they’re too short, novella-sized. Those won’t sell that well no matter what, even at $0.99.
Ever since I started in 2013 I’ve had the strategy of just writing more.
You never know what book will do well, though you can have ideas. Currently the books that sell the most for me are books that I did like all the others – something I felt like working on, thought would be fun, and that maybe some people might be interested in.
Well, they were. I got lucky. Sometimes that’s the case, other times it’s not. Most of the times it’s not.
I thought Kindle had transformed novellas into the sweet spot.
Dan
Gather some of those novellas together into an omnibus.
I enjoyed this article.
Being ‘urine-broke’, I could never invest, not at any stage of the gold rush. I stopped working on my latest novel over a month ago, many of the same thoughts going through my mind. If a book is not going to sell in any significant numbers when independently published, then the only other option is to submit it–to any number of inevitable rejections. That’s just the way things are right now.
It’s real hard to make money in this business, and yet Kristine always says, ‘treat it like a business’.
She’s right on so many counts.
You don’t have to spend any money. Sure, it would be nice to have the spare cash for a professional cover, and professional editing, paid ads etc., but it’s better to publish it than simply get a bunch of rejections.
Who knows, you might sell more than you think. And it’s very satisfying to see your book available for sale and in POD.
In terms of possibly getting rich, there is going to be another “The Martian” or “Fifty Shades of Grey” that goes viral and simply connects with an audience. It isn’t impossible. If you’ve done the hard work of writing it, why not give self-publishing a chance?
I would agree. What’s changed is the odds.
That change is significant… and I buy into and appreciate this article by Kristine Kathryn Rusch and her overall perspective because…
Odds are important. They are the difference between gambling and investing and/or entrepreneurship.
However…
Good entrepreneurs manage risks and turn what would be gambling into investment, even conservative investment.
And it’s not like traditional publishing is anything more than a long shot on the midway of the county publishing fair.
Good luck to all!
i want you in my corner, ever, Mackay Bell. Great advices