How Are You Going to Spend the Money?

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From Brandon Sanderson’s Blog:

How Are You Going to Spend the Money?

I got this question from the journalist from the Associated Press who interviewed me.  He gave an excellent interview, and we had a really great conversation.  But this question stopped me for a moment.  It’s a valid question, but it took me by surprise, as I haven’t been looking at this the way that some people seem to be.  I didn’t hit the lottery, any more than any other business hits the lottery when they have a product that connects with their market.

I will spend the money as I spend the rest of my money.  Part into savings, part into paying salaries (along with nice extra bonuses because the Kickstarter did well), part reinvested into the company.  (We’re still planning on building a physical bookstore, and this will help accelerate those plans.  Also, it’s not outside of reason that as I move into doing more film and TV, I will want to partially fund some of the projects.)

While this Kickstarter is an incredible event, and (don’t get me wrong) is going to earn me a good chunk of money, it’s going to be comparable to other projects I’ve done.  Also, don’t underestimate how much money it costs to maintain the infrastructure (like a warehouse–or in this case, probably more than one) it takes to be able to ship several hundred thousand books.  It will likely be years before we can be certain how much this actually earned us after all expenses.  More than we’d get from New York on the same books, but potentially not that much more.

That said, I will almost certainly buy myself some nice Magic cards.  Still have a few unlimited duals in my cube that could use an upgrade to black border.

Did You Anticipate This Level of Success for the Kickstarter?

I did not.  I knew the potential was there, but I didn’t think it (getting to this astronomical number of backers) would happen.

My guess was that we’d land somewhere in the 2–4 million range, though I really had no idea.  My team can attest to the fact that in the lead-up, I was very conservative in my estimates and expectations.  This was an experiment from us that I’d been wanting to try for a while.  (I’ll talk more about that below.)  I didn’t have any idea how well it would go.

To pull back the curtain for you a little, Rhythm of War’s first week sales were somewhere around 350,000 across all formats.  (That week was 50% audio, 25% ebook, 25% print.)  Starsight’s numbers were around 80,000 copies across all formats for the first week.  (This one was 54% audio, 29% ebook, and 17% print.)  Those are US numbers only.  Note, these are both what I’d consider very successful projects.  Both of these books sold enough to claim the #1 spot on their respective New York Times bestseller list, for example.  And though Stormlight sold 4 times as much–it also took 4 times as much work.  (In the long run, because of its larger price point, Stromlight does earn more though.  Which is why it amuses me that people sometimes accuse me of writing the YA books to “cash in.”  Um, no, my friends.  I earn less on those.  Not significantly less, but still.  I write them because they are stories I want to tell.)

The first year for Rhythm of War was about 800,000 copies total.  Starsight ended up somewhere around 250,000 copies after one year.  (Rough estimates.)  It’s too early to tell for Cytonic on this second metric, which is why I used the previous book.

Now let’s look at a less successful Sanderson book.  Legion: The Many Lives of Stephen Leeds is my worst-selling recent book.  First week was under 10,000 copies–and it’s only sold about 80k copies so far in the three years it’s been out, with the first year being roughly in the 50k range.  These numbers weren’t surprising to me–it was not only a short fiction collection (which is a tough sell to a lot of readers), it was also in a genre I’m not known for and the first two novellas had been out in ebook for years, with quite good sales.  So while this isn’t the best comparison ever, another good thing to look at was the Way of Kings leatherbound, which had roughly 30,000 backers.

Together, this knowledge gives a rough idea of my readership.  It’s hard to judge apples to apples with this Kickstarter, as I am giving the ebook with the other editions–and it’s hard to know how many of those readers above are buying two copies instead.  But I could guess that the upper end of the number of people willing to show up to buy a Sanderson book in the first year of release is somewhere around 800k, while the lower end of people who will show up for one is around 50k.  That’s why I say I knew the potential was there.  If the 30,000 people from the original Kickstarter showed up and bought the lowest tier, we’d be right around a million for the Kickstarter.  We knew it would likely be bigger, but how much bigger?

Modern media consumption is, for better or worse, very platform-specific.  People don’t like to be moved from one platform to another–and I get it.  The convenience of having your media collection all in one place, of already having your credit card info stored, of not having to do much besides click a button (or grab something at the bookstore where you’re already visiting) is huge.  The question wasn’t if people would want to read these books.  It was this: Would they be willing to move from their comfortable platform to Kickstarter?  Would we be able to even make them aware of these books?

How many of those potential 250k–800k people who normally buy a Sanderson book in the first year could be convinced instead to move and preorder it through Kickstarter?  Our guesses, it turned out, were way low.  But at the same time, it is interesting that (not disregarding our huge success, which I’m not at all complaining about) even this huge Kickstarter breaking all records is only grabbing a fraction of my normal audience.  So maybe you can see why we knew we had potential, but were conservative in our estimates.  We didn’t know what to expect, but assuming that we’d do a fraction of what a Stormlight book did in the same space (even if it was a reprint) was at least a reasonable baseline.

Note that if you want to consider a really daunting fact, realize that if all 800k first-year Stormlight readers showed up (these are the ones willing to buy the hardcover or the more expensive ebook, since the prices don’t drop to mass-market levels until after the first year) to buy these books on Kickstarter…  Well, our current average spend per backer is over $200.  So we’d be talking about a Kickstarter of $150 million plus, in that pie-in-the-sky case.

No, we’re not going to try to do that by releasing a mainline Stormlight novel in first run on Kickstarter.  The reason why has to do with the next questions.

Is This the End of Traditional Publishing For You?  Is That Why You Kickstarted These Books?

I know some of you know the answer to this, having read the sound bites I’ve put into various news media interviews I’ve done recently.  But if you’ll humor me, I want to go into more depth.  To do that, first let me tell you a story.  (Totally unexpected, I know.)

In 2010, Macmillan (the parent company of Tor Books) got into some finicky contract negotiations with Amazon.  The publishers felt that Amazon was selling ebooks at rock-bottom prices to move Kindles–something they wanted to do to dominate the market and control the reading platform.  During negotiations, Amazon–to put pressure on Macmillan and try to starve them out–stopped selling any Macmillan books.  (Except for used copies through the extended marketplace.)

This was within Amazon’s power; as a retailer, they can decide what they want to sell and what they don’t.  They used a common, if cutthroat, strategy here.  They had a flood of money during that time they actively didn’t want to turn a profit at the end of the year.  They knew that if they sold ebooks at a loss, Nook and Kobo would have to do likewise–and they weren’t flush with cash they literally needed to burn.

I don’t like that mindset, using our pieces of art as the thing sold rock-bottom.  But it’s not like the publishers have been angels in their treatment of Amazon.  The two have had a rocky relationship for basically forever.  Plus, the publishers have historically been backward-thinking about electronic mediums (see my next point).

The point here is that this event twelve years ago taught me something.  Amazon turning off the ability to buy books didn’t really hurt me in the long run. (Amazon, notably, picked the month of the year with the lowest book sales to do this.) But it did really hurt the careers of some newer authors who were releasing that month.  And it told me just how fragile my career was.  And it’s only gotten more fragile in the years since.

Judging how much market share Amazon has is famously difficult, as people keep sales figures close to their chest.  But many estimates put Amazon at around 80% of the ebook market, 90% of the audiobook market (they own Audible), and 65% of the print book market.  (You’ll sometimes see much lower guesses for ebooks, but I can tell you that at least for me, 80% is low.  It’s probably closer to 85%.)

So how many of those 800k copies of Rhythm of War did Amazon sell?  Probably around 650,000 copies–maybe more.  Somewhere around 80%, by my more conservative of estimations.  And in my most popular format, audio, they completely dominate the market.

This is deeply unsettling.

Now, it’s hard to blame Amazon for this, at least not entirely.  I absolutely blame them for their terrible treatment of workers.  And yes, they’ve engaged in some predatory practices, as I talked about above.  But I honestly think that the bigger factor is that they’re just really good at selling things.  Kindle has the best user experience, and was the innovation that finally broke open the ebook market.  Audible championed the credit model and finally brought audiobooks to a reasonable price point.  (Old people like me will remember the days of $70–$80 Wheel of Time audiobooks.)   Amazon’s delivery speed is incredible.  Their stock, near-infinite.

Beyond that, I have friends at Amazon.  I like the people at Amazon.  I’ve worked with them on many things, and the people there have universally been excellent.  Book lovers, passionate about their jobs, and really easy to get along with.

Still, their market share should terrify authors.  Innovation is strangled by market dominance.  And the problem with loss leading (like Amazon did over the years) is that eventually you have to start making profit.  And then the squeeze comes.  Indie authors are feeling this right now.  Amazon created the indie book market, quite literally.  Before it, indie publishing was an enormously expensive and risky affair.  One of my neighbors when I was growing up was a journalist who decided to try to indie-publish a book, and he ended up with the proverbial garage full of tens of thousands of copies he was unable to sell.

The ebook revolution, spearheaded by Amazon paying a whopping 70% royalty to indie authors who published on their platform, was huge.  (For reference, traditional publishing currently pays 17.5% on those same ebooks.)  This, mixed with authors having far more power to choose what they want to do with said books–including walking away whenever they want–created an extremely author-friendly boom that has legitimately done great things.  Smaller voices have a much better chance, the New York gatekeepers have lost some of their control, and there’s a feeling of democratization to publishing that has never existed before.

At least there used to be.

You see, since Amazon controls a huge chunk of the market, this gives them a lot of control.  For example, to get the good royalty, indie authors are forced to sell their ebooks under a maximum price chosen by Amazon.  (And that maximum price hasn’t changed in the last twelve years, despite inflation.)  The bigger problem, however, is how Amazon changed its advertising game–targeting indie authors with a kind of “advertise to sell” model.

You see, Amazon wasn’t making as much as it needed/wanted to from those books–in part because it insisted on keeping the prices low to maintain market share.  In part because it had promised kindle buyers this was their perk: cheap ebooks.  But it didn’t want to change its famous 70% royalty.  Otherwise it would look bad to indie authors.

So instead, it changed its recommendation algorithm and its page layout.  It moved organically recommended books down, and added advertisement slots across most book pages (particularly popular ones).  These slots were available for indie authors to buy.

If you go to the Way of Kings page on Amazon, you will find twelve advertisements between the top of the page and the reviews section.  Nine of these are for indie authors trying to sell their books to fans of the Stormlight Archive.  The other three are ads for non-book Amazon products.  This is better than it once was when Amazon first implemented this “feature” five or six years ago.  I once counted even more advertisements, and you had to go all the way to the bottom to find the traditional “books related to this one” list.  (This is the organically generated recommended books list, where other titles rated highly by readers of the book’s author could be found.)

These days, according to some of my indie author friends, you have to spend a great deal to sell on Amazon.  Not everyone’s experience is the same, but I hear this time and time again.  To make it as an indie author, you need to shell out for expensive advertising on the very website selling your books.  I have indie author friends who are spending a good portion of their income on these advertisements–and if they don’t, their sales vanish.  Amazon has effectively created a tax where indie authors pay back a chunk of that glorious 70% royalty to Amazon.  (And this is for the authors lucky enough to be allowed to buy those advertising spots, and therefore have the chance at selling.)

This might seem good.  Publishers spend to get their books in front of people, so it’s good for indie authors to have the same chance.  Except I think this system–as it stands now–takes power away from writers.  In the old days before this system, the primary way that you sold books on Amazon was by having people read them and like them.  If fans of the Stormlight Archive read your book (even in small numbers) and left good reviews, then your book showed up for free on my page.  Amazon might claim that it would be hard for indie authors to compete with traditional authors this way.  But if they really cared, then on the Stormlight page they could make a section titled something like “Independent authors liked by fans of the Stormlight Archive” and help them that way.

The truth is that while the people at Amazon are wonderful, Amazon itself doesn’t care about the indie authors as much as it claims.  If it did, it would let them raise their prices with inflation, and would promote them for free like it once did.  And we shouldn’t expect Amazon to be benevolent.  It is a corporation.  Indeed, this is exactly what we should expect Amazon to do in a system where it has a near-monopoly.  It lacks competition, and so where are these authors going to go?  There’s no other game in town.  So, now it’s time for Amazon to cut into what they’re being paid.  (With Audible, the move was more transparent.  Audible just dropped the royalty they’d been paying indie authors from 60% to 40%.)

This is a long-winded way of saying what many of you probably already knew.  Monopolies (or if you insist on being technical, near-monopolies and monopsonies like Amazon) are bad for everyone.  I insist this is bad for Amazon.  They could collapse this very market they created, and squeeze too much on both the publishers and the authors.  They could stagnate to the point that their user experience is bad, and we lose readers to other forms of media.

Regardless, this has been bothering me for over a decade.  I feel that the current system has a gun to my head.  Heck, all that has to happen is for someone at Amazon read this blog post or see my Kickstarter and decide they just want to make an example out of me.  Poof.  85% of my sales gone.  And while some people might go to another vendor to get my books, the painful truth is that many would not.  Time and time again, studies of contemporary tech media consumption have shown that the person who controls the platform is the one who controls the market.  And users like their platforms.  I mean, I’m as guilty of this as anyone.  I still haven’t gotten around to playing Starcraft 2, despite loving the first one, because I just am so used to Steam (where Starcraft 2 isn’t available) that I haven’t overcome the inertia to go buy it.

That said, even if Amazon weren’t a dominant force, there are some problems with traditional publishing that I’ve been fighting for years.  This is another reason for the Kickstarter.

Link to the rest at Brandon Sanderson and thanks to C. and others for the tip.

The OP includes substantially more of his thoughts and plans for the future together with past experiences, including some ways he’s tried to persuade his New York publishers to change.

PG was pleased with his perception that Sanderson doesn’t show signs of having this experience go to his head. PG didn’t agree with all of his thoughts, but admits Brandon has devoted some serious time to thinking about how he and other authors can be more successful.