Planning For 2019 Part 2

From Kristine Kathryn Rusch:

 The biggest issue for the latter half of 2018 was book sales. Indies and traditional publishers both complained that book sales were down, and that a crisis was imminent. Their ideas of crisis were different, but they come from a similar source, which is the current state of disruption in the publishing industry.

. . . .

I’m doing this short series focusing on 2018 with an eye toward 2019 because I firmly believe that you cannot plan for the future if you don’t know where you’re standing right now. (And a note on terminology: I’ll be using indie published writer instead of self-published writer because indie writers are running a business, whether they like it or not. I want the terminology to reflect that.)

This series is important to all kinds of fiction writers, whether they’re traditionally published, indie published, or a hybrid of both. Please remember that I write this blog for the writer who wants a long-term fiction career, so keep that in mind as well.

. . . .

What started this discussion were some alarming numbers from the Association of American Publishers, which can track fiction sales through traditional venues  but not, mind you, sales figures from Amazon, which is the largest bookseller in the United States. (Some of the Amazon numbers were reported to AAP from the publishers themselves.) There’s a lot of self-reporting in the old fashioned way that publishing numbers get gathered, from independent bookstores telling their numbers (without a fact check) to publishers doing the same.

Still, no small bookstore will deliberately underreport its numbers unless there is a business or tax reason to do so, which doesn’t seem to factor in here. Verifying the numbers from both booksellers and publishers has never been part of book sales reporting, not even after computers came into the picture. (Although, with the assistance of numbers from Bowker and book distributors, the introduction of computers did help.)

The numbers that caught everyone’s attention were two-part.

1) Sales of adult fiction titles fell 16% from 2013 to 2017.

2) That 16% represents a rather large dollar figure. Sales went from $5.21 billion to $4.38 billion.

Realize we are talking about traditional publishing here, not indie publishing at all. Those numbers aren’t really baked into the book sales numbers in any significant way. (Remember, Amazon isn’t counted here, and Kindle Unlimited isn’t reflected here at all.)

The scarier number for traditional publishers appears deeper in the article. This number comes from Bookscan, which only tracks print sales. I’m going to quote PW here. The italics at the end of the sentence are my emphasis added.

…the BookScan figures show that no fiction title topped one million copies sold in 2016 or 2017 at outlets that report to the service.

For an industry that used to sell print titles well over a million on a regular basis (at the turn of the century and before) that’s a scary, scary, scary number. For comparison, I tried to go to 1998 with a quick web search of Publisher’s Weekly, but I only managed to find 1999. It’ll do.

There were six trade paperback fiction bestsellers that sold one million copies plus, and trade was the smallest selling fiction category at the time.  There were more mass market paperback bestsellers than I wanted to count—and these listings began at 2 million sales plus. Leading that list with 2 books was John Grisham at 4.1 million and 3.875 million respectively.  Eight hardcover novels sold more than 1 million copies, including (again) a John Grisham.

. . . .

Last year, John Grisham admitted to the New York Times that his novels sell half of what they sold in 2007, which was less than they sold in 1997.  Here’s how Janet Maslin of the Times reported his comments:

He doesn’t worry much about book sales either, except he’s very alert to the numbers. “The biggest change for me has been that I’m selling about half the books I sold before the Great Recession,” he said. “Maybe a little bit more than half. This is discretionary spending, and people are not spending.”

Savvy readers will see that I used this same quote last year in discussing book sales.  Nothing has changed in the year or so since I wrote that post.

Until the last ten years or so, traditional publishing dominated the marketplace. They could sell millions of copies to readers because there was no other game in town. Nothing competed with traditionally published novels.

. . . .

We are at Stage Three in the publishing disruption, though, and traditional publishers are no longer the only game in town. Not even close. And they’ve got a really serious issue: their business model was built in the previous century. To make matters even worse, they’ve consolidated. None of the big traditional publishers are nimble in anyway. They’re part of large conglomerates who expect major earnings from each corporation under their huge umbrella.

In an upcoming part of this series, I will examine how traditional publishers are looking to keep themselves relevant to their corporate masters. It will change the traditional publishing model forever, but it won’t benefit writers in any way.

. . . .

Traditional publishers are terrified by these shrinking sales numbers. Their solutions are based in their old model thinking—and, unfortunately for them, are mostly impossible.

The reason I chose John Grisham as my example is three-fold. First, there’s that lovely quote he gave the New York Times. Second, I looked up his numbers last year and the current ones are this: His books now sell in one month what they used to sell in one week. Sometimes in one day.  The third reason? He’s still sitting on top of the bestseller list, as one of the most important big guns, twenty-seven years after he hit it.

He’s on the list, Nora Roberts is still on the list, Stephen King…

Let’s go back to that Publisher’s Weekly article that sparked so much discussion. A lot of the discussion was about what’s “wrong” with fiction sales. The discussion is lost in that traditional publishing bubble, thinking they’re still the only game in town.

They talk about movies and TV as competition (what is this? 1960?) and claim that people are either reading nonfiction or aren’t reading much at all. Worse, they’re blaming Amazon for much of their problems—refusing to see that Amazon is their biggest client.

. . . .

There is one line in here, though, that speaks to the problem that traditional publishers have had since 1997 or so—and they have not solved, despite being told over and over and over again that they need to rethink this.

They’re not building author careers. Or, as Peter Hildick-Smith of The Codex Group (which many industry insiders use for market research and pre-publication book testing) told PW:

Creating a dependable, bestselling author is a multibook investment that requires different strategies and great persistence. It’s not a one-and-done launch.

. . . .

The essence here is that the author is the brand, not the publisher, and traditional publishers are no longer putting the money into developing new brands. Which is why you’re seeing the same old same old on trad pub bestseller lists, and why the sales figures are going down.

There’s a lot to read out in the marketplace. Readers who like legal thrillers don’t have to read John Grisham. They can read a variety of other authors in a variety of different ways.

Hildick-Smith put his finger on the rest of the problem. He said that “so much inexpensive genre fiction [is] now available at ‘subprime price points under $5’ (from such channels as Kindle Unlimited), publishers must invest to develop brand name authors who can command premium-price loyalty.”

. . . .

Traditional publishing is not going to build new writers into bestsellers. They’re not even trying. That’s clear from a quote from Paul Bogaards, a vice president of Alfred P. Knopf who is apparently still dining out on his 2009 acquisition of Stieg Larsson’s books. In talking about rebuilding fiction sales, Bogaards is simply quoted as saying this:

There will be another big novel. There always is.

Link to the rest at Kristine Kathryn Rusch

As PG was reading this excellent post by Kris, he was also thinking about flightless birds.

PG claims no special expertise about flightless birds, but he understands that most/all flightless birds have vestigial wings. Their distant ancestors could fly, but, over time, for one reason or another, flying became less important and they lost the ability to do so.

Some species of flightless birds live exclusively on isolated islands where few predators are found. These birds deal with whatever threats remain for them without needing to fly.

Other species of flightless birds have become very large – the ostrich and emu, for example. Given their size, they are no longer potential prey for predators like weasels and small cats which could pose a threat to smaller birds.

On occasion, a small flock of wild turkeys strolls through the grounds of Casa PG. They can fly and run and, particularly in flocks, intimidate a small carnivore.

These wild turkeys bear little resemblance to the domestic turkeys which may provide the main course for your dinner next Thanksgiving. The domesticated turkeys have been bred to develop outsized breasts, the better to provide more white meat which many consumers prefer. However, the domestic turkeys are so large and heavy, they are completely unable to fly. At best, they can run for a short distance while flapping their wings.

So back to books and publishing.

Thirty or forty years ago, there were a great many more publishers in the United States than there are today. There were more large traditional publishers in New York, some of which operated under the management of their founder or founder’s heirs and including many medium-sized publishers that have now been absorbed into giant conglomerates. There were also quite a number of successful regional publishers focused on serving a particular geographic area and many more specialty publishers that focused on particular interest groups – golf, military history, regional cooking, hunting and fishing, local history, cowboys, etc.

Today, traditional US publishing is much more concentrated, with the “Big Five”, five huge publishers, all of which are located within a short cab ride of each other on the island of Manhattan and are subsidiaries of even larger worldwide media conglomerates.

One might be tempted to compare them to giant flightless birds, living within a monoculture comprised of wealthier-than-average white people who, by and large, attended the same 20-25 colleges and haven’t had any real jobs outside of publishing. All five Big Five CEO’s are white. Four are male.

Each of the large publishers relies heavily on sales through traditional bookstores. Barnes & Noble is their largest bricks and mortar customer.

Perhaps the best example of the dangers of the Big Five monoculture is the illegal price-fixing conspiracy that began in 2009 and was designed to allow Apple to derail Amazon’s ebook business.

In 2009, Big Publishing was not happy with Amazon. The publishers had finally decided they needed to start selling ebook versions of their books. However, in the typical fashion of organizations who felt entitled to exert control to protect their quasi-monopoly, the publishers did not want ebooks to cannibalize the sales of their printed books. The publishers had for some time discouraged bookstores from aggressive price discounting. This policy worked well with smaller customers, but Borders and Barnes & Noble were large enough that they were less subject to this pressure

Accordingly, the publishers set the prices of their ebooks high so as not to “devalue” their books in the eyes of customers and to encourage customers to continue purchasing printed books through traditional bookstores and restrain Amazon’s book sales.

Amazon was not cooperating with this strategy, however, and was selling ebooks from the large traditional publishers for $9.99, even if the company had to take a loss on each ebook sale.

Approximately every three months, the CEOs of the Big Six (Penguin and Random House had not yet merged) would meet in private dining rooms in New York restaurants without counsel or assistant present, in order to discuss the common challenges they faced, including most prominently Amazon’s pricing policies. (When PG first learned about this practice, he was absolutely astounded. It laid the groundwork for a classic slam-dunk victory in the later antitrust case. Any lawyer who learned a client was doing this would be hoisting red flags from morning until night. It was a profoundly stupid practice.)

In 2009, Apple was preparing for the announcement of the first iPad in early 2010. Apple CEO Steve Jobs was a very sick man.

Jobs had been diagnosed with pancreatic cancer in 2004. By early 2009, he was a very sick man and had lost a great deal of weight. He took a medical leave of absence in late January and had a complete liver transplant in April, 2009. Following the transplant, he was better, but still not completely well. He would die from his illness in 2011.

In late 2009, Jobs’ lieutenant, Apple’s senior VP of Internet Software and Services, Eddy Cue, set up meetings with the top executives of the six largest New York Publishers. Apple wanted to announce the iBookstore in conjunction with the iPad announcement but had concerns about Amazon’s pricing.

Cue told the publishers that Apple wanted to sell the majority its e-books between $9.99 and $14.99, with new releases being $12.99 to $14.99. Apple also adopted the agency model of pricing, wherein the publishers would control the price of the e-books with Apple receiving a 30% commission.

However, Apple didn’t want to be underpriced by Amazon, so it would insist on an agreement with the publishers that Apple could match any price at which Amazon was selling an ebook.

Leading up to the agreement of five of the publishers to agree to Apple’s terms (Random House abstained), they continued their private dining room discussions and called each other over 100 times in the week before signing the agreement.

On the day of the iPad launch, On the day of the launch, Jobs was asked by a reporter why people would pay $14.99 for a book in the iBookstore when they could purchase it for $9.99 from Amazon. In response Jobs stated that “The price will be the same… Publishers are actually withholding their books from Amazon because they are not happy.”

The plot quickly fell apart and the Justice Department sued the five big publishers and Apple for conspiring to illegally fix the prices of ebooks. Later, the Justice Department publicly humiliated management of the Big Five by requiring an admission of guilt and forcing monetary settlements.

The whole ebook price-fixing fiasco is an excellent illustration of one of the most serious weaknesses of the groupthink monoculture that governs Big Publishing. Even after their price-fixing fiasco, they have not made any meaningful changes to avoid becoming even bigger, fatter domesticated turkeys who are unable to respond in a meaningful way to the changes in the publishing business.

While PG believes the five huge flightless birds do not have a bright future before them, as Kris suggests, indie authors need to keep their eyes open and options ready to respond to changes in the book business.

Amazon is not the same as it was nine years ago. In 2009, its net sales revenue was $24 billion. In 2017, it was $178 billion. In 2009, Amazon was filled with managers who remembered when the company was a scrappy little underdog and maintained that mindset.

Between 2009 and 2019, a lot of new people have become Amazon executives. To the best of PG’s knowledge, the KDP group has substantially changed since then. It has undoubtedly grown into a huge organization. In 2009, Amazon had a total of 24,000 employees. Today, it has 566,000.

PG continues to be pleased with Amazon, as reflected by its usual treatment of authors. However, with a large organization, things can always change and indie authors need to be wise and ready to change when change is thrust upon them or when change can provide better opportunities for their books and their business.


17 thoughts on “Planning For 2019 Part 2”

  1. So, the BPHs look like farm turkeys? Big fat birds that run scared flapping their wings? A lot of noise and motion to little effect. They still end up as somebody’s thanksgiving dinner.

    I don’t remember seeing the Grisham quote before but it sure drives home the point that the BPH Jenga tower is getting wobbly.

    Amusements aside, KKR’s point remains that readers diffusing sales affect everybody. Readers buy by genre first, author second, publisher never. The do not sit on their disposable income waiting on their favorites.

    • The OP has a link to a “deep dive” from a normally paywalled newsletter.
      Lots of interesting thoughts there, among them this one:

      “Another knowledgeable publishing-industry insider who must remain anonymous gave us a whole host of reasons that fiction might be down but said one of his preferred explanations is that fiction is discovered or found via browsing more often than nonfiction. Purchase of nonfiction is often tied to specific intent—like a search on a topic—and so nonfiction sales favor the internet. He told us, “To make fiction bestsellers, one needs pent-up demand, on-sale-date awareness, and a lack of alternative. Fiction isn’t enjoying those advantages the way it has before.””

      Of course, the nameless one is referring to tradpub bandwagon “bestsellers”.

      Pent-up demand? Not so much; most genres are well supported. If not by TradPub then by Indie, Inc.

      On-sale-date awareness? That requires actual marketing. Very few titles get it, if any.

      Lack of alternatives? Again, no shortage of available content for most any taste.

      Which is why the drop in sales for even the big names.

        • Not safer, though.
          Most companies under stress look to develop and exp!oit new products and sidelines, not marginalize them. circling the wagons just makes for a more compact target.

        • It’s easier to keep doing what you know than to invent a new way of doing business.

          The new way of doing fiction business has been invented and is a smashing success. It keeps growing and taking more and more market share.

          When the new way of doing business does not use publishers, it’s hard for the publishers to adopt it.

          For fiction, what do you invent when neither author nor consumer needs your services? What service do you invent?

          • Are you sure they have nothing to offer?

            For readers, let’s not forget the deep IP catalogs. Or that their incremental costs on digital products is essentially nil. If they ever get over their reader spend fetish most of the BPHs could assemble their own subscription services and hold their own with KU.

            Big if, naturally, but do you really think a fixed five or ten reads/ten bucks ebook subscription from the randy Penguin wouldn’t find a large customer base even if it only featured deep backlist? The big movie studios are doing essentially that, bypassing Netflix and Hulu and Prime and doing their own streaming services. Seems to be working, too.

            The same applies to discrete sales.
            They don’t have to go into Indie territory to do competitive pricing, say $6-$8 ebooks.

            Or they could move to a console gaming-style discount schedule for their books. They would have to go Agency or openly on-consignment for pbooks but a regular 10% a month discount schedule for the first six months or some variant similar to games wouldn’t be DOA.
            Console games start at full price (and then some, with limited run Deluxe and Ultimate Editions at launch) and then on a fixed schedule of discounts move down from $60 to $40, $30, and $20 over a year or more, depending on popularity of the title.

            There’s actually lots of ways they could leverage their IP and suppliers if they started acting like widget manufacturers and actually competed for sales. It’s not as they’re likely to run out of dreamers seeking validation by contract anytime soon.

            The only thing holding them back is their unwillingness to change.

            • The things you mention are all well established, and observation shows they appeal to the consumer. Publishers wouldn’t be inventing anything.

              But, what do they offer the author? What do they invent for him?

              They certainly could do lots of things with their existing rights. But their inventory is perpetually stale if they have nothing new being added.

              Publishers exist because of paper. The stuff we fold, tear, and read. Without the medium, they don’t offer anything for fiction writers.

              And widget manufacturers? They offer a product people actually need, and nobody is concerned when the inefficient, high cost, poorly managed producers go out of business. People expect it. With publishers, however, there is lots of hand-wringing over how they will cope with the brave new world.

              • As you keep pointing out, there is no shortage of authors willing to submit to the tradpub domain. The “quality” of manuscripts may be declining by tradpub standards (that is, launch window sales) but as long as Agents are rejecting submissions they don’t really need to change their terms.

                The core of the disruption is on the downstream side, the dilution of sales volumes. Again, Indies are beneficiaries but not the cause of the disruption. The real change is that control of the market has shifted to readers.

  2. Every year more and more books are added to the limitless shelving of AbeBooks and Amazon and B&N and Kobo, as well as to a lesser extent to the more limited shelving of HPB and it’s cousins. That supply continues to grow. The demand grows only somewhat.

    That is the disruption.

  3. Even after their price-fixing fiasco, they have not made any meaningful changes to avoid becoming even bigger, fatter domesticated turkeys who are unable to respond in a meaningful way to the changes in the publishing business.

    When the service a firm provides is no longer needed, there are no meaningful responses.

    A good case can be made that the economic progress of the past 300 years is a continual elimination of transaction costs. Fiction publishers are a great big transaction cost center.

  4. Indies and traditional publishers both complained that book sales were down, and that a crisis was imminent.

    It’s the same nonsense every year: Chicken Little. The sky is falling.

    But the real numbers tell a different story.

    For 2018, Nielsen-reported US print sales were up about 10M units overall. (Due solely to more of them going through Amazon, but whatever — selling more books is selling more books, and also, fewer returns is less waste).

    For 2018, Pubtrack’s YTD ebook total (for Big Five + friends) is only down 7M or so from last year’s. Which is way less decline than previous years. When Sept-Dec is tallied, we might even see Pubtrack end 2018 up overall — it’s too early to tell, ’cause they run months behind.

    For 2018, audiobook sales are still growing like gangbusters — this year, they topped 100M units domestically.

    On the indie side, KU monthly payouts are up significantly, according to Amazon’s monthly “pot size” announcements.

    Sales of non-KU indie ebooks are also continuing to grow, as are Amazon imprints.

    In other words, US book sales are still on the upswing, across publishing sectors and formats.

    But you sure wouldn’t think it, from listening to self-appointed publishing “gurus” and author-community “influencers” who make most of their money from “teaching” authors rather than selling books.

    I love watching these fantastic logical edifices of supposition and imaginative business justifications get built atop a bad info foundation, and then a sea of followers nod sagely and soberly, as this received wisdom confirms their biases about why they, personally, aren’t selling as much as so-and-so once did.

    But hey, fear sells.

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