Monday, June 28, 2010

After the gold-rush...

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I've finished my current book, so a rather long post: an exercise in economic comparison and predictiveness.

"There's gold in them thar hills..." And the old coot gets trampled in the rush. After a while he gets up and heads very sensibly in the other direction.

Oh yes... it's the dream-chase, and sometimes it wise to step back and look at those dream chases and work out... just who did get rich (or successful) and who actually made them rich.

Is it miners? Staking a claim and striking it rich... it happens. In the first two weeks. After that the incidence slows and eventually the only finds of mining riches come from very large companies. Oh, individual miners find the gold nugget/ diamond but the claim is owned by the company. The finder may get a generous reward, but it's the company that gets rich.

And the of course just after the miners comes the traders, offering all you may need from floosies to flop-houses. At a price naturally. They're giving their chance of getting rich to serve you! Oddly they get rich, and the miner just goes right on dreaming and getting nowhere. Actually, quite a lot of the money going to the middlemen is from elsewhere and not the little gold they find, anyway. The miners and their other, previous jobs, are subsidising the middlemen.

Which brings me to a study done the economics of crack selling gangs in Chicago. Oddly , yes the two have a lot in common... You see: Selling drugs must be a way to get rich...

Except its not. Turns out that the gang-foot-soldiers are earning... around $3.50 an hour, and it was twice as likely you'll be killed as it was for a soldier in Iraq at the height of the insurgency. For which they got... About the same as at the time they could get for flipping burgers at MickeyD. And, um, it turned out that quite a few of them were moonlighting at MickeyD...

Of course the higher tiers of gang hierarchy do get rich. Well, in the middle not really rich. They do as well as an engineer... and the top end got VERY rich.

So: why are they doing this...? It's quite simple really. They hope to get to the top. And once this was possible. If you got in with the first bunch. Turns out just like the gold-rush miner, the time to get rich and move up in the hierarchy was 30-40 years back, and this is what people still believe may happen (and um, the upper parts of hierarchy, who hand down their power and mantle and money... to... not one of the foot soldiers - go to some length to foster the dream). The crack-selling gang members are living on dreams (and not quite in the way you might expect).

This obviously has parallels in many industries, including our own.

Along with Gutenberg we had gold rush. And then again I suppose with the cheap paperback. And then again with the Internet and social networking (Cory Doctrow and Charlie Stross being good examples of early adopters). And on each occasion the equation worked very similarly. The miners/writers who got in quickly and were hardworking and lucky too were successful. The chances were not great, but they were a lot better than they became (where moonlighting at MickeyD also became a necessary survival strategy). Like the gold mining industry, or the crack-selling one... it's not that very large amounts of money (as measure of success) don't come into the business, it's just that most writers don't end up getting it. In actual fact, just like the parallels, many of them are subsidising the industry by working for less than they can live on.

We're in the middle of a new paradigm shift right now. A new prose-spectre just rode into town on a swayback mule with a few bags of ‘ooooH! Shiny!' in the shape of e-books and net-distribution.

And the new gold rush is on. A few people like Baen Books got in early, staked a claim and have a ‘mining company' working the new reef. The rest of the traditional publishers -- the Anglo Americans and Billitons of the publishing world -- see the new reef and the possibility that their dominance may be lost and are trying to decide what to do. They have started by trying to block or at least slow the access of other middlemen. In the meanwhile new entrants are pouring in to scene. Soon the market is (as Amanda pointed out) going to be very full of hopeful self-pubs, and small houses/co-ops.

Some of these are going to be much better than others. Some of these will be running slush disasters. Some will be typo central. Others will be 'good story needed editing'.

And a handful will be the new leaders of the writing world, really there on merit, loved by readers, unique, fresh and wonderful. Um. And selling books and making pots of money And other miners... authors, with experience and skill but who have always been the ‘workers' making a living - possibly by cross-subsidising their publisher by working at MickeyD - will arrive from the old companies to try and do the same.

And this gentlefolk, is when the fur really starts to fly. Because... their present employers are effectively middlemen. They used to do lots of the jobs in the middle but these days they do one very powerfully: they gate-keep access to retail space - or in crack-gang comparison, they control access to the turf and you're not gonna sell anything much without them.

The turf just got a lot bigger. And there is a _lot_ of bad sh*t going to be sold... Which was fine when THEY were selling it, because it was the only stuff to be had. A few companies had carved out a reputation (brand) for ‘their' stuff being good, but mostly publishers relied on not their reputation, but their ‘dealer'/authors reputations. The author couldn't go anywhere but to the territory of rival publisher -- where the deal was pretty much the same. The author was, to a large extent, dependent on the publisher for quality control (and promotion, and size of turf he was allowed to operate in) - although of course he did have some control over how good it was to start with. These publishers didn't bother with brands. They had a stable of trademarks (authors names) they controlled. You don't search Amazon for a Harper Collins or Warner Aspect or Bloomsbury book. You search the Author's name. Most readers don't know who the publisher was anymore than a jewellery buyer knows her gold ring was made from gold ore dug up by Newmont. Of course the exception proves the rule - Baen established themselves as BRAND that did quality trademarks. And promoted the brand along with the trademarks... which means in the new expanded turf, where anyone can play, their brand has value and recognition. Harper Collins has, for example, to readers, far less - but HC has deep pockets and a stable of relatively captive well-known trademarks.

So: I don't see business-as-usual trad-pubs being threatened by self-pubs or trying to stop them much. I don't see them willing or able to really build brands (that's hard expensive work) What I DO see is them getting very aggressive about 'keeping their trademarks' ie. their established authors. You see, these authors have a reputation to trade under already. If they fulfil their last contract, and go to Kindle... or a Co-op - they have an audience buying from electronic booksellers and possibly from their own web-sites. And it doesn't take a degree in higher math to work out that even if e-books (which sell mostly online, and not in the exclusive access turf) sell 1/3 of the volume of their traditional paper sales, but they earn 70% (or 60% less the cost of editing, proof and cover) as opposed to 10% (if they're lucky) they're going to double their income. And what's more they'll have CONTROL of quality, which means a lot to us. Actually, as I work it out, break even point is 16.5% of present volume. Depending on who you believe - that's either next year, or four at the most.

So: If you're unpublished... now is probably the time to get in. Quality is only going to get worse, you need your audience established soon before the slush flood puts them off. And make sure it is edited, proofed and has a quality cover. If you are published and have an audience: I think you will find restrictive clauses in contracts wanting your name in perpetuity. Don't do it. Don't sign these sort of deals - not unless they put up your share of e-books 50% + of retail. In the meanwhile do your best to establish either your own brand or join a co-op. Otherwise... your situation will remain as is, or get worse

Otherwise, if you just want to do well financially it's probably a good time to start a publishing venture, or co-op or offer proof reading. Remember who did well out of the Gold-rush.

OK - am I out of my tree again?

20 comments:

matapam said...

Makes perfect sense to me. I, for better or worse, restrained an impulse to leap immediately into Kindle. But having hesitated, as an an unpublished novelists, it is now too easy to be just one more bit of slush and completely overlooked.

So now I'm back to trying to find a quality publisher who agrees that my stuff is worthy of her brand. It's just that there are so many new e-pubs, that we readers and writers now have to sift through *them* to find the consistently good.

Synova said...

It seems to me that I've heard more and more complaints about the quality of editing and the absence of marketing in publishing. (Hanging out with romance writers was downright alarming once anyone started talking about self promotion and what was considered a good idea to do with your own time and money.)

It all sort of makes sense if publishers went from providing value to protecting their distribution turf.

And it could be that if they lose their turf they'll have to start providing the value and value-added again.

Or someone will.

Because if an author doesn't get good editing, promotion and marketing but is expected to do those things herself, why *not* self-publish? The only thing left was distribution and it's now trivially easy to "distribute" to anywhere on the globe.

(Granted, do I want to do this myself? Heck no. I really *really* want at least that confirmation from a neutral party concerning the quality of what I've written because lord knows that the ability to judge that goes right out the window early on.)

Rowena Cory Daniells said...

Synova and Matapam, the thing about getting accepted by a mainstream publisher is that you have confirmation that your writing is good.

This is a big thing when you are first starting out.

Rowena Cory Daniells said...

Dave, that is a really interesting analogy.

Like the friend I mentioned yesterday who is a best seller in one genre and has now re-released her SF/fantasy books through Smashwords, there are writers out there who know their craft.

Some of them have been squeezed out because they are mid range in the sales market and the big publishers are chasing the Best Seller because the returns are so high.

The only thing I worry about is how can a new Co-op get their books noticed by the reading public?

matapam said...

Rowena, yes. We writers crave that acceptance and assurance. And the readers, unconsciously, perhaps, use them as filters of slush.

So of all the e-publishers that are and will soon be starting up, how does a reader find the ones that deliver a quality product?

Like Dave says, for most of publishers, it's actually the authors' names that the readers recognize. So I think any Co-ops that grow up around known authors will attract readers.

But only keep them if the quality stays high, and volume moderately large.

How many books a month does the *Active* e-reader read? How large a slice does an e-publisher need to supply, to ensure the reader comes back regularly?

Dave Freer said...

Matapam, yes, it's going to take a little while to sort e-pub from slush. I'd go for one with 1)A clearly defined Marque. 2)Some established professionals using that Marque.

Sarah A. Hoyt said...

Matapam,

the quantity per month is only important if the readers are coming to the site to buy. I think this will be a minimal to really minimal percentage, at least judging by my own ebook buying behavior. So as long as the "brand" doesn't upset people by making them notice it, it should be gold. Volume is not so important as quality.
And now you're saying "But if people aren't going to the site, how does the publisher create a public for a new writer?" Well... a) short stories as loss leaders. Look, this is what they are now, anyway. I write short stories for anthos because someone might love one of them and buy my novel. Give out two or three of a new author's stories before you push a novel into the cold cruel world.

b) endorsements and/or collaborations with more experienced authors in the "co-op" or "house" or whatever. These can be quite small. Like, two short stories sold as a volume. Or a novella.

I've seen both of these used and, guess what, it works. That way -- like Baen! -- you take advantage of your brand name authors to promote your newbies.

Dave Freer said...

Synova, therein lies common sense: if your effective monopoly is broken, get back to providing other serious value adds (editing, proof-reading, cover acquisition, and publicity) and do it at a rate which leaves your author feeling 'this is worth while, better and easier than doing it myself' AND slap your marque on it, and you're well on the way to establishing yourself as valable and then indispensible (as readers recognise the marque as a sign of quality). It may well be a long while before you and retail can claim 94% of the cover price for this again. But it is the obvious, logical, sensible thing to do.

However when you've been calling the shots and earning the lion's share for years it's not an easy move. I think restrictive contracts and deals with retail (to only allow their brands on the shelf) are more likely, quite soon.

Dave Freer said...

Rowena, yes, we worry about that affirmation. But there is NO FINER AFFIRMATION than people paying money in a open marketplace.

Secondly, if your new co-op (and we're talking e-books here) has its authors up on Amazon... why are they getting any LESS notice than Tradpub's books for sale in the same way? Seriously, that's my point: to get retail space before you needed a large traditional publisher who had leverage. Othersise, if you were lucky you got a few copies in Indies. The public never got to see your self-published book, or small-press book. Suddenly your book is up with everyone else's and it's on the same re-order tier (which is another ugly story. Some books are on authomatic re-order (tier one). Some books are on re-order on batch sold (tier 2) Some books - newbies unless you publisher has intervened expensively - are on re-order on demand - tier 3. Lets say you are newbie tier 3, and the total laydown was 2000 books (quite typical). That means you don't even have a single copy in every chain book-store. You have maybe 10% coverage. The books sell. Readers like it, but every reader recommendation only results in 1 out of 2 browse buys, and 1 out of 10 order buys. As you can see the best that author can do is to sell 2 222 copies, before it stops. Take tier A and 70 000 laydown. The book is mediocre and gets a 1:10 browse buy on recommendation, and a 1 in 50 order...(which doesn't ever apply as the book is automatically re-ordered)... it doesn't matter. the book slowly goes on selling.

In e-publishing your book is tier A re-order. No matter who publishes it.

Stephen Simmons said...

Dave - I tried to use the FaceBook button, with a dramatic lack of success. First it offered me a post sampling the paragraph from Amanda's post yesterday that begins "One thing is true: ..." Note, it didn't offer to quote the FIRST paragraph of her post ...

I backed up, clicked on the title of your post to open a dedicated page for just today's topic, and tried again. The resulting FB link offered up a quote of matapam's first comment, not your post.

As usual with all things cyber, something in htis process doesn't like me very much ...

Stephen Simmons said...

Rowene, you mention the publishers squeezing out the Mid-lister in pursuit of the Bestseller. I talked with a business analyst years ago who explained his theory that "George Lucas and Stephen Spielberg murdered Cool Hand Luke."

Before Star Wars, a "runaway success" HollyWeird film made $30M-$50M. So studios still had room for films like Cool Hand Luke and The Innocents, character stories that measured their profits in tens or hundreds of thousands, rather than millions. As long as they didn't lose money, those directors and producers were considered successful. Then Spielberg made $150M with Jaws, and Lucas made over $200M with the first Star Wars, and the face of the industry changed forever.

Stephen Simmons said...

matapam - precisely right. The new "brands" need to have a core of Names we recognize, or they won't have much chance of standing out from the vast backdrop of Internet noise.

As a reader (I'd like to call myself a writer, but, except for a few short stories, nobody in the industry with a checkbook has called me that yet, so ...) When I'm slogging through the stacks at B&N looking at new authors, the two biggest selling points for me are whether or not the book was published by Baen, and what other authors have "blurbed" it. Blurbs from newspapers I never heard of don't do anything for me. Get a "thumbs up" from Weber, McCaffrey, Pournelle, or Card, on the other hand ...

Stephen Simmons said...

Dave - "restrictive contracts and deals with retail (to only allow their brands on the shelf) are more likely, quite soon."

This is, of course, precisely the arrangement that the East India Trading Company demanded from the shopkeepers in New England - which led (with the help of some meddling by Parliament on the EITC's behalf) to the Boston Tea Party.

I think that's what we're seeing the first rumblings of now, too. The Reader's Tea Party, rejecting the publishing equivalent of the EITC monopoly. And just as no one in 1773 could possibly have predicted what came in the next 18 years (and beyond), there's no way to predict where we'll be 18 months from now. Except that we're speculative fiction authors, so it's our job to make htis kind of prediction ...

Dave Freer said...

Stephen, I am predicting they'll try it. I'm betting they'll fail. But there will be author-blood spilled ;-/

Chris McMahon said...

OK - so how do a start a saloon pardner? I's wanna get rich off those hicks commin' in to spend their gold.

Kate said...

The trick - such as it is - is to be there first with something that mostly gets it right.

As long as Baen keeps focusing on good stories regardless of political leanings and keeps providing the reasonably-priced ebooks without DRM, they'll do well.

For new entrants: established and new authors, a much larger royalty share for ebooks, only the rights that are needed (world electronic, since there's no need for geographic restrictions there), good proofing and editing, and a reasonable cover price. Add that to a wide distribution - which in the ebook world means all the major etailers you can get at - and as ebooks become more common you're golden.

It's worth remembering that while Amazon is the 300lb gorilla now, they didn't make a profit for something like the first ten-fifteen years of their existence. They held on to their business model, and when the time was right, became the entire market - to the extent that with books and music particularly, people figure if it's not on Amazon, it's not available.

Amanda Green said...

Dave, you haven't fallen out of your tree and you are all too right, I fear. I think the next tact we're going to see -- heck, we already are -- publishers taking is the refusal to return digital rights to authors. Worse in so many ways, they are also claiming digital rights for books they still have in print but that were contracted long before anything like an e-book was ever thought of. My gut tells me that we're going to actually see authors standing up to their publishers more and more about their e-rights reversions simply because the big publishers aren't 1)giving legitimate accounting for e-sales (as in consistently reporting the exact same number of e-books sold each reporting period) and/or 2)not reporting electronic sales at all. Publishers can't keep trying to tie up writers more and more -- adding contract clauses preventing the writer from submitting or publishing with other houses during the term of the contract, lowering royalties for digital sales, poor accounting practices -- while cutting the services they offer the writer and reader.

Ori Pomerantz said...

Chris: OK - so how do a start a saloon pardner? I's wanna get rich off those hicks commin' in to spend their gold.

Ori: Offer something authors can't or won't do on their own. Virtual floozies won't work, BTW - they can write their own romantic scenes.

You could provide the traditional services that publishers used to provide. A brand (as long as you convince existing brands, such as "Dave Freer", you'll offer them a better deal than a co-op). Structural editing. Etc.

If you could get Eric Flint to teach you how to do structural editing, you'd be golden.

Dave Freer said...

Kate, you're quite right both about being first and sticking to the models. The other thing I'd say is 'be flexible and respond to the market' - for eg, Webscriptions was among the first on the market and was a positive forthe publisher - if it wants to stay there it's going to have to start offering what other big operators offer - in terms of short term for payments, and a competitive rate (as for the big tradpubs and their ludicrous ideas about what amounts to less than 10% of cover price - their greed will kill them), and probably should be offering the books through other outlets.

Stick-to-it and work is important with these new trends too. I look at my blog and this one - they grow in slow saltationist jumps. We had a few participants here who were not willing to put in the hard miles or work for the common good as well as their own. I'll predict they'll go on and on looking for an easier option. Well, they might find it. But it takes - generally - hard work as well as timing. (the worse the timing, the more the work, of course)

Dave Freer said...

Chris - Ori gave you a very good answer