Publishing and Market Forces

May 10, 2010

I'm sure most everybody here is aware that the publishing industry, such as it is, is standing on the brink of an abyss. Some would argue that the publishing industry has been on the brink of an abyss since the Gutenberg Bible was published, and they're probably right.

At the moment, after at least a decade of rumors and predictions, the e-book appears to be taking off. Yes, it's only about 3% of the market so far, but that doubled in the last year or so. Even the defenders of current big publishing think e-books will come to about 50% of the market; others think print's dead, just hasn't laid down yet, and within 5 to 10 years it'll go the way of VHS and vinyl record albums.

A number of traditionally published novelists have started putting up their work on Amazon and other bookstore as e-books, self-publishing basically for the Kindle and others. JA Konrath is a leader, although Lee Goldberg, Robert W. Walker and many, many others are experimenting with it. Some are just placing out of print books and in-between books that never found a home, while others are placing their entire works up there.

Me, too. DANCING IN THE DARK is an example. And since my former publisher decided to do nothing with THE DEVIL'S PITCHFORK and THE SERPENT'S KISS, I will shortly have those up as e-books as well. Although THE FALLEN is out in hardcover, it's also available on Kindle as an e-book. I also have at least three more books I expect to have coming out soon as e-books, including THE BATTLE FOR ATLANTIS, a children's book that almost found a home with Random House, but was turned down after much consideration.

Some of the energy and buzz about it reminds me of about a decade ago when iUniverse came along with its print-on-demand publishing. There was a lot of talk about how it was going to kill traditional publishing. It didn't. And I think--myself included--many traditionally published authors were rather disappointed in the result. They are rarely if ever available in brick-and-mortar bookstores, which didn't surprise me much. But their prices were problematic. My book, CATFISH GURU, was priced at $17.95 for a trade paperback, easily $4 to $5 above market price.

One of the interesting things about e-publishing at the moment is that the "publisher," i.e., the writer, can set the price. And a lot of us are fooling around with it, setting prices like 99 cents, $1.99, $2.99, $3.99. The rationale being that low prices will convince people with Kindles or other e-readers to give it a shot, what's the worse they're going to be out of, a buck or two?

Of course, one of the potential downsides is if you get enough good books selling for a buck or two, readers are going to be reluctant to shell out $9.99, $14.95 for a book, let alone $25.95.

Just like the iUniverse trend, there's an argument that a tremendous amount of shit is going to get published. Some publishing critics argue there's already a tremendous amount of shit being published. I confess, when I popped over to Smashwords to investigate e-publishing through them as well as through Amazon, I was a bit staggered when they indicated they had published more than 253 million things. Think about that number for a moment. Almost every single man, woman, and child in the United States, publishing a book or novella, or something.

How can you possibly sort through all that crap?

Except, you know...

I was having a conversation Saturday with a friend of mine when a woman came up to us and she had read DANCING IN THE DARK on her Kindle and we got to talking about book publishing and e-books. I surprised myself by saying something along the lines, "Well, I suppose it'll result in a lot of crap being published, but I suppose the market will sort itself out."

It will. Books that are good or at least that appeal to a lot of people ("good" is a difficult thing to define) will probably become popular. Writers will be able to develop a following and be able to experiment with different approaches to books and pricing. Readers, well, readers will do what they always do, which is to say, be completely unpredictable about where their tastes will wander.

Is this good? Well, go back to "good" being a difficult thing to define. Some people think the big publishers are going to crash and burn in the next 5 or 6 years. I was at first a little skeptical, but I keep trying to reconcile my understanding of business economics with a publishing industry that's contracting. Or let me describe it this way: even if, optimistically, only 50% of the market goes to e-books, and the big publishers can make it work with whatever pricing model they settle on... for now let's say the agency model actually gets settled and a typical e-book is priced around $9.99 to $14.95. That's mostly profit. Publishers can talk all they want about their overhead for sales, marketing, layout, art design, etc., but they're full of crap, because if they only do e-books, they no longer have to pay for paper, ink, printing, warehousing, UPS/shipping, returns....

Which is where, as far as I'm concerned, the wheels start coming off the business model. Let's say a big publisher says, "Yes, we've still got 50% of the market in paper."

Except, you know, your hardcover book is being published for $25.95 and their expenses are extremely high compared to e-books--all the things I mentioned above. But now, they've got part of their products that they're only selling as e-books, so instead of the profit margin being highest for bestsellers in hardcover, they're finding that their profit margins are highest for writers who are only available in e-books because the expenses for paper, etc., are non-existent. So publishers will be forced to look at their paper books and discuss how to make them worthwhile... probably by increasing the prices, to cover the fact that they're spending even more money on warehousing and paper because their bulk orders are smaller...

Here's an example. I'm the editor of a technical journal, and I have been for about 10 years now. This year we decided to primarily shift the journal over to a digital format. This saves the organization a very large amount of money, thousands and thousands of dollars. But because we knew there were people who still wanted paper, we offered it to them for a modest increase in their dues--something like $15 a year. The organization has something like 1700 members and everybody except for about 180 people went with just the digital format. We send them an e-mail saying it's available, they click on the link in the e-mail, it takes them to the website, they type in their PIN and click to download the PDF directly to their computer.

But the fact is, there's still 180 people who are paying more to get the paper version mailed to them. And we have a board meeting in a couple weeks and I recently wrote my annual report and one of the topics for discussion is this: do we raise the price for the paper version?

Because not only do we want to get away from it, but it's a weird cost fluctuation because your postage per unit goes up, your printing per unit goes up, etc.

So where do I expect book publishing to end up in 5 to 10 years?

I don't know. Honest to God, I don't know. But I'm hard-pressed to come up with really good arguments to JA Konrath's opinion that in 5-6 years paper publishing will be dead. Unless the big NYC publishers get creative with e-books, I can't quite get a grip on how they're going to be able to continue to support their huge overhead based on the current model.

I also wonder what will happen if a major bestselling author--Stephen King or Mitch Albom or Dan Brown, etc.--decide, "Hmmm, I can get $3 million for this book through Random House by selling 1.2 million copies in hardcover, or I can self-publish it myself as an e-book with a 70% royalty, and even at a $9.99 price point, if I sell 1.2 million copies my income will be closer to $7 or $8 million. Hmmm....."