"Can't We All Just Get Along?" -- A Manifesto of Sorts

"My advice, Stevie? Get the Hell out of this industry, 'cuz it's sinking like the Titanic."

This was said to me yesterday at lunch with a dear friend of mine who is also a prominent and enormously successful literary agent. There is no question there is trouble across the industry -- and here I will define "the industry" as the organization of major book publishing houses based primarily in New York City and owned by a handful of (primarily foreign) media conglomerates, a body of companies that 20 years ago numbered in the dozens and can now be counted on one hand, with maybe a few fingers on loan from the other. I've spent my adult life happily toiling at book publishing houses, feeling proud of the enduring significance of books and their ability to educate, inform and entertain. I have worked with hundreds of extraordinary people who gave up the prospects of more lucrative careers for the chance to work with authors to shape, package and promote their ideas to the best of their abilities, because these people love their work. I have watched the incremental troubles metastasize, while at the same time, I have noticed over the past few years a troubling trend entering the picture, a trend that is encapsulated in the blogs posted by Chip O'Brien and Mark Coker.

Both blogs are, to this reader, rife with fallacious thinking, faulty reasoning, and/or tunneled perspectives that ignore the complex realities that publishers face during this turning point for the industry. But at a time when it is in the best interests of everyone who loves books to help the major houses endure, they're being scapegoated, demonized and ridiculed for trying to survive with the crippling business model they've been handicapped with for decades.

Let's start with Mr. O'Brien's blog, titled "Why New Books Don't Sell on the Kindle". When Mr. O'Brien breaks down the costs of producing a book, the majority -- nearly 70 percent -- is in preproduction costs: editing, copyediting, design, the more-than-a-village it takes to produce a book. So when people complain that an e-book is little more than "an elaborate text file with the ability to show a few black and white pictures [and] has no visible production costs", he has his reasons for saying this isn't true. "Take out the costs of printing, warehousing, and distributing, and the only cost left seems to be the electricity needed to run Microsoft word," he writes, temporarily setting aside the stark financial realities he later cites as "intangible costs: preproduction (editing, graphic design, etc.), marketing, and author royalties and advances," citing Money Magazine that "these three made up about 77% of a hardcover's production costs...so maintaining the same profit means a fair price for a $27.95 hardcover in an e-book format would amount to $21.50." Faced with a $9.99 price tag set by Amazon and cemented by Dan Brown, this leaves a margin of slim to none.

The puzzling financial paradox for publishers is further exacerbated by the fact that, as I write, Brown's e-book rests comfortably atop the Kindle bestseller list, but the #2 bestseller carries a price tag of $0.00, the same price carried by #3, and #4, all the way to #10. Many of these e-books derive from major publishing companies, like HarperCollins or Random House, where the costs for creating the books were absorbed, and the responsibility for explaining the royalty structure for such e-book "sales" to the authors and agents is a perplexing mystery akin to a Dan Brown narrative, but without the tourism.

On the other side of the argument is Mr. Coker, who makes his point clear in his title: "Why We Need $4.00 Books". Mr. Coker is the founder of Smashwords, a website where it seems any aspiring author can publish his or her e-book, where the home page proudly declares "150,212,900 words published" and which includes such titles as Fifteen Stories of Female Domination: Bad Ass Office Bitches. I'm sure Mr. Coker is a pleasant enough gentleman and I have no truck with him personally. But when he states that "many publishers view e-books with a skeptical eye" I know we're dealing with someone who is operating from hearsay rather than relevant experience in the trenches of a large and established publishing company; thus he may not be aware that all the major houses I know of have been investing in the development of digital files for both frontlist (recent) and backlist (older) titles for many years, well before the impact of e-books was starting to become clearer and back when the costs to create these digital files were five or six times higher than they are now.

Mr. Coker runs a website that publishes e-books for titles that the major houses have either not seen or have passed on (much as his own book, according to his bio, was passed on by "every major New York publisher of commercial women's fiction"). While such services provide a helpful function for aspiring writers (and Bad Ass Bitches) everywhere, it's worth noting here that the overwhelming majority of e-book bestsellers, like print bestsellers, are books that were published, usually at great expense and with a concerted cross-departmental effort, by a major publisher.

The publishers have had to pay the agents and authors sometimes usurious rates at auctions for the rights to publish and sell these books. This is so for several reasons -- because agents and authors have managed to pit houses against each other in their need to fill inventory pipelines, and because of publishers' increasingly desperate search for anything that might carry the scent of a Big Or Important Book, and because of the audacious and perpetually unrealistic demands of the parent company for a 12 percent return on investments, and because publishers tend to be staffed by people of great passions serialized from one prospective project to another. I'm not a lawyer, but I've played in enough sandboxes with members of the bar to know that concerns about price fixing prohibit publishers from gathering to discuss their perceived valuation of a particular submission's worth -- a discussion that might help them the avoid the auction fever I've seen the strongest and most disciplined men and women fall prey to over and over again.

Permeating not only both blogs but the conversation they engendered on this site and elsewhere is the sense that publishers are resistant to e-books for some reason. But publishers want e-books to succeed because they have the potential not only to expand readerships but leapfrog us over the historically insuperable and tenacious cancer at the heart of the business model; returnable books. I know of no other consumer products industry in which retail outlets are free to return unsold merchandise to manufacturers and require manufacturers to absorb the costs of shipping and destroying the returned merchandise. Friends in other industries find this situation laughable, until they hear about how auctions are conducted and about coop fees publishers absorb and about the pressures of the parent company in an environment in which the competition for consumer attention and money is accelerating at a breathtaking pace -- at which point they tend to lower their eyes and steer the conversation toward law schools.

Why do we demonize publishers as greedy, monopolistic and backward when they are peopled by such idealists and lovers of literature trying their best to navigate a ship that was corroding from decades-old rust well before the economic collapse placed icebergs in the water? Why don't publishers defend themselves more vigorously -- or at all? Why can't we start talking among ourselves about the forces we face -- the burden of preproduction costs in the era of free or too-cheap e-books, the stranglehold of the returnable model, the hidden costs of the highest bidder auction marketplace, to name a few -- and share best practices and exchange ideas for the salvation of the industry and the perpetuation of Big and Important Books during this epochal period of transition? Perhaps we can. Despite having lost my own job in the recent economic collapse I remain an idealist about our industry, and invite publishers to arm themselves with that same idealistic spirit and start talking. There must be a middle road between the old model and Mr. Coker's $4 book, but to imagine what that road might look like requires brainstorming, community, open conversation. Without such conversation our "unsinkable" ship may not sustain the blows of the icebergs in its path. It seems to me that the Books Section of the Huffington Post serves as about as good a place as any I know of to begin that conversation.

 

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Comments

[Fauzia Burke - Huffpost Blogger]

I agree Steve, we all need to talk to each other. Sure there are problems in the industry but as I said to a group of smart book packagers this week, we have all the content. We have the words. An evolution is taking place and I say an open, honest dialogue is a great place to start. Some of the best people I know are in this industry. We are idealistic and trying to do our best. Together we can come out of these changes stronger and better. I'm with you!!

[athenap]

...because of the audacious and perpetually unrealistic demands of the parent company for a 12 percent return on investments...

This right here is your problem. Traditional/NY publishing has no choice but to chase the careful blockbuster, because if the house doesn't, then the parent company doesn't have that dependable revenue stream.

I find intriguing, fascinating, wonderful books from small presses--little outfits who don't have to make that 12% growth or bootstrap another flagging division of the parent company into minimized losses. Small presses can give me reasonably-priced ebooks (comparable to paperback, because let's face it, after the first flush of "ooo, lookee!" any sustainable sales life of a book is made in paperback form, or on the discount 4.99 hardback table). Not only do small presses give me reasonably priced books (which I can devour because of the low price point), but they don't cripple them with DRM (so if my ipod/computer/smartphone fails I will still have the book, and they don't assume I'm a criminal right after I've given them my money and credit card info), and they release them at the same time or even before the print volumes hit the shelves. I also have the ability (and I prefer to do so) to buy them directly from a publisher site (which has a better chance of awarding my favorite authors with the most favorable royalty percentages).

[comradity]

IMHO this industry needs leadership to inspire all the stakeholders to work together to use all means available to create new value. I mean use different media to deliver different benefits, priced accordingly.

I have posted on the same point on the Mark Coker and Chip O'Brien's posts here on the Huffington Post and on Mark Barrett's blog, Ditchwalk - http://bit.ly/SkWrt

I understand that publishers are handicapped because they rarely have all rights to all media to work with. But perhaps there is a writer with a good, original story that wants to experiment with what the possibilities could be.

Prove the value of being strategic instead of knee-jerk pricing tactics that worked when packaged good brands were challenged by generics. Look to the wisdom of P&G's leadership who returned the company to its core strategy of new products that really made a difference for consumers.

Katherine Warman Kern
@comradity

[athenap]

You have some good ideas, and there are authors out there experimenting with possibilities opened up by multimedia delivery, but the thing you have to remember is that most readers of books are looking to, well, read books. Books do compete with other media for entertainment time and dollars, but the enjoyment gotten from a book is at its heart the experience of reading a story in narrative. Trying to turn books into something else may open up new markets, but it won't replace the reading experience, which is by its nature, cheap and easy entertainment, hence the universal and persistent appeal.

Listen to the readers. Following the P&G analogy, P&G's core products still do the things the consumers want and expect them to do. Books in whatever form they come in, must also do so.

[Karl Scanlon]

An excellent response to this discussion.

http://www.ditchwalk.com/2009/10/10/finding-common-ground/#more-271

[liberalmomof7]

I am a writer. I have stories at Smashwords for free. By the amount of downloads, people like it. There is my disclaimer.

I really think it was disingenous for you to pick a title such as *Fifteen Stories of Female Domination: Bad Ass Office Bitches* to use as an example of Smashword's product. Really. (although Femdom is notoriously hard to get published so Smashwords is an excellent avenue for someone to use in that instance) On the other hand they may, after this post, get a total boost in downloads, so if they do, Grats! ;-)

Here's the thing about lowering book prices-as a writer I want to get paid. It's just a silly dream I have, you know, to pay my bills? I want my book well edited and I want my copy editor to be happy, too. I'm not asking for ginormous advances for myself-I'm actually against them, they're nothing more than betting on horses. I want to make a living at this writing thing, and that means being able to pay the electric bill. It also means paying the people that help me so together we can put out a product we can all be proud of. 4 bucks? Unless I'm going to sell 100k units I'm not so thrilled with that price. But I can't, as a reader, justify paying a few dollars less than a hardcover for an e-book. So what's the answer?

[Steve Ross - Huffpost Blogger]

Dear liberalmomof7,

I am glad you have stories available at Smashwords and that people have been downloading them. As I said, sites like Smashwords provide a helpful function for aspiring writers, and the importance of that function cannot be overstated in a literary democratic marketplace. I'm sorry you found my citation of the "Bad Ass Office Bitches" to be disingenuous, but it did occur to me that by citing it on a website that gets over 27 million unique visitors a month I might be providing the authors of that book a service.

But your main point is one with which there can be little disagreement: writers should indeed be remunerated adequately for their labors. A $4.00 e-book does not cover the built-in editorial and preproduction costs required to help facilitate that and still have financial wiggle room for marketing, publicity and inventory costs. If a writer's work is published by a large publisher there is more distribution reach at the publisher's disposal, but on the other hand there are a lot more costs involved in keeping that machinery running smoothly. I don't know the answer to this essential enigma, but it can't come at the expense of our writers, whose work we value so highly, nor at the financial peril of the publishers, where so much of the burden currently rests. All I can hope for is to initiate a dialogue, and so I am grateful for your comments.

[liberalmomof7]

"(Man, 250 words is so few for reasoned discourse.)"

It is. My initial comment was so much longer, and it brought up my not understanding why there were such things as book returns. As a business owner myself, I cannot wrap my head around why the publishing industry maintains those streams of production. Wouldn't smaller print runs and sell outs be better for all involved?

I remember standing behind an elderly woman at the courtesy counter at the supermarket and hearing her want to return 4 clementines out of the box because she didn't want to eat them. How is returns and reserves against returns not like the woman with the clementines? Wouldn't ridding the system of the returns process be better for all? In that I think e-books have the advantage.

[Mark Coker - Huffpost Blogger]

Hi Steve. My post touched raw nerves, and the reaction isn't so much to what I said but more what people fear I implied. I didn't imply publishers are greedy, monopolistic or backward.

People who take offense to the column either misunderstood it, or failed to read it. I love publishing. I have tremendous respect for the people in it. I'm not suggesting all books become $4.00 ebooks. I don't want all ebooks at $4.00. Instead, I'm calling on publishers to create lower cost formats to better serve customers.

Books are precious and dear, but they're not irreplaceable. Publishers are losing readers. Books are in jeopardy. The book trade is in jeopardy. Let's avoid bunker mentality in the face of such calls for change.

Your argument about the high cost of book production is only partially valid. Yes, as you note, publisher costs are completely out of line. Lower the costs. Don't blame the agents for auctions, blame the publishers who bid like drunken sailors. Yes, the system of consignment bookselling is broken, and terribly unfair to publishers. Publishers should stand up and do something about it.

It's a fallacious argument for anyone to suggest because books are expensive to produce, ebooks should be expensive too. Lower the costs. The incremental cost of producing an ebook is practically nil.

Despite our minor disagreements, we're essentially on the same page. We both want to save publishing for the benefit of authors, the book trade and readers. Let's get busy.

[Steve Ross - Huffpost Blogger]

Hi Mark, Thanks for your comments. I'm glad we agree on so many points: books are "precious and dear" ("the game changers of civilization", Amy Hertz has called them); the book trade is in jeopardy; the costs to produce a book too high; consignment bookselling is broken and unfair to publishers. But we disagree on solutions.

Your mantra of "lower the costs" regarding production costs for books may seem simple to someone who only deals in e-books but seems simplistic to someone who has spent time in the trenches. Publishers have been cutting cots for a year--massive layoffs across the board (including me); cutbacks in T&E budgets to almost nothing; slashing marketing and publicity spending; cutbacks in travel, including to book fairs and writer conferences--but it's clear that these cuts won't make a dent in the expenses of making a book. If I seemed to be blaming agents for the high advances paid in the open marketplace than I stand corrected, although they do share some responsibility.

Your solution to the generations old, deeply entrenched problem of consignment bookselling, "stand up and do something", is also not particularly helpful, although I will point out that the good people working with Bob Miller at the laboratory of HarperStudio are in fact doing something, and we should all be cheering them on and hoping for their success. (Man, 250 words is so few for reasoned discourse.)

[boychiklit]

It's not surprising that current ebook sales are stimulated by traditional book sales -- because that's where publishers spend the publicity dollars.

But it's also amazing to me how the debates among publishers -- and among movie studios -- seem to ignore the recent history of the iTunes phenomenon. Music was there first partly because it's bandwidth is the least demanding and its fans the most technologically savvy.

The record labels now watch the clicks, then put their money behind the winners.

Same will happen, IMO, with books. Mark Coker has it more right than wrong. Garage-band marketing will be the name of the game in books and in movies.

Short definition of garage-band marketing: You sell out of your trunk. Until you don't.

[StevefromStPaul]

Ross has it exactly right. The idea that books should be almost free is terribly naive. Only those who aren't trying to make their living writing or publishing longer works would ever suggest such a thing as a $4.00 novel. No one knows better that those of us in publishing that the model needs to be radically reformed; we've all known that for quite a few years. The question is how to make that happen, when the problems, as laid out nicely by Ross, are as intractable as they are critical.

One place to begin is to stop talking nonsense about $4.00 e-books and settle on a price that accuartely reflects the expenses incurred in creating a book. As costs decrease through systemic changes or greater efficientcies, the prices can decrease accordingly. But there is no reason Amazon or Audible should arbitrarily be setting these unsustainably low retail prices. They lead to the Walmartization of publishing, and the only one who will benefit in the long run is Amazon. Eventually, if we continue down that road, readers will be left with only Walmart-quality merchandise: Bad Ass Office Bitches and the equivalent. For $4.00.

[CitizenWhy]

It's good to see an insider stand up and defend publishers and editors while recognizing that the traditional business model is broken. Incidentally, i have never worked in the publishing industry but my aunt did know Bennet Cerf well.

Adding to the problem in the industry is the tendency of students at our leading universities to major in Economics while humanities departments at those same universities are populated with pseudo-scientific "lit cit" ideologues who seem to hate humanism and to have turned the study of literature into a bizarre form of corrupt medieval theology.