Thursday, August 27, 2009

Bits Of Destruction Hit the Book Publishing Business: Part 1
Written by Bernard Lunn on ReadWriteWeb

"Bits of destruction" is a phrase Fred Wilson uses to describe the destructive part of "creative destruction" brought on by digitization. We hear a lot about the destruction wrought on the newspaper business.
A more interesting and nuanced wave is now hitting the book publishing business.
Actually, it is three waves: the digitization of back catalogs, e-books, and print on demand.
However this plays out, a lot of people will be affected, but the way in which it will play out is not at all obvious. This is too big a subject for one post, so read this as an introduction to a multi-post investigation.

Somewhere Between Author and Reader Is Multi-Billion Dollar Market
Data on market size is hard to come by. Albert N. Greco, in his book "The Book Publishing Industry" (the relevant extract of which is available, ironically, on Google Books), pegs the number at $65 billion in 1993. The value is probably higher by now. In any case, it is big.

An author writes a book, and you read it. A lot of money is exchanged between those two actions.
Consider the steps an author has had to go through in the past to make a living from writing books:

Find an agent, who takes a cut and finds a...
Publisher, who arranges everything and takes a very big cut and delivers the manuscript to the...
Printer, who takes a cut and delivers the product to the...
Distributor, who takes a cut and delivers the books to the...
Retailers, who sell one to you.

Courtesy of iReaderReview, we have created a very simplistic view of how the pie is currently divided:

Author: 10% (This in fact ranges between 8% and 15%, depending on the author's clout -- e.g. Stephen King does better than most. If the author has an agent, the agent's cut comes out of this. It is indeed tough for new authors.)
Publisher: 30% (This ranges between 25% and 32%, again depending on the author's clout -- e.g. their percentage is less with Stephen King because the risk is lower too. Note: this is their net revenue, after deducting author royalties and printer fees.)
Printer: 10%
Distributor: 10%
Retailer: 40%

Enter the Dragon: Amazon
Jeff Bezos, who could go down in history as the most driven and talented entrepreneur of the Internet age, shook up this last stage: retail. About a decade ago, people were talking about how retailers were "getting Amazoned." But then a couple of things happened:
Amazon discovered that pick-and-pack distribution through warehouses was almost as expensive as running stores on Main Street.
Because the end product was still a physical object, many people still liked browsing in bookstores.
During all of these bruising battles, the publishers did just fine. The long-tail of online media enabled them to sell more of their back catalog.
So, we know how e-commerce played out. But then along came three more waves
Read the full piece at ReadWrite Web.
My thanks to Mark Cubey, producer of Kim Hill's Saturday Morning show on Radio New Zealand National, for bringing this thoughtful, sometimes provcative piece to my attention.


Gerard Reid said...

Who is this guy who knows so little about the book business? He blithely calls the publisher's 30% a net amount. So who, pray, pays for editors, designers, post-processors (whether for print or digital delivery) and for marketing?

The truth is that the publisher does well, after all the investment, to make as much as the author.

Given this fundamental error, the rest must be read cautiously.

Bookman Beattie said...

Thanks Gerard.
Here is the author's bio from his website.

Bernard Lunn is Chief Operating Officer at ReadWriteWeb. Prior to becoming ReadWriteWeb's COO, Bernard was a serial entrepreneur and business adviser to start-ups. He is Chairman of IQ Resource and Co-founder of iYogi.
Bernard is based in New York, was born in Berlin, has lived in and
started companies in Asia and Europe as well as America; he is
comfortable with globalization. He started in online publishing before the Internet (with Prestel in 1980!). You can reach Bernard Lunn at

Vanda Symon said...

As an author, the one I grizzle about, which isn't pointed out, is I make 10%, the government makes 12.5% in GST, and then the government taxes me on my 10%. They make more than I do and I write the thing!

keri said...

"the publisher does well, after all the investment, to make as much as the author."

That statement, Gerard, is tosh. As well you know.

I have been fascinated that some NZ publishers are -quietly, somewhat shiftily, and with the caveat - 'by & large" arguing *for* the Google Grab...I wonder why?
Keri, who is most definitely opting out (I have a very good idea of what e-rights are worth to me.)

Martin Taylor said...

Sorry, Keri, I have to go along with Gerard on this one. The way the "pie" is carved up is a little misleading here and typical of the way it's perceived by people who don't see the full picture.

If you research publicly available industry data you'll see that publisher profits are around 10% of (wholesale) sales, roughly 6% of retail. That, if you like, is the shareholders' "royalties. So over the long term, the publisher's share is roughly the same as the author's (10% of retail is 17-18% of a publisher's wholesale revenue). How is this so unfair? That's not the same as the question of whether authors make enough for the effort they put in. Most don't. But as a share of the too-small pie, it's fair.

Unfortunately, the way the data is presented here if typical of the misinformation out there and inflames the author vs publisher relationship unnecessarily.

Interestingly, the digital splits for authors are looking bigger than they have been in the paper world.

On the Google Book settlement, BTW, I'm with you 100%.

Steve Jones Snr said...

As a new author, I am only now beginning to realise just how much work the author has to put in to editing, formatting and marketing his work. I think that most people believe as I did, that the author merely writes the book (a sizeable task in itself)and sits back to count the profits.
Writers work very hard, for many hours, and deserve as much of the profits as they can get.

Fergus Barrowman said...

I agree with Gerard & Martin, the picture of publishing economics in this piece bears little relation to my experience.

But Keri & Martin: I don't understand your position on the Google settlement. Leaving aside the question of whether you oppose the settlement, IF it goes ahead, and you stay in and instruct Google not to display any of the content of your books, in what sense are you giving up any of your electronic rights?

Martin Taylor said...

Hi Fergus

Re: Google Books settlement and your comment: "IF it goes ahead, and you stay in and instruct Google not to display any of the content of your books, in what sense are you giving up any of your electronic rights?

One right you're giving up, of course, is your right to sue them (individually or in a future class action perhaps). If you were going to place all the restrictions in your note above, why not just opt out and wait?

If you just want your book scanned and used for discovery via Google's search engine, Google has been running a Partner Programme to do that.

As to whether you'd want Google to be selling your book via this system, my hunch at this stage is it's likely to devalue and compete with other methods you might choose, so why do this.

Then what's left to opt in for?

I blogged about this in a bit more detail on my eReport blog. "Google settlement: Why I’ve opted out"

However, I fully admit to being as baffled by much of this as most other people.

keri h said...

Fergus - simply right to sell my ebook copyright to other parties in the US.

And Martin - we all know that 10% is pretty well as good as gets for ANZ authors. I know of more than a few writers who have accepted 5% *or less*, and many who were happy with 6-8% for pb eds.

I have an inate suspicion of anything that sets a subsidary bureacracy to deal with income from writers' work. CLL anyone? said...

Hi Martin & Keri,

I think we will have to agree to disagree. It is crystal clear to me that by staying in the settlement you gain MORE CONTROL over what Google does with your copyright material, and create MORE OPTIONS for licensing your electronic rights.

By staying in, you grant Google the right to digitise your book for inclusion in their database, and you gain the right to dictate how much of it they display, and whether they can sell it as an e-book. You will be able, for instance, to instruct them to display none of it, and sell an exclusive e-book licence to someone else.


keri h said...

"MORE control over what GOOGLE does with (MY) copyright"?

I dont want Google doing ANYTHING with my copyright!

I want to use/alienate/enhance my copyrights as I choose.

keri h said...

O -"sell an exclusive ebook licence to someone else"? In the US? Not according to the 2 US publishers I have been in negotiations with, not at all-

Fergus said...

Keri, the way I read the situation, and I've been doing my best to understand it, the best way to stop Google doing ANYTHING with your copyright material is to remain in the settlement and instruct them to remove it. If you opt out the only right you gain is the right to sue them yourself. Good luck with that.

keri said...

Fergus, why the fuck should I HAVE to instruct anyone to get their grabby wee hands off my copyrights?

Why the fuck should any of us have to go along with a one-sided grab?

"Do Nothing Evil." ?

Dudes, you've done it.