Wednesday, September 14, 2011

Reselling Digital Products

If you read my post the other day about why direct publishing will prevail, you will know that direct publishing and traditional publishing are different distribution models. In other words, they present two different options for moving a product from the author to the reader.

So, over the weekend, I heard a common author complaint. She had direct-published one of her books using the usual channels for direct publishing. Her sales were good. She intended to use that good sales record to entice a traditional publisher into taking over publishing duties. Her theory was that they ought to be interested in a title with a proven sales record. Readers were interested. And so should be the publishers.

To her surprise, she received nothing but form rejections and one personalized rejection that said, in essence, that the publisher doesn't think it makes financial sense to re-release the title when the author has already picked off the easy sales to friends in family. (More on this in a moment.) She was baffled that no publishers would be interested in taking over a title that was a proven seller.

But really, why would they want to? Books are neither fungible nor consumable. There is a set number of people willing to purchase a particular title, and they will usually only purchase it once. If those sales have already been made through one distribution channel, you won't re-make them through a different channel. Maybe you can reach new buyers, but why would a publisher want to take on a title knowing that its sales prospects are already limited by a competing distribution effort? "I've already made 50% of the sales this book can possibly make. Now I want you to make the other 50%, but your up-front costs will still be the same, even if your possible gross is diminished." It doesn't make good financial sense, and in this market, publisher have to watch their numbers very closely.

Now, about that publisher who complained that the author had already sold to her friends and family. That statement worried me for a different reason because it betrays a fundamental flaw in logic used by some smaller houses. For a long time now, the conventional wisdom has had it that the efforts of the publishing company will be responsible for 80-90% of a book's sales, and the author's efforts will be responsible for about 10-20%. (I don't know where those numbers come from, but I've been hearing them for years.) That 10-20% are the friends and family sales. I've heard more than one publishing professional at small houses say that the friends and family sales are their bread and butter. They undertake minimal distribution and no promotion, and they throw away the 80-90% of the sales they should be going after, instead expecting the friends and family sales to cover costs and generate profits. For many of these houses, it's a model that works for them. It might not be great for the author -- the author might make more elsewhere -- but if the author complains, the publisher response is, "Do more PR."In other words, maximize your friends and family sales, and hope you pick up some extra sales along the way.

But this is not what I said to my friend who was upset that a publishing house wouldn't take over responsibility for a direct-published title that was selling well. What I said to her was, why do you want a traditional publisher at all? If you're making good money doing it on your own, claiming 70% of retail on every sale, why would you trade that for an 8% royalty? The book is selling, and selling well. Thank the gods of publishing and cash the check. And for the next book, consider whether to direct publish or try to entice a traditional publisher, but do it in the knowledge that either option is more viable for this second book than it was for the first.



Adrian said...

I don't disagree, but to play devil's advocate...

It seems to me the financial sense of the deal depends on specifics that weren't revealed. If the author's direct-publishing efforts are all ebooks, then it seems there could be a financial case for the publisher being interesting in non-digital channels, like paperbacks, audio books, foreign language versions, and possibly film and TV rights.

From what I've read, the hardcopy audience and the ebook audience are mostly disjoint sets. Most readers who switch to ebooks don't go back. So if an author has proved themselves a valuable seller to one audience doesn't mean there isn't still a decently- sized untapped market in the other. (It doesn't mean there is, either. I'm just pointing out that the argument isn't clear cut without more details and data.)

If the author has done both POD and ebooks, then, yes, there seems to be little leftover for the traditional publisher.

Having decent numbers for a directly published book might help when the author has a new book.

Edittorrent said...

Adrian, yeah, I thought, "Publishers should be interested in future books, if not this one."

But I think everything is in such a flux right now, no one really knows what's going to happen well enough to make it so. We can make some guesses based on the experiences of others, but who knows, in this lightning world, what will strike twice.

Dr Ian Hocking said...

Thanks for an interesting post.

I'm thinking about offering my science fiction books to a publisher on the back of fairly strong (I guess) ebooks sales, which are about 6000 copies since March. I see the point of view of the publisher, but I feel it is a bit narrow-minded.

As a self-published author, I'm somewhat in the position of an independent software developer, and I recall some comments made my Marco Armet (creator of Instapaper). His app has been the number one news app on the iPhone for a while now. He has sold ten of thousands of units, and doesn't feel that he's even scratched the surface of the market. (He knows what the market size is because we know how many people have bought iOS devices.)

I'd argue it's a similar situation with books/ebooks. If you sell a few thousand copies - and I don't have that many friends! - it probably means the book is good, particularly given that you're just one person and these sales will be due to word of mouth. It suggests to me that its potential market size is huge and it might pay off for a publisher to give that extra push.

For my part, I've made a reasonable amount of money over the summer with these books, but I still regularly get emails from people asking when it will be available on a non-Kindle platform. That's more than I have time for right now. I'd love a publisher to help me out with this stuff and get my work to more readers. Of course, the number of readers is my primary goal - and that has been pretty much achieved with my ebook sales, so no complaints.

Edittorrent said...

Okay, Adrian, that's a valid strategy, and it's one that publishers have tried. But here's the problem with it. Let's assume a book is going to be taken to market by a traditional publisher. If it's a genre book, they'll launch it in mass market paperback and digital formats. Maybe it will also come out in trade, but probably not for a newish author.

At current rates, we can estimate what the digital sales of any title might be. As you say, much depends on specifics, such as the particular genre and readership for this title. Maybe it would be 10%, and maybe it would be 50%. But why should a publisher write off 10-50% off sales right out of the gate? Especially when margins are slightly better on e-books -- razor thin in any case, but slightly better on e-books. A drop of 10% in total sales volume can have a huge impact on the bottom line, and when that 10% comes out of a more profitable sector, it will hurt even more.

And their up-front costs are not changed by the fact that you already published in digital formats. There will still be editing, cover art, paper costs, files to create -- you don't really think they'll skip any of this, do you? So it's the same cost to produce the book, but they walk into it knowing you've already skimmed off anywhere from 10-50% (or more, in some cases) of sales.

But the most telling word in your post is this: leftover. You're asking them to take your leftovers. I'm sure there are times we might want to choose leftovers over a fresh dinner, but that's the exception, not the rule.


Edittorrent said...

Ian, well, you know, decades in the publishing industry has taught me one thing: If it's sensible, it probably won't happen. :)

The big publishers have become so consolidated (there used to be a whole lot more than "5 or 6"), multinational, and, I think, out of touch. They've always done some things really well (I mean, since Victorian times), like finding new writers of great potential and championing them, and providing for more editing and promotion than made financial sense, and discovering or creating new markets. But those were the first missions to be hurled off the back of the train, and now, you know, as we say, "Maxwell Perkins was just laid off!"

I think this is what you get when you marry cold-hearted business conglomerates to woolly-headed artistic free spirits.... the worst traits of each predominate, because they truly don't value what the other is actually good at.

Edittorrent said...

Ian, this is a situation many authors are contending with at the moment. And congratulations on your sales record! That's a very good number of titles sold, and yes, I would take it as evidence that people like the book and word of mouth is solid.

I'm not saying it's impossible for a publisher to want to pick up a title like this. I'm saying it's far, far more likely that they would ask for fresh content.

By the way, let's play with numbers a little. Even if a book is priced at 99 cents, at 6000 copies, it has earned around $4100 to the author (gross).

If it comes out in mass market and retails for, say, six bucks, at an 8% royalty rate, it would have to sell around 10,500 copies in mass market to gross the same amount to the author after the agent's cut. That's certainly attainable. You would have to sell half again as many copies at six times the price to make it, but it's do-able.

But here's the problem. The publishers want to sell both -- 10k copies in mass market AND 6k copies in digital. They don't want to split the baby. And if you think that's unfair or wrong, think about what it would be like if the tables were reversed. What if they said, "We want to keep all proceeds from trade, but you can have digital." Would you go for that deal?


Adrian said...

Not really disagreeing, still playing devil's advocate ...

Of course a publisher would want as many rights as it could get (print, digital, audio, foreign, etc.), but that doesn't change the fact that we read about more and more deals where the rights are split up: the publisher gets print, another publisher gets audio, and the author retains digital. Many authors even have second agents for foreign markets and film/TV.

I'm under the impression that, like the movie industry, most books flop and a publisher survives by the few blockbusters. (And nobody can reliably predict the blockbusters. If they could, they wouldn't publish most of the flops.) In movies, we see less and less risk: more sequels, knockoffs, and remakes of successful known quantities.

I could certainly see cases where a limited market (e.g., only print) of a proven quantity (novel sold well in ebook) might be viewed as a less risky investment by a publisher than buying all the rights to an unknown quantity which will almost certainly flop.

There will still be editing, cover art, paper costs, files to create -- you don't really think they'll skip any of this, do you?

Yes, I suspect they might skip some of this. If the author already had a professional edit before releasing the ebook version, the publisher might be satisfied. (And might not want to upset readers if they learn the print edition is different than the ebook edition.) If the author owns the all the rights to the cover work he/she commissioned for the ebook version, I could see it being considered for a hardcopy version.

I know a few (nonfiction) authors who've griped about getting zero editing on their recent books when the publisher had invested in editing on their earlier books. (In one case, the book was simply typeset directly from the author's manuscript with no proofreading and no galley reviews. Every typo in the manuscript made it to hardback.) So, yeah, I could see the publishers skipping some steps to reduce costs. They already do.