Friday, March 28, 2014

Continuing to examine forms of publishing

As I continue to see a variety of posts on Indie and self-publishing and to a lesser extent “hybrid” publishing versus “standard” publishing, the rhetoric seems to be getting more and more shrill, with—in my opinion—less and less thoughtful analysis. Don’t get me wrong, I don’t think that I am unbiased in my thinking, or opinion, but I do try and think about this from a bit of a statistical and analytical manner, rather than a series of anecdotes.

My first observation is everyone has an axe to grind. There is a group of successful self/Indie published authors who take a huge amount of schadenfreude at the woes of the publishing industry right now and use those woes as “proof” that the publishing industry is dying off, that they are no longer needed and that any interaction with the traditional system is stupid. This group points to their own success and says “see you don’t need publishers, or agents, or the old system. Many go on to say you don’t need printed books either. There are a number of financial models and calculations going around to “prove” that you make more money by NOT doing print.

The total number of TITLES published between 2010-2012, if you include eBooks, was an astounding 1,348,121 titles (this does NOT include textbooks). Versus the “big” five put out 83,463. So, the number of titles for Indie, small press, and self-published was over 15 times the number of titles of the big five. Now, if the Pollyanna group, as I call them, were accurate in that the big five were crumbling and had no power and all that, you would expect the REVENUE of all of those to be 15 times what the big five were. Yeah, we all know that is not the case. The total revenue for books over all has been largely flat. The big five have lost some of the slice of the pie, but they still control something like 85% of the pie.

Of course, what the successful Indie authors will say, is “yeah, but you CAN be successful, look at me.” Sure, but lets think about that. Say all the “successful” Indie authors (and this includes micro presses like our own) are lumped into one virtual company (I’ll call them the Polly-Indies) that takes the remaining 15% of revenue. Lets also assume that they sell per person a similar distribution as in a publishing house (which is optimistic). That means that about 17,000 titles in the Polly-Indie group are as successful as the publisher group. That means if you Indie/Self publish your odds of success are about 1.2%

So, can you be successful? Sure. But, it is hardly guaranteed.

BUT, here is where I will grant the pure self-publishers something. If you self-publish and do all your own work, you will be getting three times, or more, the royalties that you would get with a big five publisher. Given that advances are shrinking for new authors, this starts to be a big deal. Lets be super generous and assume that because of this greater royalty we can expand the number of titles that are successful by three. Now your odds of being successful go up to 3.6%.

Now, lets look at what success MEANS. Your average published book, by a publisher, sells 150 copies. Yes, that is a statistical mean. Still, that probably means that your AVERAGE successful published author makes 20% of say $5 * 150 = $150.  Don’t plan your retirement!  Your average successful (again I am making lots of assumptions, but really erring on the generous side) self publisher thus might make three times that amount! Woo Hoo. $450.

Now, of course, there will be THOUSANDS of Indie/self published authors that will laugh and say that’s ridiculous. “I made $100,000 last year” and similar claims. I am sure they did. If the 150 is also a MEDIAN, then half of the Polly-Indies are going to make MORE. 5% are probably going to make big money. If 17,000 * 3 titles were “successful” that is 51,000 “successful” (average = 150) titles per year. Realistically, if they have anything resembling the normal book distribution, then 5% of them will actually make “good money.”  2,500 or so. So, of the 1.3 MILLION titles, 2,500 or so were successful, make a real living, titles.

So, sure, you can ignore the publishers. It is possible. It is worth a try. But, if you think it is EASY and that it doesn’t involve LUCK then you are really Pollyannna-ish.

Book publishers (and their proxies, Agents) tend to accept 1 out of 100 books. So, if this sounds negative on the Indie/self published side, it is not. Your odds are about the same in both camps. Book publishers are NO MORE ACCURATE than the marketplace in predicting what is going to sell, so I would encourage people to consider BOTH. You probably double your odds. But, it is doubling from a small percentage. BOTH are a lot of hard work. You might actually make money as an indie, but if you want to double your odds, don’t ignore publishers. Not yet.

I was going to include some of the “Fear, Uncertainty, and Doubt” that the publishers certainly like to tout, to keep their slice of the pie from shrinking, but that will be a different discussion.


Tuesday, March 4, 2014

Response to “Publishers Need to be Data Driven”

I just read an interesting post in Book Business concerning Publishers Must Embrace Data-First Thinking.

This article has some very interesting facts, but suffers from a number of fallacies. It is a conflagration of data and facts that destroys any semblance of a conclusion. This may be rooted in the article that the blog cites, by Tom Davenport, but I would have hoped that there would have been some analysis included in the blog entry.

Data, by its nature, is the past, yet there is a blast against big publishers for making bets on books based on what succeeded in the past. A retailer (such as Amazon) can use REAL TIME data, or near real time data to adjust certain things, such as pricing and what people might be interested in from a VIRTUAL inventory. A publisher has a lag time. The data will be old, even with technology, and the time to market—even rushed—will create a lag between the recognition of the data and action on it.

Now, this does not preclude the importance of data, I am a data person from way back. But, there is data and there is information. Data tends to be raw and needs interpretation. It also tends to be badly interpreted. I can demonstrate a statistical correlation between eating tomatoes and (for instance) the number of orgasms per year a person has. Yet, the correlation is probably nothing but a statistical artifact. Still, I am sure someone would then market tomatoes as the next cure for your sex life if I came up with a study with that data.

What Amazon is doing (disclaimer, I used to work there) is not just data, but using the business concept of “spinning the flywheel.” (The concept of the flywheel effect was popularized by Jim Collins in his book “Good to Great.”) The root of this is not just data, but synergies. Because of technology, Amazon is becoming a both vertically integrated and horizontally integrated, where ever it spins the flywheel. The examples Ms. Harvey cites of positive actions by publishers are really more of the vertical integration. Combining two, or more, businesses that are in different stages of production of similar products (e.g. a farm combined with a food manufacturer combined with a supermarket). By doing this, they are indeed capturing data. But, they are more importantly in control of multiple stages and able to respond separately to each stage as they see fit. Amazon does this incredibly well and it is all part of the flywheel.

Unfortunately, for the publisher, they do not have the horizontal integration that Amazon has. This is what really spins the flywheel. While Amazon uses some data on trends and what customers wanted, it too has the issue of lag time when producing its own video, or book imprints. What it has is the ability to largely ignore the need to guess and interpret the data by letting the market (or rather its market) determine the winners and losers and then automatically the system responds. If you pay your authors (largely) by only a percentage, the authors self-select out of the system. This is not so much data, but self-correcting systems that are possible when you control a large share and are both vertically and horizontally integrated.

To Ms. Harvey’s credit, the final section of her post captures the essence of this. Workflow. When you have a vertically integrated system, with a strong flywheel, you create a workflow that always provides additional momentum to the flywheel, rather than spin against it. Amazon is fantastic at this sort of thinking and internal development. In no other company that I have observed is this flywheel effect and workflow to mesh with it better implemented. It has its flaws, including stifling innovation that goes against the flywheel, but it is massively successful in creating growth (which Amazon does for revenue and customers, if not for profits).