The Future of Publishing (Part 3)

Ranson Stephens, Ph.D., a writer, physicist, and public speaker, joins us one last time for part three of his series on the future of the publishing industry. He’s a novelist and mentions other novelists as well as nonfiction writers. The information in his posts is relevant to all writers.

Today he looks at the inimitable strengths of the legacy publishing industry and what that might mean given that more books will be published in Silicon Valley in the next 12 months than have been published in New York City in the last 12 years. In part two he looked at the evolving state of self-publishing, title-positioning and business practices. In part one he focused on book development and acquisition.

The Next Big Move in Publishing Will be Geographical
Ransom W. Stephens, Ph.D.

Legacy publishers have several inimitable core strengths. The question is: Are these strengths sufficient to keep them alive as they navigate the altered landscape? The thing that historically trips up legacy players is the inability to see past their own sense of validity in the face of technical disruption. The role of the publisher is to make books available to the people who want them. In the absence of that role, none of the others – the cultural filter, content development, quality control, employer, protector of shareholder value – are relevant.

In this, Part 3, we concentrate on legacy publishers’ immediate strengths, a few mistakes they’re making, an obvious weakness, and one huge oversight that speaks of the industry’s myopia.

Details, details – no one can handle the mess of details that the stature of books in our society demands. From ISBN and Library of Congress cataloging to legal issues like copyright, plagiarism, and most important of all, the inter-human details of book promotion.

A myth has propagated in the wake of the transformation of the music industry. People steal music. They steal movies. The volume of theft crippled the industry until a reasonable price model was developed by Apple at the iTunes store. The legacy players either died, followed suit, or are still lingering in corporate hospice. There are two fundamental differences between music and books: the customers and usability. The vast majority of music buyers are 18-24 years old. As for book buyers? We’d rather not discuss our ages, thank you. And it’s not that book buyers are aging, the demographic has always been thus.

Second, when you buy a song you expect to listen to it dozens, maybe hundreds of times. A book? Get through the whole thing if it’s good, twice if it’s really good, several times if it’s outstanding.

The fact is, people do not steal literature. It’s not like music, doesn’t have the same customers, doesn’t have the same usability. If people stole literature, libraries would be packed. The only part of the library that is packed is over at the computers.

It has never been particularly difficult to copy a book and then reprint, bind and sell it. This has been a small problem for the US publishing industry, hardly worth mention. Ebooks, of course, are the issue.

Legacy publishers are wringing their hands over Digital Rights Management (DRM) – a technique for preventing piracy of text files, that is, ebooks. It’s a massive waste of time. More people share hardcopy books than ebooks, it’s easier. The only area of piracy that needs to be monitored is redistribution of ebooks. Anyone can buy a copy of an ebook, turn around and sell it on the internet. Preventing this flavor of piracy requires skills that legacy publishers lack: software and web-sniffing algorithm development. Skills that are integral components of the businesses models of Google, Apple, Smashwords, and Scribd.com.

In an irony that is typical of these types of business transitions, the new players have solved the problem but rather than adopt the solution, the legacy publishers are suing them. It’s a corporate temper tantrum that is disturbingly reminiscent of the legacy music industry’s business model of suing their best customers.

To prevent copyright violations at Scribd.com they developed technology that automatically checks whether an ebook uploaded to their site was truly the property of the person who claimed authorship. It’s impossible for you to upload Eat, Pray, Love because the technology knows it’s not yours; more importantly, it’s impossible for you to upload The God Patent because Scribd knows it’s mine. Legacy publishers demonstrated their appreciation for the new kid looking after their rights by suing them. You see, Scribd’s technology compares uploaded text to a vast database of known copyrighted works. The publishers are suing on the basis that Scribd.com’s database itself violates their copyrights because the database contains excerpts of copyrighted work. Forget that no one can access the database for something as trivial as reading. It’s just there to protect everyone. Even me, probably you, too.

There is something sinister in the way that publishers handle the elusive details of legal issues like libel and defamation. Every contract between an author and publisher places the legal responsibility for any conceivable lawsuit at the feet of the author. Legacy publishers are good at handling the details, but they do so to protect themselves, not their authors or their customers.

In fact, there are other backhanded gifts handed down from publisher to author. One of the perceived perks for an author signed to a legacy publisher is the advance on royalties. But the advance is more shackle than perk, at least for those authors who could benefit most. Should the title earn less than the advance, the author frequently becomes anathema to the publisher. It’s an odd way to run a business: fire the developer for a mistake made by the marketing team. In publishing’s glorious past, they trusted their initial judgment of an author and provided a steady hand through the bumpy ride of the first few titles. This is now more often exception than rule.

But, you say, pounding the keyboard, how else can a writer be paid? How can new books be written by competent authors? How can writers make a decent wage?

Ultimately, in the course of an author’s career, whether they are paid before or after a title earns money only matters for their first title. It’s called a bootstrap issue in Silicon Valley, “chicken and egg” in the heartland, “advance on royalties” in New York City.

The new model flows more logically. My publisher, Numina Press, LLC does not pay advances. Instead, they pay more than three times the royalties that legacy publishers offer and they pay them promptly each month. Google, Smashwords, Scribd, Amazon, etc take a commission, anywhere from 20-45%, and the author collects the rest. Yes, the author must finance the first title, but that’s always true. You can’t get an agent, much less a publisher without the manuscript in hand. After that, the first title finances the second, the second finances the third, and so forth. Successful authors build a trail of royalties that increases organically with their readership and will support them at whatever level that readership provides.

The advance is coveted by authors, but it is ultimately a red herring used against them.

None of this means that authors and, for the moment, readers don’t need publishers. There is one vital component of the process that the legacy publishing industry simply dominates: wetware.

It’s part skill set but, as they say, it ain’t what you know, it’s who you know.

When Random House sends a press release to NPR, or complimentary copies to Booklist, Kirkus, Publisher’s Weekly, etc, the person at the receiving end recognizes and trusts the person at the sending end. When the director of promotions for Numina Press sends out press releases, there is no response. Neither Smashwords, Scribd, Apple, nor Google are likely to ever send such a press release and, if they did, they wouldn’t know to whom to send it.

Radio, television, and print sell books. There are a lot of details to cover and, with well over a century of experience, legacy publishers know how to manage them: reviews, awards, author appearances, book tours, timely placement of excerpts in ideal places, tradeshows, sales calls on booksellers – all these things, not to mention the long list that I didn’t mention, are utterly foreign to the likes of Apple, Google, Scribd and Smashwords.

The most poorly written book in history, if its author appeared on Oprah, would spend at least one week on the major bestseller lists. Of course this wouldn’t happen; back in the real-live handshake-and-meet-for-lunch world things are vetted. The problem is that the vetting is still small-statistical-sample subjectivity. How long until Booklist, Kirkus, Publisher’s Weekly, etc, realize the power of democracy and choose books to review based on how they are received by readers? Or will reader reviews altogether replace them? And why not? Is their opinion more relevant than yours?

How effective are reviews? The God Patent got a stellar review in the San Francisco Chronicle, but the 50+ reviews by actual readers posted at Amazon provide a much more accurate snapshot of who likes it.

The Six Sisters get major reviews for all of their titles and more than 75% of those titles fail to return their initial investment. By “investment” publishers only include the author’s time investment up to the advance on royalties. Most advances these days don’t pay the author minimum wage for the hours spent writing (when royalties on The God Patent reached minimum wage on the time it took to write, I had a party! If you weren’t invited, you should complain bitterly to: ransom at ransomstephens dot com).

A new type of marketing acumen may prove far more important than the wetware-handshake-and-lunch-based model that has served legacy publishing so well. Programmed targeted marketing builds a model of your preferences based on the web pages you surf, the stuff you buy, the questions you ask of Google, your social networking profiles and standard demographics like age and zip code. The model calculates the probability in terms of a confidence interval that you will buy a certain item. The best current example is Netflix’ method for predicting what movies you’ll like. The beauty of targeted marketing is that it makes narrow niche items profitable. In annoying corporate parlance: it monetizes the long tail. With known probabilities and their uncertainties, promotion budgets can be produced with known risk.

Where success in legacy marketing results from who you know, success in targeted marketing results from how much math you know. Legacy publishers do not employ an excess of mathematicians, physicists and software engineers – the people who understand data analysis and mathematical modeling. On the other hand, at Google, Apple and Yahoo you can’t spit without hitting one of these guys.

At last, to the point around which we have danced: The publishing industry operates with a blockbuster profit model. They are homerun hitters who survive on that less than 25% profitability batting average by having a few big hits. In addition to this model being subject to fluctuations, there is a deeper more essential weakness.

Consider three different authors. First, a guaranteed bestseller: Janet Evanovich. Rumor has it that she has demanded $50M advance for her next books and St. Martins has denied the offer. Does she need a publisher? If she were to toss a manuscript to iUniverse, Lulu or any other self-publishing house wouldn’t she make more than by having St. Martins run the show? Janet Evonovich doesn’t need the marketing acumen of a legacy publisher. The instant gratification of the internet will propagate her work with little effort on her part. Bookstores will grapple for copies, even if they can’t get them on the archaic consignment/returns model.

The question is more interesting when rephrased: Does the legacy publisher need Janet Evanovich? A homerun hitter who has lost the ability to hack a hanging curve out of the park is soon riding the pine (i.e., yes).

A more telling example is Mark Morford. Morford is a columnist online version of the San Francisco Chronicle, SFGate.com. He is brilliant, hilarious, outrageous and so edgy that you have to sand down his sentences to avoid cutting your retina on them. Morford self-published his book, The Daring Spectacle, a collection of his favorite columns supplemented with fresh details including samples of the hate mail he has received from people of opposing political opinion.

Morford is the guy that legacy publishing needs; someone who jumps over the transom with 50,000 ardent fans in tow. But, does Mark need the publishing industry? Why take 7-12% royalties that are delivered 6-18 months after they are earned when he can take 50-100% right now? What makes Morford’s story intriguing is that he’s in the middle. A big publisher probably would finance a substantial marketing campaign and that 50,000 could go up by a factor of ten. Of course, then Mark would have to answer to editors and if you read his column you’ll detect reticence to subject himself to censorship of any flavor.

What about the emerging author who lacks celebrity? Writing is solitary work which naturally attracts people who like to be alone. Being alone is not an effective approach to building a platform. A “platform” is marketing-ease for what Mark Morford has, a large group of people who are ready to buy his book the instant it hits the metaphorical shelves. If we make a list of the great writers – people like Cormac McCarthy, Amy Tan, Nick Hornby, Michelle Richmond, Mary Stewart, Neal Stephenson, Ransom Stephens (thought I’d squeeze that in to impress my daughter) – we’ll see few names who would have gained celebrity independent of their books.

In statistical terms, legacy publishers are biasing their sample against the very writers who make them the most money.

Where Janet Evonovich does not need a publisher and Mark Morford can do just fine without one, who does need a publisher? Ransom Stephens needs a publisher. His, I mean, my platform was quite tiny before The God Patent came out. With the help of my indie publisher, my list has increased by a factor of almost a hundred. A hundred times nothin’ is, umm, well larger than nothin’. If we believe the dozens of reviews on Amazon, it’s easy to see that the marketing acumen of a big publisher could have increased it by thousands. Of course, if a legacy publisher had bought The God Patent, the marketing budget would have been the same that Numina Press provided and the actual result would be the same except that I’d be getting 7-10% instead of 40-80%.

The problem for legacy publishers is this: The authors they need, don’t need them and they don’t want the authors who do need them. It’s unstable. It will change.

But how will it change?

Shortly after the 2009 San Francisco Literary Festival, Litquake, in a glowing New York Times review of the festival, a phrase appeared. A fragment that indicates the mindset of the legacy publishing industry. It said,  “… San Francisco’s writers have come to recognize and trumpet the idea that this city prizes their craft, its solitary difficulty and what can emerge from it, even though there isn’t much of a publishing industry here.” Between Google, Scribd and Smashwords, more books will be published in the San Francisco Bay Area in the next 12 months than have been published in New York City in the last 12 years.

It’s true that most of the publishing profits for the next few quarters will be made by legacy publishers in New York City. These two facts are indicative of the accelerating part of the technological development S-curve.

Let me conclude with this, pay attention to that Sister who first makes a substantial Silicon Valley footprint by, for example, acquiring Scribd or Smashwords, you can forget the rest.

About the Author

Ransom Stephens, Ph.D., writer, physicist, and public speaker, has had a front row seat for three industry upheavals: the collapse of the established computer industry in the mid ‘80s; the transition of the World Wide Web from a physicists’ tool to an economic cornerstone in the early ‘90s; the introduction of 3G and 4G technologies in the mid 00’s; and sees established publishers making the same mistakes that killed other legacy institutions. The San Francisco Chronicle called Ransom’s novel, The God Patent, “the first debut novel to emerge from the new paradigm of online publishing.” (www.TheGodPatent.com).