Friday, June 6, 2014

Why Are Publishers Telling Us E-Books Are So Profitable? Another Book-Business Fallacy

Coverage of the Hachette-vs-Amazon dispute has recycled various misconceptions about what’s happening, as Michael Cader noted Wednesday in Publishers Lunch. But one of the most widespread fallacies you may hear, and not just relating to Hachette/Amazon, is that “e-books have been more profitable for publishers than print books,” as Evan Hughes put it in Slate. The chunky margins generated by e-books, the thinking goes, are what the publisher and the 600-pound gorilla of bookselling are tussling for.

Even before this dispute, some industry voices, led by Mike Shatzkin (echoed by Hughes in the piece just cited, and of course the agent community), have argued that in a sense publishers have been asking for trouble by maintaining such high margins on e-books—like kids walking back from the candy store, their pockets bulging, past the local bully. Shatzkin proposed that publishers raise their royalty rates on e-books so that they could gain some advantage by sharing the “extra” profits with authors before the retailers could zero in on them.

Mike’s suggestion was prescient, and there are other good arguments for passing along more e-book revenue to authors (starting with, "they could use the money"). Nonetheless I believe publishers would have been better served by pointing out, long ago, that the notion of e-books as a magical cash cow is wildly misleading. Because the supposedly greater profits from e-books—when published alongside traditional print editions—are an artifact of accounting. The margins that both Amazon and Hachette find in e-books are only as high as they are because of all the resources Hachette devotes to hardcovers and paperbacks.

Today in mainstream publishing, e-books are almost invariably published alongside a hardcover or paperback edition. This means the e-book edition floats on top of a huge investment in whatever that title is, which in most houses is not charged against the e-book edition.

Consider the following costs incurred in publishing a new title:

The advance—frequently the largest single line item in the investment in a given book, and in many houses charged entirely to the first print edition. Even when it’s allocated otherwise, there are many other costs that are charged the print book, such as:

“Plant” costs—such as copyediting and proofreading, typesetting, design, illustrations, legal vetting, maps. These are typically charged to the hardcover edition, even though the paperback or e-book editions benefit equally from them. (Side note: for the same reason, even in pre-e-days, paperbacks were often seen as more profitable than they "deserved" to be.)

Furthermore, marketing costs are also charged to the hardcover even when the e-book is published simultaneously. These include promotion (catalogues, advance reading copies, BookExpo displays, etc); advertising; and publicity (review copies and ARCs, author tours). Obviously all these efforts are working to sell the e-book just as much as the print edition.

And alongside those expenses are the heinous, eye-watering costs of producing and distributing physical books:  Printing, sales commissions, warehousing, shipping, and all the hideous inefficiencies of taking returns.

Wait a minute, you’re saying, now you’re going too far. Why should the new, innocent e-book be charged for costs of the bad old dead-tree "legacy" (shudder) business?
Because the existence of printed books, the trafficking and display of them, is still a critical marketing tool for e-books!

What is the currency of advertising? Impressions. Every physical book you see as you go through your day is an impression, just a like a Coke ad on a bus shelter or a Coach logo on a handbag--each of those glimpses is a little hit of marketing. Think about the millions of printed books out in the world--displayed in store windows, piled on tables, racked at the checkout in supermarkets and drugstores. Or seen in the hands of people on airplanes and buses; given as given as Christmas or Mother's Day presents to people you know. 

We know that one of the reasons people buy books is that they see other people enjoying them (hence the enduring popularity of bestsellers, even in a long-tail marketplace). There is no question that many of the titles on the e-book bestseller list are boosted by the visible popularity of hardcovers and paperbacks. The thankfully still-robust presence of printed books contributes significantly, I would argue, to the “mindshare” enjoyed by any e-book--not to mention the overall "mindshare" of "book" as a category of entertainment.  

There are, to be sure, e-only bestsellers—works that achieve significant sales without riding the coattails of a print edition. I would guess, though, that very few titles which have achieved true blockbuster e-book sales—tens or hundreds of thousands of copies—have done so without a blockbuster print edition helping to spread the word. (Fifty Shades of Gray, a bestseller as an e-book, became a megahit when Random House published a print edition.)

Perhaps I’m pressing a point if I go from there to arguing that the cost of trucking a new title to a Barnes & Noble distribution center ought to be spread across its e-book edition. But the larger point is that it’s arbitrary at best, and again, misleading, to think we can neatly separate print from e-book costs, when publishing any title is a multi-platform campaign. And it leads to fuzzy thinking about the business if we look at the P&L spreadsheet for a given book and say “wow, the e-book is really profitable” when the poor hardcover is carrying 80 or 90 percent of the investment load. What’s really happening, if you look at this another way, is that the print edition is subsidizing the e-book!

My point here is not to bash the e-book business. It is true that e-books have an enormous economic advantage over print when it comes to manufacturing and distribution, because the incremental unit cost of creating & delivering an e-book is virtually nil. (Even better, no warehousing and no returns.)  You need no publishing expertise to see this, and it’s one reason why it seems intuitive to say e-books are more profitable.  

Some publishers, I’m afraid, have encouraged this misapprehension. Corporate houses in particular like to trumpet the profitability of their digital businesses because it makes them look “innovative” and tech-savvy and gives Wall Street an easily-grasped, upbeat story of a growth driver in the industry. Trade publishing companies have historically thrown off quite modest, not to say anemic, profits and have for decades been caricatured as quaint, retrograde, etc. so maybe we can’t blame them for bragging about better margins wherever they come from.

But for all the reasons above, it's wrong to consider the profitability of an e-book edition separately from an accompanying print title. And it makes no sense for publishers to boast of wonderful margins on e-books, unless they are also going to apologize for the lousy margins they get on print titles.

Publishers are straining mightily to maintain a healthy publishing ecosystem that includes print and e-books, online selling and brick-and-mortar bookstores. This is not out of nostalgia or an inability to grasp the digital future, but because they understand, as explained above, that print and e-book sales boost each other.  And if they give away too much of their revenue from e-books, whether to retailers or to authors, they risk making that multi-format marketplace unsustainable.

Wednesday, October 2, 2013

Reports of Editorial's Death Are Greatly Exaggerated (or, Why Mike Shatzkin Is Wrong)

Readers of this page or the @BloomsburyPress twitterstream know that I think Mike Shatzkin is one of the smartest observers of the publishing industry today. I cite and retweet the posts from his Idea Logical blog so often that I sometimes feel I'm just a distribution service for him. So I'm perversely happy to report that I think one of his most recent posts grabbed completely the wrong end of the stick.

His title says it all: "Marketing will replace editorial as the driving force behind publishing houses." Mike starts with a thumbnail history of the rise of sales departments in publishing, noting rightly that large sales forces and the tools they used--cover, catalogue, and the summary of key selling points we call title information sheets or tipsheets--were "critical factors to a book's success." I agree with Mike that as he has often written in other posts, the ability to put titles in front of readers simply by getting a lot of them on bookstore shelves has been for a long time the biggest "value added" by publishers for authors. The sheer scale of a big publisher's sales operation, its reach into the widest number of bookstores (or other outlets), was often its key competitive advantage.

So far, I'm with him. And I'd largely agree with the next part of his history, which explains that as the marketplace changed (he points to e-books but in fact online bookselling was critical long before the e-book explosion), "selling"--getting books onto shelves--became only a part of the much broader effort to make consumers aware of a title and motivate them to buy it. Publicity, advertising, author branding, and nowadays an ever-evolving range of social media now outweigh wooing booksellers as critical parts of the process of delivering the author's work to readers. I concur with Mike that the "pull" function of motivating buyers has eclipsed the "push" function of bookstore sell-in in importance.

(Parenthetical note:  This isn't to say booksellers, or sales reps, aren't crucial! The hand-selling that good booksellers do is actually the best marketing we have, creating that "pull" at the store level.)

"So," Shatzkin writes, "marketing has largely usurped the sales function. It will probably before long usurp the editorial function too." This is where we part company. Mike believes that publishing houses "went from editorially-driven in my father's time to sales-driven in mine," and that "the new transition is to being marketing-driven." The fact is that all great publishing houses, and I would argue most really successful ones, are driven by editorial taste, passion, and savvy. ("Savvy" includes commercial savvy, a point I'll come back to.)

I know we bloggers are supposed to make lists, so here's my list of 5 Reasons Editorial Still Drives Publishing.

1. First of all, as my old boss Tom McCormack used to say, "salepeople can't sell, marketers can't market, publicists can't publicize, until editors bring in the books." However the marketplace has changed, attracting and developing new works that people want to read is the sine qua non of a publishing house. Sales couldn't perform this function, nor can marketing.

2. The current explosion of self- and small publishers and the hugely expanding universe of titles available makes the role of a trusted curator that much more valuable. It's a cliché in the business that publishers' brands are meaningless to consumers. But with tens of thousands of new titles, mostly mediocre or worse, flooding the market, that is going to change. Houses whose editors consistently find works that readers respond to are going to have the most success.

3. The development of those works--that is, editing--is still a really vital part of what publishers offer authors. It's easy to romanticize, and overvalue, the mystical author-editor bond and the brilliant contributions of editors who turn sprawling stacks of manuscript into future classics. Such transformations are very rare; more often, the best an editor can do is take a book from a B plus to an A minus. Nonetheless, that might be what breaks that book out of the pack--there are a lot of B plus books out there. And whenever I meet with prospective authors and ask them what they're looking for in a publisher, the first thing most of them say is "an editor who will help me make my manuscript the best it can be." So the editing process is still a place where publishing houses truly do add value.

4. Most important, the best editors ARE marketers. To acquire and edit a book well, an editor needs to identify and understand the audience for that book, whether it's a poetic literary novel or a frat-boy memoir.  Editors need to understand those potential readers and what they're going to respond to in a book; with more specialized content (say, history or science or cooking) they need to know something about the field. The editor has to articulate the "sales handle"--the reason why someone would part with $10, $25 or more to own this particular work. (That sense of the reader's interest is also critical in the editing process--the way you edit the book is shaped by what you intuit readers are looking for in it. So "marketing" and "editing" are not in fact separable.) All of this is what I meant above in saying that great publishers are driven by taste plus commercial savvy.

Sometimes an inspired sales or marketing person, or a publicist, has a new inspiration for how to pitch or package a book, and often those colleagues will refine and sharpen the editor's take on it for their own purposes. But as my marketing colleagues will remind me, it's the editor who has to generate the passion and excitement that gets the machinery of the house moving. When editors don't do that, it's hard for marketers to manufacture that excitement themselves.

5. By the way, not only do editors need to know what readers in a given field are looking for. The best ones also find things that readers aren't looking for--yet. They recognize when an author has written something that doesn't fit an established template yet is fresh and compelling enough to create its own audience. It might be a first novel by David Foster Wallace, Art Spiegelman's Maus, or The Worst-Case Scenario Survival Handbook. Marketers are great at selling books to audiences they recognize, but usually very reluctant to embrace things they don't recognize. The first question marketing asks an editor with a new project is, "what are the comp titles?" When the answer is "there really aren't any" the editor meets stiff resistance. So a drawback of a "marketing-driven" house is likely to be that it follows trends rather than sets them--over the long term, a recipe for diminishing returns.

Mike's column cites the example of a small publishing house where the head of marketing is also an acquiring editor and remarks, "I think many publishers will come to see the benefits of marketing-led acquisition in the years to come." But the fact that one smart, creative person with an editorial background has a marketing job doesn't mean that marketing is taking over editorial. In fact, it might be the reverse!

There is no question that marketing is now more important, and more complex, than it has ever been in publishing, and it is likely to become even more so. But--and I say this with complete respect for the many superb marketing people I have worked with--as long as publishing houses as we know them exist, editors will remain at their heart.

Monday, March 18, 2013

Tweet Not Your Query, Author, or, Why I Don't Read the Slush Pile Anymore

When I began working in publishing, one of my jobs was to read the slush pile--the stack of unsolicited book submissions that pour into the mailbox of any publishing house. In those pre-email days they poured physically through the mail slot in our office door, five days a week. As a young, optimistic eager beaver, I cheerfully tore open envelope after envelope, imagining I might find something brilliant inside.

Many publishers back then had already declared they wouldn't accept unsolicited, unagented submissions, but I thought authors shouldn't be penalized just because they had not been able to find a literary agent. Perhaps I would find a work too original, too daring for the commercial-minded book peddlers to have picked it up, or discover a rustic genius who had banged out the great American novel at her kitchen table and sent it off to publishers without even knowing what agents were. After all, the tales of bestselling authors who have been discovered in the slush pile (such as Tom Clancy and Martha Grimes) were the stuff of industry legend.

I was rapidly disillusioned. Of course, I had expected that 90 percent of what was in the slush pile would be unpublishable--and so it was. The many, many ways in which slush can be unpublishable are fodder for much editorial-department humor, but my point here is not to shoot the fish in that particular barrel. What I came to realize is that the task of approaching a publisher is a useful test of common sense and some of the basic skills required for authorship. Writing a book demands the ability to do probably some kind of research; to string a sequence of coherent paragraphs together focused around a central idea; and to have some idea of what the sort of person who's likely to read your work will be looking for in it.

This is not in the least to suggest I don't recognize how challenging it can be to find a publisher, even for a very good book. I have both respect and sympathy for anyone setting out on that quest. What I'm saying is this: If you are thoughtful and imaginative enough to write a first-rate novel, say, or a gripping historical narrative, you should be able to apply those skills to the process of putting your work in front of an editor. You should not just chuck your query letter into a mailbox addressed to "Editorial Department,  Random House" or "To Whom It May Concern". Rather than just sending your stuff to every house in the Literary Market Place from Abbeville to Zebra Publishing, you should find out whether the publisher you're querying even has fiction, or children's books, or whatever, on its list. You would not believe how often my imprint, which states on its webpage it publishes NONFICTION, receives queries from novelists. If you have a little more common sense and a bit more enterprise, you can probably figure out that it makes sense to query publishers who have been successful with the sort of book you're writing; take it one step further, and you can track down the name of an editor who worked on such a book. I am always receptive to a letter from an author who says, "I'm writing a book that I think will appeal to readers of XYZ Title and I saw that you edited it."

But by definition, writers in the slush pile have not taken these elementary steps. They have not gone through the thought process, or done the legwork, necessary to put a well-targeted pitch into the mailbox of a specific person, they have trusted to luck or perhaps the dazzling quality of their work, or they simply haven't thought about it one way or the other. That doesn't mean they aren't gifted; maybe they are naive, untutored geniuses. But it does mean they're not professionals. They aren't thinking about their work or their careers in a businesslike way. And that simply means the odds  that they can be successfully published are really slim.

I don't mean this snidely. Creativity being what it is, it's always the case that there are talented writers out there who are totally naive about what might be involved in getting your work published. And once I even found a pretty talented mystery writer in the slush pile, who went on to write several books. That was one author, though, out of the hundreds and hundreds I sifted through--meaning it wasn't 90 percent, but well over 99.9 percent, whose work had not been viable. Given the state of the marketplace, where it seems to take more effort than ever--by both publisher and author--to make a book work, I've had to conclude that the time I might devote to panning the slush pile for gold nuggets is that much less time that I have to spend on all my other tasks.

The 21st century cousin of the slush-pile submission is the query-by-tweet. Not only do we get "Dear Editor" letters, we see messages like this on Twitter.  Hey, @BloomsburyPress, I've written a teen paranormal romance. Ppl say it's next TWILIGHT-DM me for details!  After seeing one too many of those, I tweeted in response, Dear Authors: Twitter is not the way to query us. And this imprint is nonfiction only. If you want to get published, please do yr homework.  Instantly--this being Twitter--I received a stream of tweets disparaging Bloomsbury Press as arrogant and ignorant of the new world where "publishers need to impress and adapt, not writers. We have other avenues."

Now, I celebrate the fact that authors have many ways of reaching readers. Yet as in any other form of writing, it's important to suit your content to the medium. Twitter, a medium of 140-character blurts, is not a good showcase for your ability to write a work of 70,000 words-plus. And since even our Twitter profile says @BloomsburyPress is a publisher of "140+char serious nonfiction," an author who queries us about his YA novel has failed to clear even a pretty minimal threshold of effort. My abovementioned tweet was not intended to disparage or discourage authors, but to offer straightforward, good-faith advice. Twitter is a great tool for authors--but so was the telephone. Neither of them are the right tool for finding a publisher.

(photo from Wikimedia Commons)

Sunday, April 1, 2012

Publishing and Bad Publishing Are Not the Same Thing: A Publisher's Response to "An Agent's Manifesto"

The London agent Jonny Geller stirred up a lot of discussion, and a flurry of Twittering, by posting "An Agent's Manifesto" a week or so ago. Jonny contended that in the "maelstrom" of the current book business, authors are being forgotten, taken for granted by booksellers and, in particular, by publishers. The original post seems now to be behind a paywall but it's extensively quoted here and here. He writes:
The author is not an object which a publisher has to step over in order to achieve a successful publication. If they have a problem with the cover, blurb, copy or format, then something isn’t right….Remember, we don’t have a job without [the author]. For those of us still working in the legacy business of publishing books, here’s a reminder of the primary mover in this chain.
A great many people retweeted his column or commented on it using words like "fantastic." And his dim view of publishers was echoed elsewhere. At her blog, the novelist and ghostwriter Roz Morris had even more negative opinions of my colleagues:
It is common, behind the scenes, to hear editors talk about authors with undisguised loathing – not just individual ones who may be difficult, but all of them, authors as a breed. There is a culture that authors must not be listened to.
I have to say that I don't buy these generalizations about our business.

I have worked at publishers large and small--two Big Six houses, a literary indie, a university press, and currently a house I'd describe as mid-size. Never, ever, at any of them, have I heard authors discussed with "loathing." At all of them it was fully understood by editors, marketers, and management that the author is, in Jonny's words, "the primary mover" in the publishing firmament. The whole enterprise would not exist without authors. To put it another way, as one of my colleagues says, "the author is our customer." I simply don't know anyone in publishing who thinks of an author as "an object we have to step over to achieve a successful publication."

At Bloomsbury, we regard the author as a key partner in marketing the book, because as Jonny correctly observes, "the author is the expert" on the subject, setting, and likely readership of her book. We want to tap into that expertise, and use the author to help mobilize the networks of readers who are going to respond to what she's doing.

I have made clear elsewhere on this blog that I'm fully aware publishers often fail authors (and themselves for that matter)--for all sorts of reasons. One is simply the tendency of any complex organization to screw up from time to time. Another is that most publishers are under-resourced. Trade publishing is a chancy and low-margin business, and there's rarely enough money and man-hours to lavish on each title--on any title--as much as it deserves. In the hustle to get things done, there can be a temptation to take shortcuts--and one of the most ill-advised shortcuts is to discount the author's input about jacket design, flap copy, or marketing ideas when they are at odds with the publisher's. This does sometimes happen, and sometimes with the arrogant justification that "we're the professionals." I have no hesitation in saying this is simply bad publishing, and any author who experiences such treatment is right to resent his publisher for it. But in my experience it's relatively rare.  It may be more common at the biggest houses, where the sheer volume of titles can, at its worst, lead toward a book-as-widget mentality. Throughout our industry, however, dedicated people are expending sweat, toil, and sometimes tears to meet authors' expectations.

By way of example, in the past week, I've been working with our creative director to find a jacket for a fall title, where in attempting to satisfy the author, we have gone through not less than a dozen different designs. I have exchanged numerous emails with another author, trying to choose a title and subtitle from among 5 or 6 possibilities--this after his original choice had been embraced by our marketing team but he had second thoughts. And I spent an hour on the phone with a third author, negotiating the precise wording of the captions in his photo section. This is not because I'm a unique paragon of editorial virtue; all around me, and not just at Bloomsbury, my colleagues are toiling away with their authors in similar ways. Down the hall from me, a publicist was booking and rebooking flights for an author's book tour in response to her changing schedule. And out in the Northwest a sales rep was arranging a dinner for a debut novelist to meet with booksellers for the region. None of these authors, by the way, are bestselling VIP types, although we hope they eventually will be.

I submit that these authors are, as Jonny urges, being "valued, understood, appreciated, included, nurtured and spoken to like adults." Furthermore, I can think of no other major creative industry where a single artist has so much control over his or her content and how it gets presented to the public. The author has absolute final say over the text of the book (contrast this with Hollywood, where a director may not even have final-cut approval, or journalism, where a writer's copy may be heavily rewritten at the editing desk); and--the above-noted Bad Publishing exceptions aside--typically has consultation even on covers and catalogue writeups. 

Editors, especially, value authors because they are our closest partners in the process. The relationship can be intimate, and like any close relationship it can be fraught. Authors do things that make editors grind their teeth from time to time, just as spouses do to one another. And publishing people do, it's true, vent about authors now and then, just as authors vent about publishers. That doesn't mean there's a lack of respect on either side. 

Several of the commenters on Jonny Geller's and Roz Morris's posts cite "horror stories" they have heard about author mistreatment. I note that most of these horror stories are secondhand. In saying such stories are unfortunate and rare, I'm not saying none of them are true. By the same token, I think most agents do a good job for their clients, even if one of Roz Morris's commenters wrote "I still want to punch something when I think how my agent mistreated me." In any case, I was pleased to see that several authors also posted comments about how happy they were with the care and attention they received from their publishers. It's human nature that "horror stories" circulate more widely than "satisfaction stories."

I have no quarrel with Jonny Geller’s manifesto. Authors will always be at the core of whatever publishers do, and it is worthwhile to remind us of that. But to the charge of disrespecting authors, on behalf of all the publishers I know, I plead not guilty.