Kristine Kathryn Rusch

The Business Rusch: How E-Books Will Save Big Publishing (Changing Times Part Four)

Written By: Kristine Kathryn Rusch - Nov• 10•10

The Business Rusch: How E-Books Will Save Big Publishing

(Changing Times Continued)

Kristine Kathryn Rusch

In my very first post in this long series of linked topics, I advised anyone who cared about publishing to keep up with the day-to-day industry news.  I wrote that blog post in my spare time over four days and I noted: “In four days, some parts of the [publishing] landscape changed—small parts, mind you, but they changed.  That’s how quickly the sands are shifting.”

The sands continue to shift.  Last week, I mentioned that expensive overhead is one of the problems Big Publishing has—and by Big Publishing , I mean established commercial publishers who run multimillion dollar (in many cases multibillion dollar) corporations.  (Find that definition and more essential stuff in my second post). One aspect of that expensive overhead are the long-term rents they pay for their office buildings.

I posted that on the 2nd of November.  On the 6th of November, The Wall Street Journal ran this article: “Big Book Publisher to Reduce Its Offices.”  Random House Incorporated—which is a unit of Bertelsmann AG (remember, corporations inside of conglomerates)—announced that it plans to sublease more than a third of the office space that it holds in its headquarters building. (It has other buildings.)

According to the article, that’s nine of 24 floors or 250,000 of 645,000 square feet.  Random House hopes to get $55 per square foot for its sublease.

There are many other nuggets in this short article.  First, a passing mention of a fact: Random House used to own the building.  The company bought the building in 2003 and then sold the building in 2007.  As part of the sale, or just afterwards, Random House agreed to a long-term lease for its office space inside the building.

Before you go any farther in my post, go back and read the previous three posts. If you’re pressed for time, read  last week’s because this week’s post won’t make a lot of sense without it.

Random House is doing exactly what I said Big Publishers need to do to stay competitive—hell, to stay alive—in the modern market. They’re trimming overhead.  Because of layoffs (remember, cutting staff to the bone was a way of keeping book costs down), Random House now has a 30% vacancy rate on its floors.

So let’s figure this out, using the numbers the article provided us.  At the moment, Random House, trapped in a long-term lease (ten, twenty, or thirty years), is not using 30% of its office space.  That’s 193,500 square feet vacant, which is costing Random House at least $55 per square foot or $10,642,500.  That’s per month.  That’s almost 128 million dollars per year wasted on empty office space.

Random House doesn’t have a lot of maneuverability here.  It signed a long-term lease after the sale of its building (probably reducing its overhead at that point).  It laid off a lot of employees, as many as it could and still keep its company viable.  It cut back on the number of books produced per month.  And now, it’s trying to reduce overhead again.

If Random House manages to rent that 250,000 square feet of office space, it will have to cram down its own office space even farther. Right now, it’s occupying the additional 56,500 square feet of office space.  Editors and assistants, the art department and sales force, will have to move into closer quarters.

But if they do, and if Random House gets its $55 per square foot asking price,  Random will take in $13,750,000 in rent per month.  Random House will go from losing $10,642,500 per month to making $3,107,500 every month.  (Of course, Random House will still pay the rent on that 56,500 square feet of office space, but it’s paying that now—and using the space, which makes it a legitimate expense, instead of a continual useless loss on the balance sheet.)  If Random House’s advisors, lawyers and accountants are smart, the company will make a small profit per square foot on the sublease.  But Random House could simply be breaking even or taking a small loss.  Even a small loss is a win after that ten-million-dollar-plus monthly loss.

Random House’s announcement this week gave the readers of this blog a gift.  The announcement  makes my point so much better than my vague pronouncements do.  As I’ve said before, publishing is a multibillion dollar industry.  One that allows a single corporation to swallow 128 million dollars in loss for the past few years.  Of course that has an impact on the corporation’s profitability.  But these changes that Random House is making—within the limited options it has—improves profitability.

It also gives Random House some breathing room. And that’s what Big Publishing needs right now. Breathing room.  Because something everyone has feared has finally come to pass: the business model for commercial publishing is changing and companies need to change with it, or they’ll die.

Last week, I ended my blog with this controversial statement: Electronic publishing won’t cause the demise of Big Publishing.  Electronic publishing will save it.

Here’s why.  As I tried to show last week and as the Random House example above aptly illustrates, Big Publishing has a huge overhead that it can’t easily get rid of.  Smart people, people with clout, people with more business sense in their thumbs than I could ever hope to have, have seen this problem coming and have tried to change it for decades.  The reason you often hear about the collapse of publishing from people in the know (not the death of publishing as the bloggers claim) is because of this horribly unwieldy, costly, and somewhat stupid business model.  It’s not that Big Publishing is filled with stupid people who can’t see where this will lead.  It’s that the system is set up to combat change.

Booksellers will fight the loss of the returns system by refusing to order books that can’t be returned.  Long-term contracts—like that lease above—make it impossible to move a large corporation to cheaper production models and to cheaper office space.  Big Publishing has responded to all of these challenges (and others too numerous to mention) by making incremental changes.  The incremental changes have kept Big Publishing going (as has the increased literacy among a growing population, mentioned in part two), but the incremental changes haven’t solved the fundamental problems.

Now remember, we’re talking about Big Publishing here.  Existing commercial publishers.  Smaller publishers can come into the business with a different model and survive—there’s a lot of money to be made in this industry, particularly with a well-managed modern company—but that’s not our focus today.

Today our focus is on the existing businesses, the ones that need to develop a brand-new business model to survive.

Let me give you a short and very general overview of what happens in a corporation that’s a “unit” of a conglomerate when radical change gets proposed. (Those of you who work in these kinds of corporations in other industries already know what I’m talking about.)

First, a series of analysts find the problems. The analysts (either in-house or brought in special) will suggest radical change.  The radical change will have three costs: one in actual dollars, one in time, and one in disruption.  Other parts of the conglomerate will have to fund those costs while the corporation goes through the change.  I can guarantee that it is less expensive, less disruptive, and in the short term, better for the conglomerate, to live with the problems, serious as they are, than it is to go through the upheaval and expense caused by radical change.

So the conglomerate, the corporation, and the really smart people within will find some kind of compromise, pushing the problems off until such time when they can’t be pushed off any longer.  These delaying tactics are built on hope: hope that the market will change in favor of the corporation, hope that the problems won’t become serious enough to have a major effect on the corporation’s bottom line, and hope that the problems won’t have to be dealt with until someone else is in charge of the corporation.

That, in a nutshell, is what Big Publishing has been doing for the past twenty or more years.  Big Publishing has been doing what it can to survive until something makes radical change inevitable.

Enter electronic publishing.

Big Publishing has known that electronic publishing was on the horizon for those same twenty years or so, but has chosen to ignore it.  Why? Because until the introduction of the Kindle, e-reading devices haven’t caught on with the average reader.  Electronic publishing was seen as a small arm of publishing, something that could be added to the repertoire like audio books have been, something that doesn’t get in the way of books, but enhances them.

Had Big Publishing remained in control of the electronic publishing marketplace, electronic publishing would not have become such a big deal.  Big Publishing did make nods toward electronic publishing as far back as the mid-1990s, by attempting to change writers’ contracts and trying to grab rights.

But the rights grabs and the contract changes meant very little when placed inside Big Publishing’s business model.  (Please note that other publishers, like textbook publishers, have a different business model.)

Big Publishing—big commercial publishing—has a “produce” business model.  Because books occupy shelf space and shelf space is limited, bookstores need to “turn” (change) their inventory on a weekly or monthly basis to attract customers.  Big Publishing responded by developing a way of publishing books that works like this:

Each book must make back its costs and preferably earn a profit within the first few months of its initial publication.  Because after that, there’s no guarantee that the book will remain on the shelf. And remember, each book must carry the weight of a second book with it because of the returns system. So each book must earn back double its actual cost within the first few months of its initial publication.

Not all books earn that well, of course.  But some books continue to earn for years, making up for the losses of the other books.

But the point here is that each commercial publishing house’s accounting system is based on this “produce” model.  Books are purchased with an eye to a quick return.  Longevity is a bonus.

Even the bestseller lists are designed to reflect this.  A book that has 100,000 sales over the course of a year might not make a bestseller list.  But a book that has 25,000 sales in less than a week might.  Even if the second book never sells more than the 25,000 copies, publishing houses reward those books (and their writers) much better than they do the books (and their writers) whose 100,000 copy sales build after a slow start.  In fact, sometimes those writers will see subsequent books go out of print because the first few months of the book’s sales are “disappointing.”  The slow build of the previous book will not happen because the existing business model won’t allow it.

The “produce” model came into being as a response to the needs of publishers and booksellers.  As John Updike wrote in 2008 (before the e-book revolution began), “Although books circulate ever more swiftly through the bookstores and back to the publisher again, the rhythms of readers are leisurely.  They spread recommendations by word of mouth and ‘get around’ to titles and authors years after making a mental note of them.”

Electronic books, with their virtual bookstores and unlimited “shelf” space, reflect the rhythms of readers.  Electronic books don’t have to go out of print, so a reader can find a book years after publication.  It’s ideal from the point of view of writers and readers.  From the point of view of Big Publishing, it’s a whole new way of thinking.

You’d think Big Publishers would adopt this way of thinking immediately. But it doesn’t work that way.  The books still have to make the bulk of their profits in the first few months of publication.  At the moment, a slow build can’t factor into a publisher’s profit-and-loss statement because no one knows how this will all play out.

Yet, I stated firmly that I believe electronic books will save Big Publishing.  It has less to do with costs or the longevity of book titles than it does with corporate politics.  Let me explain.

J.A. Konrath and other bloggers state that the costs of publishing an electronic book are “significantly” less than the costs of publishing a regular book.  And if publishing didn’t have insane publishing practices, that would be true.

However, here’s the reality of how books get published in commercial publishing.  The book’s fixed costs are its advance, its cover, its interior production, and its slice of the overhead.  Those costs will remain the same, even in electronic books.  Right now, Big Publishers send electronic files to printers and binders or they send the electronic files to e-book venues.

Big Publishers do save money on the costs of printing, binding, and shipping the e-books.  E-books don’t have returns, so that double expenditure on printing, binding, and shipping doesn’t happen.

But…right now, e-publishing is new and the formats haven’t shaken out yet.  Kindle’s format requirements are different from PubIts, which are different from iBooks.  I’m sure you get the picture.  To negotiate all the different formats, Big Publishing needs actual people to do the work.  Labor costs are the highest costs in any business.  And the hours someone spends on a book to format its e-file will then go into the cost of the book, negating some of the savings from the printing, binding, and shipping.

In other words, it’s not as cheap as the bloggers think for a Big Publisher to put out an e-book.  (This labor issue, by the way, is why some of the early books from Big Publishers had formatting problems.  Big Publishers saw e-books as a tiny, insignificant part of the business and tried to use the same electronic file that they sent to a physical printer for their e-books.  It took some time to figure out that this was unwieldy at best, disastrous at worst.)

Economically, the savings are minimal and Big Publishing’s “produce”-based accounting systems aren’t going to change any time soon.  (There are reasons for this beyond accounting; we’ll discuss those in the writer sections of this prolonged examination of publishing.)  That’s really not a major concern; “produce” systems exist inside other entertainment venues as well. For example, the major television networks still roll out their fall premiere week and advertise it in a “produce” fashion, even though almost every television show ever aired is available on DVD or as a streaming download.  People like new and exciting, just as they like catching up on old favorites.

The way that electronic publishing will save Big Publishing has little to do with “produce” or savings on rents or shelf space or the returns system.

It has to do with the crisis mentality.

Right now, Big Publishing recognizes that electronic publishing will fundamentally change the business model. Everything is moving quickly.  Last year, e-book sales were less than 2% of total book sales. As of last week, they were 9%.

Let’s put this a different way:  In 2010, consumers will buy close to one-billion dollars in e-books.  Some experts believe that by 2015—five short years from now—e-book sales will total three billion dollars.  That’s “billion.”  With a “b.”

That’s a lot of money.  The kind of money that makes conglomerates sit up and take notice. The kind of money that stockholders pay attention to.

So, when a CEO of a corporation inside the conglomerate tells the conglomerate that the corporation needs to make drastic changes to its business model or face extinction, the conglomerate listens.  Finally.   The crisis that the smart people inside Big Publishing have been waiting for has arrived.

Nimble corporations will make internal changes to the business model.  Finally, they can take the risks they’ve been wanting to take for more than a generation, and they’ll have the backing of everyone in doing so.

You can see bits and pieces of those changes already. Random House is a prime example—not just in their cost-cutting measures, but in their fights over e-rights.

What this means for Big Publishing, really, is a way to finally get out from under the returns system, which has threatened to strangle the business.  It’s a way to lower prices and to expand product lines.  Harlequin is already doing so with its Carina Press, a model of experimentation.

Carina Press is online only.  It buys the books for no money up front, just a share of the profits. The books are edited by freelance editors, produced by freelance designers, and then published on Carina Press’s website at a very low price point.  If a book takes off and goes past a certain e-book sales point (which is known only inside the company), then that book will get a print edition. [Correction: Angela James of Carina responded below and explained how the system works for in print books.  Check the comments here.)

This branch of Harlequin has  minimal overhead:  no advances, freelance fees only, and almost none of Carina's staff works inside Harlequin’s Toronto offices. (Again, a correction: I'm wrong about the almost none.  [That's what I get for not following up on info I got six months ago.]  Please see Angela’s post below.)  It’s a bold experiment. Harlequin, unlike its New York competitors, has been known for bold experimentation, being one of the few publishers to work on the subscription model into the late 20th century.  (For the longest time, the category romances were published without allowing returns, which was why major bookstores didn’t carry them.)

Carina Press is just one example. There will be others.

For the first time in years, I’m hearing a lot of positive buzz about publishing from within publishing itself.  Everyone knows change is coming, and a lot of people understand that the change (while disruptive) will ultimately be for the good.

The changes won’t happen all at once. They can’t, because as I’ve said a bunch of times, Big Publishing is not a monolith. Every corporation will handle these changes differently. The experimentation inside each publishing house will differ according to that house’s needs.

But the powers that be—the conglomerates and stockholders, the people who have their fingers in a bunch of pies (not just publishing)—finally understand the need for change.  And the change will happen swiftly. The change will happen because otherwise, the publishing branch of a conglomeration will die.

Some publishing houses will die.  Corporations whose names we recognize will cease to exist.  They won’t be nimble enough to make the necessary changes—or despite the air of crisis, they won’t get permission to make the sweeping reforms.  Other publishing houses will move through this change with apparent ease.  As Steve Mohan mentioned in last week’s comments, some really savvy person in some major publishing house will come up with a publishing scheme that will change the business model forever.  That house will back said savvy person, and the changed business model will create dominance and increased profits for that publishing house.  Other publishing houses will notice, and do their best to adopt the new model.

What, exactly, will the new model be?  I doubt it’ll be Carina, although it might have aspects of Carina.  I’m sure that new model hasn’t found its way into the public yet (although it might be being discussed in some boardroom as I type this).

Why should we care if Big Publishing survives? There are two short answers, really. The first is that despite what the blogosphere tells you, Big Publishers are very, very good at promoting books and writers and reading.  I’ll deal with this aspect of publishing in-depth in the writer sections of this long series of essays.

The second reason is even more obvious.  If a place like Random House can spend $35,475,000 per month on rent for its New York offices alone, if you figure that 9% of the book market will bring in one billion dollars in sales in 2010, then we’re talking about an industry with a phenomenal impact on the economy of the United States.  If that industry disappeared in 2012 like some of this silly bloggers predict, the economic impact of that loss would be staggering—not in book sales, but in lost wages, lost rent, lost utilities, and so on.

As I mentioned, a lot of people much smarter than I am know all of this and are working their tails off to make sure Big Publishing survives into the 22nd century.  Judging by the mood of the industry, a lot of those smart people see a brilliant light at the end of the tunnel for the first time in decades.

That’s good news for all of us.

I’m out of room again. This topic is vast, and I’m going to try to cover all aspects of it in the blog.  In a general way, of course, because it’s impossible to be specific about something this big.  I appreciate all the support I’ve gotten so far on my decision to tackle this topic.  Please feel free to forward information about this post to other lists, or friends.  I make only one request:  Ask them to read the previous posts so that this one is in context.

Thanks.


“The Business Rusch: How E-Books Will Save Big Publishing” copyright 2010 by Kristine Kathryn Rusch.

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47 Comments

  1. I never realized how quick of a turnover there was in bookstores. Perhaps because as a student I relied mostly on the library, and the books I wanted to buy tended to be popular and stay in print. The “produce model” is a good way to frame it. I hadn’t heard that term before.

    • Kris says:

      Thanks, Livia. Even libraries turn their books. If a book hasn’t been checked out ever or in a year or two or three (depending on the library and the space), the library will sell the book to make way for more books. I was shocked when I realized that. I thought libraries were forever. :-)

      As for the “produce” model, that’s my term. I made it up about six months ago when I tried to figure out how to explain the publishing biz model to some friends. It works, doesn’t it?

  2. JC Andrijeski says:

    Great article! Thanks, Kris…and you’re right, your analysis really rings true with (large-scale) corporate culture as I’ve experienced it. Changing the culture in a company that’s had a relatively stable business model for anything over 20 years is a lot more difficult than most people think, even beyond the structural impediments you mention. There’s a whole industry that’s grown up around “change management” because it’s so difficult…and even so, they estimate you’re likely to lose 20-25% of your people who can’t adjust their mind frame to the changes (assuming you can get past the resistance to that change in the higher ups to begin with). Crisis is often the only thing that accomplishes it. I’m actually watching something similar happen in the health care industry right now, and like with publishing, some companies will make it and some won’t…but none of them can avoid the iceberg on the horizon.

    Thanks again – really enjoyed this!

    • Kris says:

      Thanks, Julie and Thea, for the insight into other businesses. I hadn’t even thought about “change management” but you have a good point. Office and retail space used to be at a premium. Now it’s hard to lease. Half of my little tourist town is empty storefronts/office space these days.

      Rob, thanks for the good words. :-)

      Rich, I think you’re right about word count. I find myself preferring to read thick books on my Kindle, just to save my arms. A lot of folks say that shorter will be better on e-books, but I don’t think so. Now you can do an omnibus of–say–all the Robert Jordan books, in one volume as an e-book. And I think folks would buy that.

  3. Angela James says:

    Hi Kris,

    Thank you so much for talking about Carina Press. We’re always pleased when people notice what we’re doing and think it’s interesting enough to talk about. However, since you use us as an example of differences, I do need to point out two inaccuracies in the article that I hope you’ll change.

    First: If a book takes off and goes past a certain e-book sales point (which is known only inside the company), then that book will get a print edition.

    We actually have nothing like that in place. Several of our books are scheduled to go to print via Harlequin’s Direct to Consumer (DTC) Reader Service Suspense program, because they fit the paramaters of that program and were what the people in charge were looking for to add to their shipments. We haven’t made any decisions on further print programs, and that includes arbitraray numbers for a book going to print if it “goes past a certain e-book sales point”. While we’re certainly interested in print as an option for all of the books, we have no firm plans in place for print other than what’s been announced to date.

    Second: and almost none of Carina’s staff works inside Harlequin’s Toronto offices.

    Properly, this is actually all but one of Carina’s staff works inside Harlequin’s Toronto offices. While it’s true that none of the freelance editors are in the office, all of the Carina Press team and staff itself, with the exception of me work in the Toronto offices (and I actually have a desk there that I visit regularly). This includes everyone from the management team, to the production, marketing, ecommerce, newsletter, and other support personnel. A good portion of the Harlequin digital team has some role in Carina Press, and they’re all located in Toronto!

    Perhaps the distinction you could make is instead the utilization of freelance editors and copy editors (it’s a distinction I like to make myself, because it can benefit the authors and editors, in that their sole “job” is editing), none of whom work in our offices, but instead freelance from their homes.

    I am really pleased you’re interested in what Carina Press is doing. We’re proud of what we’ve achieved so far and I’m happy to answer any questions you might have !

    Angela James
    Executive Editor, Carina Press

    • Kris says:

      Thanks, Angela, for the clarifications. I spoke to some of the freelancer editors/copyeditors at the point of start-up and didn’t follow up to find out if my information was still correct. I’m sorry about that. And thanks too for the clarification about the “going-into-print” model.

      I am interested in what Carina is doing. I think it’s a grand experiment, and I’ve purchased many books through your program. I hope it succeeds.

      Thanks for the clarifications. I’ll link to your comment, so that folks can see it.

      Best,
      Kris

  4. RKCharron says:

    Hi Kristine :)
    Thank you for sharing your acumen & wisdom.
    I am learning quite a bit with your essays.
    (It’s like an on-line course)
    :)
    All the best,
    Rob

  5. Lots of companies are in a bind with office space. We own our building. It was a good move sixteen years ago. Now, not so much. Most of the office works from home or is on the road all the time.

    It has become a huge burden, since it was built in the Sixties and energy was plentiful. We’ve done a far amount to help make it more cost effective to run, but with the economy the way it is, nobody wants to buy it, or lease it either. The commercial real estate market in Denver is really depressed because loans are super hard to get.

    So I sit here in this giant office, mostly by myself with the lights off and the heat turned down, for sale and for lease signs hanging on the fence.

    The owner is getting more and more frenetic about the need to do something, but I am out of ideas — not that I had many to begin with — and none of those bore any fruit. This is not my area of creative expertise.

    I hope things come back or somebody just can’t resist this gorgeous building and buys it or leases it.

  6. Rich Ware says:

    One of the advantages I saw toward e-publishing was the word count. No shelf spaces = no competition for said space. With Big Publishing having another viable source, do you think they will be more accepting of larger words counts?

  7. Rich,

    The trend to longer stories already exists in online erotica. The most popular stories at the various free sites are multi-chapter epics with word counts well into the upper six digits and sometimes into seven. In fact, there are a number of readers who complain openly about anything less than 100,000 words as being “too short.” While it may not be a perfect example, I think the extrapolation to regular ebooks makes sense.

    Big Ed

  8. The “produce model” metaphor really makes it clear. I don’t think I ever understood publishing until I came across your way of explaining it, Kris (via Dean’s blog).

  9. Skip says:

    As for a Robert Jordan omnibus, yes, folks would buy it, except that under the Macmillan price scheme they’d want to charge $150 for it.

    As an example of this, last year I wanted to reread the Peter F. Hamilton Night’s Dawn “trilogy”, published in the US as 6 thick paperbacks. And I own all of them. But at the time you could get an omnibus edition on the Kindle for like $7. That was an insta-purchase for me, even though I already owned them. Without that I very well might have found a pirate version, as the kindle reading experience is so much better than that of a paperback.

    And I go look now, and the omnibus is no longer being sold. Instead, each of the three books of the trilogy are being sold, for more than what the dead tree version costs. Publishers that price like this are just throwing away money. And honestly every time I see a publisher that prices like that I make the assumption that this is going to be one of the publishers that fails. I assume about half of the Big Publishers won’t survive the change, although I suspect that some of them will have their nameplate survive as a small publisher, purchased in a fire sale.

    • Kris says:

      I think you’re wrong, Skip. Right now, this is all shaking out. And you’re judging all of publishing by your personal experience with a few e-books. I think most of the Big Publishers will survive. Prices will fluctuate, the products will change. Just be patient.

  10. Steven Saus says:

    I was wondering how much impact you think the small innovators – like Carina, or the small presses – will have on the larger corporation’s business models. Is the entrenched nature of business practices able to be swayed by proof-of-concept examples?

    Or to put it another way, do you think that the proof-of-concept examples – the nimble small presses – will actually foster real change in bigger businesses or simply mindless emulation? What I refer to here are the endless “management fads” – all of which start well among those who grok them, but quickly turn into catchphrases without the understanding behind them.

  11. Steven Saus says:

    To clarify, you said that while digital has savings, current publishers have fixed overhead costs that cannot go away, even if they instantly swap over to digital-only publishing. Is that correct?

    The reason I ask is that I’ve been showing a proposal around all summer (with little interest from publishers 1) where an anthology could be assembled and published (albeit only digitally) for essentially the current cost of acquiring an anthology from a packager.

    If you’re already stuck with the rent and long-term contracts (as you pointed out earlier in the series), innovation’s not going to help much, right?

    Or have I completely misinterpreted what you said? :)

    1 The response has been “That looks really interesting and looks solid, but we have a plan already and/or we don’t have the capital to fund something different now.” I’m presuming that they’re all telling me the truth and I’ve not wildly miscalculated or made errors in estimation.

    • Kris says:

      Let me start with your first comment, Steven. I will get to the smaller presses and different business models next week. Just like some readers did last week, you have already anticipated some of what I’m going to say.

      As for your second comment, see what I said to Skip, below. You’re taking your experience and spreading it across an entire industry. You have to be patient. No industry this big changes overnight.

      Both of you should reread my post, then try to imagine the size of this industry. Then think of it this way: If all of publishing were ships on the sea, then the big publishers would be aircraft carriers or that cruise ship that got stuck this week. You can’t move those things as fast as cigarette boats, no matter how much you want to.

  12. Hi! I’m a regular reader over at Dean’s site, but heard about these articles and hopped over to read them. I actually read them all – with comments – back to back tonight. Very interesting, powerful reading.

    I think the bottom line that the “doomsayer” crowd is not understanding is simply the scale that these companies (and the conglomerates behind them) operate at. They’re not pleased with taking losses (no business – or shareholder! – is). But they are by design large enough to soak some level of loss without suffering critical damage. In a way, conglomerate corps are to business what a large, diversified portfolio is to investors. They’re spread broadly enough that losses in one area tend to be manageable.

    I think your insight that ebooks will provide the stimulus to force change – and therefore get publishers out from under this gradually collecting pile of old baggage – sounds right on the money. People used to seeing change happen overnight watch that change happening slowly and predict demise, but they’re not taking into account the depth behind the company – not just the billion dollars in sales of that publisher, but the fifty billion in annual sales of the conglomerate behind it. That’s a staggering, almost incomprehensible sum. And while we’ve recently learned that very few businesses are “too big to fail”, it gives them a lot of breathing room.

  13. John Sauls says:

    Thanks for an excellent article. Though it doesn’t really change what you’re saying, commercial rents are generally expressed in $x per square foot per year, and I think the $55 figure is an annual one.

    • Kris says:

      Thanks, everyone.

      Kevin, I think you’re right. It is the scale. Books are very personal things, and everyone has met (or is) a writer, so publishing feels small. It isn’t. I love your point that corporations are to conglomerates like a diversified portfolio is to an investor. Great analogy.

      John, you could be right. However, I’ve rented a lot of commercial property all over the country and I’ve always been charged sq/ft per month. NYC may be different. I simply don’t know. But from Wisconsin to Idaho to Oregon, I’ve been charged square foot per month, so I’m basing that part of my math on my own experience. You’re right, though, it doesn’t really change the point. Anyone out there have experience w/NYC rents?

      Roguecyber, I’d love to know how you slice & dice those amazon numbers because that’s a cool statistic that you have. Do you have a website detailing all of this?

      Karen, I suspect we’ll see a lot of changes in the way things are done in big and small publishing, right down to the way that files go to the “printer,” be it electronic or paper. Good point.

  14. Roguecyber says:

    Couple things…

    First love your blog, just discovered it the other day.

    Second, one of the things I do professionally is to Slice and Dice numbers to prove a point, making them say essentially what I want them to say. Every time I read the metics on ebook adoption I get the feeling that there is some major S&D at work. Amazon has release numbers that make it appear that Kindle books are sell as good or better than paper books. Yet other industry reports show that 9% number. I think both these numbers are accurate and that if you cut the NYT best sellers out, the numbers would show and extremely strong kindle market (closer to 50%).

    This is great for NYC publishers. The reach of a James Patterson or Susan Collins will allow them the time they need to move their “Aircraft Carriers”. It’s also great for small publishers and mid-list authors, allowing them to make a killing in the kindle market.

  15. Wow, what an excellent summation! I hope that when publishers finally get ready to innovate, they look at their workflows and consider the benefits of single source publishing. In that workflow, the data (yes, books are data!) is stored with SGML or XML tagging so that it can be validated and reliably converted to whatever output is needed– print or digital.

  16. Roguecyber says:

    Sorry Kris, I didn’t mean to imply that I had any special data. In fact my main point was that we don’t have enough data to make anything but the grossest speculation. You don’t have a breakout by genre, you don’t have non-fiction vs fiction, you don’t know how much of either market is consumed by big brand name authors.

    There are a couple things that stick out to me. Amazon will only talk in units, not in revenue, yet every report about publishing speaking in revenue not units. This tells me if you look at market share (number of units sold) you would get a very high ebook number percentage when compared with that 9% number.

    And that 9% number that has been stuck in everyone’s head is misleading. That’s 9% of gross retail sales, which includes mass market paperback, but does not include all publishers especially not small ebook only publishers or self publishers.

    For example look at Grisham’s week one results on the confession. 30% ebook. But if you do the math it would only be 5% of revenue to the publisher. So if the revenue number for ALL ebooks is 9% then…. :)

    Now that is bad math and logic, but you see my point.. all the ebook numbers REAK of a S&D job. You have Amazon inflating numbers, publishers minimizing impact yet some authors saying their ebook percentage is 60% and higher. So go figure.

    I would love to get some raw data to play with, but I doubt that would ever happen. I’d love to even get some numbers that exclude the top 10% and the bottom 10%, but that would be a very different picture.

    Whew, really didn’t mean to go on that long. Back to work for me!!

    • Kris says:

      It would be nice to get actual numbers, wouldn’t it? Thanks for the analysis. It’ll be interesting as it shakes out, and yes, no one is counting the e-books sold by small publishers or the writers themselves. Can’t wait to see how this all ends up.

  17. Steven Saus says:

    Sorry, Ms. Rusch, but I think you missed what I was saying with the second question because I poorly chose to illustrate my request for clarification with a personal anecdote. Please let me try again without the personal bit that confused things.

    To clarify, you said that while digital publishing has savings, current big publishers have fixed overhead costs that cannot go away, even if they instantly swap over to digital-only publishing. Is that correct?

    If you’re already stuck with the rent and long-term contracts (as you pointed out earlier in the series), can innovations in publishing help without innovations in ways to reduce overhead?

    • Kris says:

      Good question, Steven–and it’s Kris, btw. Ms. Rusch makes me sound…ahem…like I’m as old as I really am. Okay. I did misunderstand. My bad.

      Yes, Big publishing is stuck with this overhead, but not forever. And when they get the opportunity–when the contracts are up–changes will get made. The key is surviving until then. You’ll see more moves like Random House’s with the rent. You also won’t see a lot of things, like internal cuts that no one will discuss.

      I’m pretty sure someone is going to figure out how much money e-rights are making at this 9% and that will make a financial difference as well.

      But the overhead and the long-term contracts will slow down change. But it won’t stop the change. It might, even, give the Big Publishers a chance to watch other models succeed or fail and to then choose the right one.

  18. Dave Freer says:

    Hmm. With respect, I might suggest that your conclusions are not actually supported by evidence or incontestable logic. They may still in be correct (but for different reasons, I think).

    Let’s start with this one: “If that industry disappeared in 2012 like some of this silly bloggers predict, the economic impact of that loss would be staggering—not in book sales, but in lost wages, lost rent, lost utilities, and so on.”

    That assumes (against the evidence considerable historical precedent and current data) that the only possible source of the income for those wages, rent, utilities, etc is big publishing, and that without it, nothing would fill the hole. In which case those clever people at Random house should stop trying to re-rent their office space and close their doors. Let’s take this from a historical perspective: when Henry Ford started making automobiles, according the logic above, it should have impoverished America, as all those lost wages in buggy making (to say nothing of the whips) rent and utility payments would have dried up. Instead, it enriched America, and increased all of the above payments: because people still needed transport, and many of the buggy makers had transferable skills and could learn the ones they lacked. Likewise for the employees of big publishing. We still want reading matter, and may not need big publishing per se, BUT we will _always_ need good editors, proof readers, and cover artists. Yes, the CEO and the guy in marketing whose skill was networking with distributors is out of a job. So is CEO’s niece who was an ‘editor’, and the author who cannot fly without constant expensive push – but is someone’s pet. These are not losses to anyone but themselves. These people were drag — part of the large overhead, which made the company spend less on its core functions. The shareholders take a haircut, but for almost all of them it’s a very small part of their portfolio, and that’s part of the gamble.

    So: The world wouldn’t stagger, the US wouldn’t miss more than half a step, and even the world of writers and editors and proof-readers and artists – our world – would be knocked sideways for a surprisingly short time (once again based on historical precedent) and, equally surprisingly it would be to their medium term BENEFIT. The reason is fairly obvious when you think about it: you’ve alluded to it yourself. The enormous fiscal drag of high overheads which are retained from a different business scenario, means that money that could have gone into paying wages for productive people, or authors or for things that related directly to the core business… were spent on rent for expensive premises in place where they don’t have to be. Or on servicing the debt on advances – which a new paradigm says don’t need to exist. Or for buying end displays and book dumps, in a disappearing brick-and-mortar chain retail environment — none of which serve the core function of publishing : which is to get the right book (a good quality right book properly edited and proofed) to the right customer, leaving the customer happy and wanting more. (Book dumps etc are shotgun marketing, expensive and very inefficient).

    One suspects at this point you leap your first contention here: “Big Publishers are very, very good at promoting books and writers and reading.” I know you said you’d come back to this later, but it is intrinsically an unsubtantiable argument. (The equivalent of saying the New York Yankees are the best sports team in the world, because they win the World Series… where most teams don’t play baseball and don’t live in the US or Canada). In fact there is very good circumstantial evidence that small-to-medium sized publishers do a far better job with less money, and Random House having office space to rent (when economic downturns are historically boom times for the entertainment industry (including publishing)) suggests that this is possibly no longer true. My own point of view is that big publishing controlled access to mass-market retail space – which is provable. That does mean they could promote the books they chose, while brick-and-mortar chain stores accounted for the bulk of all sales. It cannot be proved to mean anything further. Certainly not that they were better at than any alternative, or that their efforts fostered reading (which ought to have a strong direct positve lineal relationship with literacy and population size if it were true, and thus be demonstably true or false.)

    I don’t, personally, think large publishing will disappear any time soon. I do think some parts will remain, simply because they are large, wealthy and will employ economic, contractual, legal and politcal means to try and hamstring any competition. I don’t think this necessarily good for anyone, and I would be delighted if they changed back to persuing their core functions and are positive forces for reading and authors. But I am not holding my breath.

    • Kris says:

      I’ll get to some of what you’re talking about, Dave, in future columns. Don’t forget, everyone, that I’m taking this in chunks. Right now, I’m just saying that Big Publishing won’t go away. It won’t. It might not be as big, and it certainly won’t be the only game in town, but it won’t go away.

      Of course, we’ve all learned that no company is too big to fail, but entire industries don’t vanish overnight. Even your lovely buggy example is only accurate in part–a lot of the buggy makers went on to make car parts, and a bunch went into making bicycles. The companies didn’t go away, but their main product changed. (Buggy whip guys, well, there are still buggy whip makers now. Just not as many of them.)

      Your point about Big Publishing controlling the retail space is a good one and one I’ll get to in about 3 weeks (or more) from a perspective other than Big Publishing.

      I’m not saying here that they aren’t making mistakes. I did say, above, that it’s a stupidly managed industry because it tied itself to its own history. I’m just saying that it’s not going to die any time soon, like the bloggers predict, and I believe Big Publishing will come out stronger than it’s been in decades because of the changes it will have to make.

      Stronger, btw, does not mean bigger. It means healthier companies, able to make a profit without bleeding as much money. That’s all.

      • Kris says:

        One other thing: I don’t Big Publishing’s core function was ever as a positive force for reading or authors. Big Publishing needs readers to sustain its market and it needs authors for content. So the support comes from economic need, not from any intrinsic altruism, now or in the past.

  19. Dave Freer says:

    My apologies: Possibly me being less than clear (my concience troubling me, I should be working) you said: “Even your lovely buggy example is only accurate in part–a lot of the buggy makers went on to make car parts, and a bunch went into making bicycles. The companies didn’t go away, but their main product changed. (Buggy whip guys, well, there are still buggy whip makers now. Just not as many of them.)”

    I said : “many of the buggy makers had transferable skills and could learn the ones they lacked.”

    which amounts to us saying the same thing — except that we both leave out the crucial point – The buggy manufacurers that didn’t go out of business went from being the 600 pound gorillas of the personal transportation market to being mere suppliers of parts to the new 600 pound gorilla or other industries entirely (or became very tiny). Many of their former employees probably ended up in auto plants.

    The point being that even if big publishing imploded tomorrow: your concluding statement would not be true, and can never be true “the economic impact of that loss would be staggering—not in book sales, but in lost wages, lost rent, lost utilities, and so on.”

    No.

    It doesn’t matter much if they fail or survive. At present I suspect readers and writers would be better off if they went out of business en masse. There would be new publishers taking their place within days and the main loss would high overheads. There is no reason to try to protect or conserve them. However, I don’t think they’re going to vanish overnight, and some will survive.

    And for the record Big Publishing’s (or publishing of any sort beyond the very small and idealistic) core function was never altruism toward authors or readers (I chose my words very carefully in that part of the comment.) Its core function is to act as the best possible intermediate between the writer and the reader — because that will give the best economic returns, at least in the medium term. This means providing the reader with a quality product which they actually _want_ at price which is high enough to allow a profit margin, but not so high as to reduce their purchasing volume. It means providing the writer with access to the right readers, and paying them sufficiently to allow them to do the job and want to (and not so much as to make them not hungry for success. It’s a fine balance, both with readers and writers). Big Publishing has outsourced many of their strengths (freelance editors, freelance proof readers) and part of that core competancy. (wry smile: my economist friend who lectures business people on how to lose money and friends says that if you outsource your core competancy you risk becoming irrelevant and disintermediated). Their core functions are not to act as retailers (the agency model), or to raise the funds for a NY office. When they are working at that best book for the reader, they are in fact serving readers and writers interests because doing it well is good for all parties. Individual editors may altruistically nurture talent, or even be a writer’s friend. Big Publishing does not, although it frequently claims it does. That’s not wrong, it’s just business.

    • Kris says:

      i think we’ll agree to disagree, Dave, even on what Big Publishing is. As I said before, Big Publishing’s core function is distribution–getting books to the readers. Big Publishing eventually decided to become a gatekeeper and to actually hold back books from readers who wanted them. (If you look at the history of the industry, going back a hundred or more years.) I don’t think their core competency is producing a quality product: there’s too much history to show that they’ve failed time and time again.

      Their strength is, simply, getting books from writers to readers. And that’s all. And that’s what’s changing. (Look at my first few posts. I get the sense you haven’t read the earlier ones.)

      If existing Big Publishers go away, as you would like, only to be replaced by newer Big Publishers well, then, the publishing industry hasn’t changed. Then Big Publishing will still exist, only with a cleaner business model.

      That’s not what I’m saying. Nor am I saying that Big Publishing is good or bad. It just is. So many people have jumped on me this week for being a “defender” of Big Publishing, and I’m not. Nor am I a detractor.

      As I’ve said in this comments section, and in the posts themselves, this is a long project and I haven’t gotten to half of my points yet. I’m just building a case piece by piece.

      We can agree about “just business,” though, which is something so many writers and readers forget. Publishing is a business, and it’s reacting like a business to major change. Like a series of corporations inside a series of conglomerates, actually.

  20. Hmmm… I’d argue that while Big Publishing might not have been intentionally working to be a “force for reading”, that was the result anyway. It’s to Big Publishing’s benefit to encourage reading and readers; it makes them more money to do so, therefore they do.

    Likewise, it was in Amazon’s interest to introduce and then drive the Kindle. Near as folks can tell (some people deconstructed a Kindle last year and estimated costs based on the parts), Amazon is probably losing money on every Kindle sale, and losing a LOT of money on every Kindle sold in retail stores (since they have to pay the retail store too) like Best Buy, Target, and Staples. But it was in their interest to push the Kindle – and as a result, we’re seeing an ebook revolution that might not have happened near as soon without their interference.

    Having big corporations push reading as a “good activity” for people to engage in is a powerful motivating force for the industry. Reading is competing with so much, these days… But is still holding strong. Partly, I think that is because there’s something inherently amazing about the art form (although I might be biased!). But partly, I think it’s due to the billions Big Publishing has spent over the decades encouraging people to read. A little “enlightened self interest” can go a long way.

    • Kris says:

      Absolutely, Kevin. I do think the encouragement of reading and readers is the law of unintended consequences by Big Publishing. I also think that as the years went on, Big Publishing got filled with readers who were in the business at the lower level (editing, for example) for the love of books, not for the business reasons. Part of the change in the last 20 years has been the inroads made by conglomerates who don’t care about reading or the product, really, just about how much money it makes. But that’s a different series of blog posts. :-)

  21. T. England says:

    Kris,
    In the Nov. 8 Publisher’s Weekly is an interesting article about small presses taking over what used to be the midlist, the writers who’s sales were steady but not bestseller levels. Even some writers who had been bestsellers but their second books didn’t rise to the sales of the first are migrating (sometimes a forced migration) to the smaller folk. Here’s the opportunity for nimbleness on the part of publishers; some of the presses are new (in the last decade or so) whose leaders will have a better sense of the new media and the new technologies.

    I’m sure you’ll cover this in the future, but I wanted to bring attention to the article for others.

    And to add to Kevin’s point about the Kindle and Amazon losing money over it, it’s not the hardware that’s important. They can take a loss on the hardware (for a while, anyway) because they see the profit in the software, in this case, the books. Computers are just metal and plastic, it’s the software that makes people want them. Changes in the hardware are driven by the demands software puts on them.

    • Kris says:

      Good point, Terry, on the soft/hardware issue. I’ll go look up the PW article now. The issue’s in my to-read pile. (Along with about 100 other things…)

  22. Steve Mohan says:

    A brilliant post as usual, Kris–and quite interesting comments, too! This has turned into a fascinating discussion. Two quick points about big publishers dying.

    1. Kris said that publishers have big costs that they CAN’T get out of it. I suspect that’s not true in all cases. There may be huge penalty clauses that make it unthinkable for them to get out of the contracts, but once the handwriting on the wall is clear to their corporate masters they will rethink what “unthinkable” means. They will take the losses that they’ve been avoiding, because they have no choice. And overheads will change. As Kris points out, RH is already trying to turn the ship. Others will follow. And a colossus like Bertelsmann can swallow a lot of losses before they are forced from the field.

    2. The kind of technology revolution that is happening in publishing today happens in other industries all the time. Business school textbooks are filled with examples. One I know about: In the late 1980′s The Trane Company was the first firm in the commercial AC industry to successfully implement screw compressor technology. The market rewarded Trane for its early adoption, but within five years, every other AC manufacturer had successfully adopted screw technology. Innovations (both technology and the business models need to exploit that technology) diffuse quickly through industries. Publishing is not likely to be any different.

    I’m sure some well-known publishing companies will die–but most are huge. And their bulk will keep them around until they can adopt a model that one of their more nimble competitors has proven works.

    JMO, of course. I really appreciate the good discussion here!

    S.

    • Kris says:

      Thanks, Steve. You’re right about penalties for breaking contracts. I suspect Dorchester did that when they went e-book only.

      I didn’t know that about Trane. Fascinating. I just heard a radio story about light bulbs going to LED, and how that’ll “hurt” the lightbulb industry. They’re talking about “smart” lightbulbs that can have camera and photo technology as well as motion sensors. So the tech change is having an impact everywhere. (And let me say as an sf writer….I think this is sooooooooo cool.)

      I agree: good discussion.

  23. Dave Freer says:

    Actually, Kris, I have read the earlier posts, but thought you were on the money there. Please don’t think I disagree with your final thesis, because I don’t (possibly in detail) but this post contained three things I thought firstly had nothing much to do with big publisher survival, and secondly weakened your thesis. Like someone trying to persaude kids not to make sinkers out of old car batteries, and starting with clear points about the toxicity of lead, and the danger of acid… and then saying lead is a modern material and not natural, I merely felt that this post had some inconsistancies which could be used to weaken your argument. You were conveying the impression that you were defending the status quo (not the possibility of big publishers, but today’s set thriving and this being good).

    I still think it is unlikely given the conservative nature of large corporates that few will be able to cut the 25-30% of cover price consumed by historical overheads that they need to, to be competitiive – and bankruptcy may actually be ‘easier’, and thus new ‘big publishers’ are more likely to arise without the baggage. Of course I believe they’ll try and keep that status quo as is, by all possible means.

    As to core purpose: I am probably referring to an earlier point in the evolution of commercial publishing – pre 1850 for example when publishers would actually engage in soliciting orders from influential individuals they thought would like that specific book – something that was plausible then, and I believe will become increasingly plausible in future. Matching the right book to the right reader would change the game. Amazon is already working on some very complex programming to do this. In the meanwhile the fixed cost/per unit equation has been pushing publishing in the opposite direction toward bestsellers, driven by marketing and distribution factors, not reader popularity. For readers and writers, the former is better, for publishers (because of the fixed cost being divided by the number of units) the latter is better. Sadly I think publishers may win.

    I’m really not trying to pick scabs but the cost of format change is one point you ought to consider carefully. While various publishers have cited this as vastly slow, expensive and difficult, firstly, it isn’t (I’ve done it, and you can get it done commercially same day for $15 a book – which is about $14.50 too much), and secondly ‘track changes’ type programming will soon reduce the man-hours needed to make sure the layout is correct. It’s intrinsically little more than another excuse not to cut overheads.

    And for fear of being considered a pestilential troll, I’ll leave it there. While I politely differ about some of your conclusions, I look forward to reading the rest.

    • Kris says:

      LOL. “Pestilential troll.” Dave, I’ve had readers who are pestilential trolls, and believe me, your polite letters don’t even come close. (And they smell better too.)

      I’m glad you reposted. You’re not picking scabs. So…lemme see what I can do here.

      The problem with writing in chunks is that parts get seen out of context. (This is why critiquing a novel in progress is a terrible idea.) I am not defending the status quo. I’m just stating what the status quo is. I haven’t even gotten to the other stuff yet. Most of my readers on this blog, and indeed, most people blogging about new publishing have no idea how Big Publishing works. Or how big it really is. I honestly don’t care if today’s group of Big Publishers thrive or not. I’ve seen two companies die during my tenure as a writer–one spectacularly–and one just vanish. I’ve seen dozens and dozens of others get swallowed up and become part of different conglomerates. It happens all the time. So…nope. Not defending the current set of publishers at all. And in fact, I’m not defining Big Publishing as the current set. Go look at my definitions. I defined it as multimillion or multibillion dollar publishing companies. If tomorrow, KKR’s Little Publishing Group goes from being a figment of my very active imagination to a multimillion dollar publisher, it will by my definition be a Big Publisher.

      Most big publishers will not go bankrupt. Bankruptcy is rare in the corporate/conglomerate setup. The Big Publisher with either get sold to a different conglomerate or it will cease to exist except as an entity to maintain the old product and the copyrights. The losses will get eaten by the conglomerate.

      Will that happen? It has been happening–a lot–as Big Publishing got harder and harder to sustain. Look at the history of the late 1990s and early 2000s. A lot of Big Name Publishers “consolidated” meaning that they either got sold to a different conglomerate or they got “downsized” and disappeared within their own conglomerate. That’s the history of publishing for the past 15 years. Is Big Publishing in trouble? Oh, yeah. Do they know it? They’ve been living it. Will they take this opportunity to change? Hell, yes. They’re already well underway.

      You’re right that some companies will try to keep the status quo and will fall. We might not notice, because they’ll get sold to the better, more successful companies. Some companies might not be able to change quickly enough. And some might not want to change. But some already are–that’s the point of the Random House part of the post. This subleasing is a very big deal. Very big. It’s an external sign of internal changes, brought about by economic conditions.

      Look at my site: I’ve done all of this electronic and new market stuff too. I know how easy it is for you and for me. But we’re not Big Publishing. We can move quickly. They can’t. That’s part of my next post about smaller, more nimble companies. But again, with your comment about how “easy” it is, you are missing my point. These conglomerate/corporations are huge. They’ll take time to make the changes–but they have the cushion to do so (that’s the conglomerate) and that will give them the time to make the changes. My husband likes to say that publishing is glacial. The time frame in publishing is very, very slow, and all of their economic systems are based on that. (I haven’t discussed this.) Their profit and loss statements on one book run from purchase (Year 1) to publication (Year 2) to profit (Year 3). (What I’ve just outlines is fast: generally publishing looks at each book as five years from first expenditure to first money received from accounts.) So you’re looking at instant response, and they’re looking 10 years out.

      As for winners and losers, I disagree with you there too. I happen to believe the winners in this scenario are the readers. Not all of the writers will win (I’ll get to that) nor will all publishers or all the booksellers. But the readers–they’re already reaping the benefits of more books, completed series, books available at the touch of a fingertip, books that won’t go out of print, books being easier to find. The readers win hands down.

  24. Dave Freer says:

    Well, I still feel guilty about taking up your time, as for writers time really means money. It’s a subject I find of great interest (It’s my way of making living too, and my background as a Fisheries Scientist makes me methodical, picky and statistical in my analysis of it, which most writers find terribly boring and depressing ;-))

    You are quite correct, given the nature of books being a minor aspect to many corporate body they belong to, and that within conglomerates, they will probably disappear (or de facto disappear with the name being sold or used for something else). It really amounts to same thing for those on the outside, or working there. To shareholders it’s different.

    I sincerely hope you are right about readers being winners. Unfortunately one cannot conflate ‘more books’ with a better catering to a wider range of tastes. It’s something most writers, readers and indeed I have heard two senior Editors publically say is true, but it’s wrong. Firstly there has been some very elegant work showing that more choice on offer actually restricts the selection made. I can search and refer you to the paper if you like, but you’re an intelligent person, I am sure when you think about it, you understand the mechanism. Secondly in my ex-field they attempted to cut down on catch in a fishery by reducing permitted sea hours. The effect was very very tiny – less than 1/10 of what was expected, and closer examination showed… 10% of the boats caught over 90% of the fish, and those 10% became more efficient. The same general principle holds true for publishing. I will bet (and I don’t gamble;-)) that less than 10% of the readers who would like your books know you’re alive. For authors with less time in the marketplace and less retail exposure, that rises to 99% or more. I agree, wholeheartedly, that ebooks are going to allow better reader-to-reader commendations, and longer shelf time — good for readers and writers. But I will give you long odds that big publishing will still be pushing Dan Brown at the reader who buys maybe 1 book a year (95% of the market) who really would prefer KK Rusch (and then buy everything she ever wrote, and read more and more) but needs to be pointed at her. Dan Brown at least superficially makes more money for the publisher, but unfortunately doesn’t satisfy the reader, who buys the next book she has pushed at her – Stephanie Meyer. She hates it, and doesn’t buy anything else for years, if ever, let alone experimenting until she finds her ideal kind of author. Big Publishing is happy, they sold two books with very low fixed cost:unit ratios, and ‘there is one born every minute’. Kris Rusch lost 50 sales. Reading lost another reader, and her children (oddly, reading is a heritable habit ;-)). That is why ‘more books’ does not equate good for the reader, unless it comes with more accurate linking of reader with writer.

    Anyway. I have rabbited on… again. Thank you for a very interesting post and well-thought out replies to my irritating comments.

    • Kris says:

      A lot to agree with here, Dave, and a bit to disagree with. I’ll be getting to the reader effect later–and you do raise good points about visibility.

      However, repeated studies of reading show that a bad book does not turn readers off of all books or even of all books of its type. It keeps the potential reader from gaining a love of reading. What the studies do show is this…that once a reader finds one book to love, they will love reading for life. So it only takes one book. (It’s like one hit of a really good drug.) I’m just back from a signing and tired, so I’m not going to look up a study, but they’re easy to find.

      I promise, though, I will be dealing with all of the reader/writer/ visibility stuff later–probably, the way this is going, in December.

  25. Chuck Emerosn says:

    Hi, Kris.
    Keep this up.

    One technical “adjustment” for you: commercial office space leases in office towers $ per sq foot is usually an Annual Rate, not monthly as in the $55 you worked out with Random House.
    so… $886,875 monthly….which is still a BUNCH of $$$.

    • Kris says:

      Thanks, Chuck. I never rented in an office tower, so I had no idea. It still seems cheap to me, considering NYC apartment rents are 2K-5K (& up!) per month. But if I do this as a book, I’ll check with a NYC real estate agent before I put this part into the mix. I appreciate the post.

  26. Chuck Emerson says:

    The key difference between a tower rented out in 700 sq ft flats (my brother’s was 550 sq ft when he lived there, a block from Central Park) and an office tower rented out in floors is Administrative Costs (to include marketing costs).

    Instead of 9 floors comprising One Tenant (with an ee of the leaseholder who Always deals with the Owner, and thus is well-schooled in what is specified in the lease, compared to a renatal tenant who just gets mad) 250,000 sq feet broken up in to 700 sq foot apartments would mean over 300 tenants (allowing for halways that can’t be rented but still must be cooled/heated and cleaned). I have an apartment that is 1,030 sq feet and is one of 190 units. There are two full/1 part time in the office, never mind the 3 maintenance guys. Then there is the costs of credit and background checks and high turnover, meaning unoccupied units with no cash flow….. With 300 units, the rent would be $3,800 or so per month, so that jives with your scenario if we then add in the additional cost of administration per unit per month.

    Am I helping any? You luv math, right? LOL

    • Kris says:

      I forgot about administrative costs, building fees, etc. You are helping. I’m fascinated at the way money just leaks away….

  27. Kathryn, this is rather exhaustive but to me all it does it point out the competitive advantage held by the wily author out there in the Internet wilderness. As I see it, all these “economies of scale” can offer a writer is promotion, and we all pretty much see how that goes. Quite a small offering for taking the bulk of your e-book stream for what’s likely to be for the entire life of copyright.

    But good luck, though. As an author, I am real comforted to know that some real-estate mogul will be able to get an extra yacht if publishing “survives.”

    Scott Nicholson

    • Kris says:

      Scott, we haven’t even gotten to the advantages of this new world, etc, to writers. I’ll be dealing with that in a few weeks. (And there are great advantages in this new publishing world for writers.) All this article is saying is that Big Publishing will survive. That’s it. Not talking about the benefits to the writers or anything like that. Just talking about Big Publishing itself. I will get to the writers down the road. Read the next post. And the next. As I said in response to other comments, this is a long piece on the publishing industry not just on writers, not just on Big Publishing.

      And why are you wishing me luck? I’m a writer, just like you are. I have made my living as a writer for decades now.

      And as I have repeatedly said, I am not defending Big Publishing here. I’m just explaining it and why it will not go away.