The Business Rusch: Those Pesky Bestselling Writers Again (Changing Times Part Ten)

The Business Rusch: Those Pesky Bestselling Writers Again

(Changing Times Part Ten)

Kristine Kathryn Rusch

I finished the first draft of the book yesterday, my brain is made of Swiss cheese, and now I’m faced with this post.  When I finish it, I’ll collapse on the couch and let visions of sugar plums dance in my head for a few days.  Or I would, if I knew what sugar plums were.

Anyway…it has taken me three posts to get to the place where I can comfortably make my point about bestselling writers.  If you haven’t read the previous posts, they are an overview on writers and the changes in publishing, a post on what bestsellers actually are, and a post about what bestsellers get from their publishers.  Please look at those before you read this one.  I’d prefer it if you read all nine of the previous posts, but at this time of year,  none of us has the time.  So just go back and read those three.

Finished? Good.  Because here goes.

Professional writers are different from each other.  Our careers may be similar to each other, but they aren’t the same.  They differ in time and place, from personality to personality, and in a myriad of financial ways. The careers also differ in experience.

Scratch every single professional writer and you will find a beginning writer who is ecstatic to be published.  We all were unpublished once upon a time and we all understand the pain as well as the frustration of that position.  When professional writers give beginners advice—especially the advice that includes the words “drive,” “work hard,” “write a lot,” and “patience,” we know what we’re talking about.  That’s how every single one of us crossed the line from unpublished to published.

And that’s where our experiences diverge. So if a professional writer tells an unpublished writer that the pro’s way of doing things is the only way, that pro is wrong.  It’s just one way to do things, and might no longer apply in the current market.

Even the most empathetic and understanding of writers, Stephen King, doesn’t understand what his midlist colleagues go through.  He comes close, but he misses on several points.  In his recent (wonderful) collection of novellas, Full Dark, No Stars, King has a story that features a midlist cozy writer as his protagonist.

This cozy writer, who has a modicum of success, somehow manages to get five-figure speaking fees and can afford a secretary.  Well, um, probably not.  Most midlist writers command three-to-four figure speaking fees if they get paid at all.  (Most of us are expected to give away our time—and many of us do.)  The midlist writer—particularly the midlist writer of that particular mystery form called a cozy—rarely makes six-figures in one year.  Certainly, she doesn’t make enough to afford an employee year round—unless that cozy writer writes many other things as well.  King’s cozy writer isn’t a real cozy writer at all. She’s an Advertising Bestseller (see my definitions two posts ago) or she’s writing many books per year under a variety of names (not mentioned in King’s story).  But as written, the character shows that a long-time bestselling writer doesn’t quite know what it takes to work in the trenches—even though he has many friends who work there.

The same thing goes for midlist writers writing about bestsellers.  Most midlist writers have no clue what it’s like to be a bestselling writer.  I read a number of category romances in the mid-1990s featuring bestselling writers who loved going on tour and made a gazillion dollars and spent their days hobnobbing with the rich and famous in designer clothing.

I’m sure there are bestsellers who love giving up their lives for two weeks to a month to go on a grueling book tour, where they give interviews and signings and fly on too many airplanes and have to be social (tough for most introverted writers), but I don’t know many of them.  And a lot of bestsellers make a gazillion dollars, but most of them don’t hobnob with the rich and famous.  Most of those writers spend their days the way the rest of us do—in our sweats or our pajamas, trying to find the next plot point and keeping the cat off the keyboard.  As desirable as it is, bestsellerdom ain’t glamorous.

So when bestselling writers make pronouncements about the ways that e-publishing will hurt all writers, take those pronouncements with a grain of salt.  However, from the perspective of a bestselling writer, that pronouncement might just be true—but not necessarily for the reasons cited.

In my last few posts, I’ve been picking on Scott Turow’s statement about e-books from the spring when he became President of the Author’s Guild.  So I’ll start there.

Turow’s two voiced concerns are piracy and royalties for writers.  Let me explore those, and then move onto the things the bestsellers should worry about.

I used to worry about piracy.  When I had my first stories up online more than a decade ago, I sold them with trepidation.  I used Google Alerts to track piracy, and I often sent my publisher’s lawyers to shut someone down. That also made me uncomfortable.  Usually the person who got shut down was just an enthusiastic fan who didn’t know any better.

There are egregious e-pirates, stealing from everyone to make a profit.  Writers, writers organizations, and publishers are shutting them down.  Servers, web hosters, and other organizations often shut these people down well ahead of writers or writers groups.  The music industry fought the battle against piracy well before publishing did, and got many of the systems we now rely upon in place.  Yes, there are e-pirates. Yes, they are a problem.  Are they a greater problem than shoplifters? I have no idea.

I stopped worrying about e-piracy when I started The Freelancer’s Survival Guide here on my blog.  I learned that the number of generous people who believe they should pay for content even when the content is free well outnumbers the pirates.  I finally remembered the lesson I had learned when I worked for years in listener-sponsored radio.  People who value something want to contribute somehow.  And those people well outnumber the people who take something they haven’t paid for.

I may cover e-piracy later, when I have the time to look up the statistics on the relationship between price and piracy (in short, studies have shown that people are more likely to steal an overpriced item than they are to steal an item priced reasonably).  I’ll see how the rest of this series goes.

But let’s deal with Turow’s other concern first, since it fits more clearly into the overall topic of changes in publishing and their impact on everyone within publishing. Turow believes that e-book royalties rates will harm writers.  He believes that he is fighting this fight for the midlist writer as well as the bestseller.  From his perspective, he is correct.

Right now, the average royalty rates for hardcovers run at 10%, 12.5% and 15% of retail list price.  As I mentioned in last week’s post, this changes from writer to writer, contract to contract, book to book.  So I’m going to use 10% of the retail price as my base for the argument here.  Yes, I know, this doesn’t include other contract points like escalators or deep discounts. That makes everything much too complicated for this discussion.

The average royalty rates for e-books are 15% of gross sales or 25% of net sales.  Note that this is different from retail price.  Let me give you an example.  If a hardcover book costs $30 and it sells for $25, the author (depending on his contract of course) will still get $3 for that sale.  That’s 10% of the retail list price.  If that book retails for $30 but sells for $25 as an e-book, the writer who gets 15% of gross will get 15% of $25 or $3.75.  If that writer gets 25% of net, then the publisher gets to subtract his costs, which might run as high as $20 of that $25.  Then the writer gets 25% of $5—the net received by the publisher—or $1.25.

The average e-book, released at the same time as a hardcover, runs about $15.  The average hardcover book these days costs close to $30. So for simplicity’s sake, I’m going to do the numbers again, rounding up to $30 for the hardcover and $15 for the e-book with no discounting or special pricing. I’m going to skip the 25% of net figure because net profits change from company to company.

So for each $30 hardcover book sold, the writer would get 10% of retail list price or $3.  On each $15 e-book sold, the writer would get 15% of the gross price or $2.25.

You can see why Turow is concerned.  At the time he gave that little speech, the e-book industry was still shaking out pricing—the arguments with Amazon as to whether e-books should be priced at more than $9.99 were heated.  That has resolved itself in the past six months, with recently released New York e-books pricing themselves between $12 and $15.  So when Turow gave his talk, he was actually thinking writers might get 15% of $9.99 or $1.49 per e-book sold.

That’s half what the writer would get from the hardcover under the different model.  See the concern?

But the other reason for his concern is much more subtle and actually comes out of his own career. Remember that Turow is an Occasional Bestseller (please see my terms in the earlier post) whose books have never gone out of print.  Let me repeat that last statement because it’s important.  His books have never gone out of print.

For those of you who are not in publishing, let me give you an important fact.  A book’s contract remains in effect as long as the book is in print. There are clauses in every book contract that define what out of print means.  Usually a book is out of print if it is not selling up to a certain number of copies per six month period. That number of copies is often ridiculously small when you’re dealing with bestsellers.  If the book sells below, say, 500 copies in a six month period, then the book is deemed out of print.  The novels of Occasional Bestsellers and Guaranteed Bestsellers generally sell more than that—significantly more than that—in that six-month period of time, even when the sales aren’t being driven by new promotion or a new book by the same author.

So the contracts Turow signed when he first sold those books remain in force.  Some of those contracts predate the digital revolution (One L and Presumed Innocent) but other books did not. So whatever he agreed to before the industry set standards are the terms he is stuck with probably for the rest of his life.  Unless, of course, he finds some legal way to break that contract.  If—and this is a big if—he even wants to do so.

Let’s go back to the Publishers Weekly Facts and Figures list and deal with That Old Cape Magic by Richard Russo.  Last week, using my extremely low figure of a straight 10% of the retail list price ($25.95) for his book and the sales figures for 2009 (164,437), I guessed that he earned on the hardcover alone $426,714.01.

Now let’s see what he would have gotten for the e-book.  When the hardcover came out, the price for the e-book was $15.  (Now that the trade paper is out, the price has been slashed to $7.99.  But we’re going to pretend that the books have just come out.)  Let’s assume that the e-book sales completely cannibalize (to use Turow’s term) the hardcover sales.

So the math looks like this:

164,437 x $15 = 2,466,555

$2,466,555 x 15%=$369,983.25

Under this system, Russo would have suffered a loss of potential earnings of $56,730.76.

See why Turow is worried?  He isn’t worried for himself and for the bigger bestsellers as he is about the midlist authors.  But he doesn’t understand something about midlist writers.

Our books go out of print all the time.  Until two years ago, having a book go out of print was a tragedy.  Now it’s something to be celebrated.  Why?  Because we’re no longer bound by an out-of-date contract, and we’re free to sell our backlist titles ourselves.  I’ll be getting to this next week.

But let’s continue with Turow’s point of view for the moment.  His point about e-book royalties is a good one.  I don’t think that e-book sales will ever cannibalize traditional book sales (see my very first post in this miniseries), but there is a good argument to be made that e-book sales will seriously harm hardcover sales.

This fall, hardcover books had another (silent) dramatic price increase.  The average hardcover now costs $28.95.  Note that I used numbers from 2009 on the Russo book which was priced at an exorbitant (or so I thought then) $25.95.  With the price of hardcover novels at about $30, consumers will buy fewer hardcovers.  Hardcovers are sold on the premise that the hardcover readers can’t wait a year for the lower-price paperback. The hardcover reader must consume that content now.

In some ways, the hardcover novel is the prime example of the produce model of publishing (see my third post in this miniseries).  The book must be purchased now or grow stale.  Of course, readers don’t read that way.  A number of readers wait to buy the paperback. But there’s always a group of readers who want the book the day it’s published and are willing to pay a premium to read that book first.

The question vexing publishers is this: are the readers in love with the ability to read the book quickly, the format, or the text itself?  If it’s the format, then hardcovers aren’t in trouble.  But if the reader only wants the text, and will read that in any format, so long as they read it when the book comes out, then e-books will cannibalize hardcover sales.

Statistics show that this is, indeed, the case.  Publishers Weekly stated in an October 4^th article on the shift in sales, “Industry analysts expected that lower-priced e-books would lead to consumers paying lower prices per book and the slight shift away from hardcovers to e-books seems to be having just such an impact.”

A study by the Book Industry Study Group, Inc, and Bowker found that e-book consumers are buying more books overall but fewer in print. And here’s the key point:  These consumers are spending less money overall.

Scott Lubeck, BISG’s executive director, stated, “Earlier this year we reported that e-book readers cite ‘affordability’ as a key priority in choosing an e-book over its print counterpart.  Now, we’re seeing how that might translate into bottom line revenue.”

So…if your experience leads you to believe that writers can only access the digital marketplace through traditional publishers or what I’ve been calling Big Publishers, you will see a crisis looming in e-book royalties.  The amount of money a writer will take home in royalties (and advance payments, which are loans against future royalty earnings) will decrease significantly.

From Turow’s point of view, based on his experience and the experiences of the other bestsellers who run organizations like the Authors Guild, e-books are a serious problem, both for the publisher (lower revenues) and for the author (lower revenues).

But the majority of writers don’t have work continually in print.  Not even all Guaranteed Bestsellers have every single novel in print.

Now I’ve confused you.  But think about it:  Many bestsellers became bestsellers after publishing dozens of books.  Those books went out of print years ago.  Some writers have brought those books back into print. Some decided not to.  Just last week, I noted that Lawrence Block, who is now a Guaranteed Bestseller with his mystery novels, is putting some of his novellas up as e-books.  Publisher? Lawrence Block himself.

So he is tapping into the e-book revolution in a way that I’ll be discussing in future posts.

But let’s finish with the bestseller post.  I think the royalty issue is a nonstarter.  Remember that 92% of all book buyers still buy traditional books.  No expert—not even the most optimistic—expects e-books to be more than 50% of the market in 5 years.  So traditional book buyers will still dominate.

The numbers won’t look as stark as I make them out to be.  Taking Russo’s numbers, let’s assume that the same 164,437 people want to buy his book the day it comes out.  Since this is the future, let’s assume that half of those readers will buy him in hardcover, taking his earnings down to $213,357 for that edition.  The other half buy him in e-book format, taking those earnings down to $184,991.62.

Add those two numbers together and you get $398,348.62 as his total earnings, which is still less than the $426,714.01 he earned from the hardcover.  But his loss is $28,365.39 instead of $56,730.76.

And if you raise the hardcover price to $30 from $25.95 (this is the future, remember), he’s earning $246,655.50 instead of $213,357.  Add that to his e-book earnings, and you get total earnings of $431,647.12 or $4933.11 more than he earned off the straight hardcover sales in 2009.

You can also project that he’ll get more readers quicker at the lower e-prices—and well, then, you see how this all shakes out.

I think Turow is worried about the wrong things.  On the contract level, he needs to worry about establishing better out-of-print clauses for writers as well as ways for writers to regain subsidiary rights (like e-rights) that aren’t be exercised by a publisher.

On the practical level, he needs to start monitoring all those start-ups that want to help writers get their books into digital book form.  Some standardization needs to happen there, in a very new industry.

He doesn’t foresee how e-books will change the publishing industry; all he knows is that they will change it.

I believe the biggest change for bestsellers will come in the near future, and it won’t be because of e-pirates or royalty rates.  It will be because of the rise of the backlist.

Readers will no longer be limited to the books they can find in the library, the local Barnes & Noble or a nearby used bookstore.  If a reader likes legal thrillers and has read all the books by his favorite authors, then that reader must find other legal thrillers that don’t have quite the same buzz for him.  In many cases, these legal thriller writers become lower level bestsellers because they’re the best of what’s available. If more and more legal thrillers become available—those from 1986, 1996, and 2006—then that reader won’t have to content himself with what’s in the library and bookstores in January of 2011.  He can pick from a wide range of legal thrillers.  He might even go back and read the grandfather of the legal mystery (not a thriller) Perry Mason.

We’re on the edge of a content revolution, the kind television saw in the 1990s.  The bestsellers will continue to sell extremely well, just like the shows on network television still draw the largest audiences.  But the bestsellers won’t sell as well as they did five years ago, because there will be more choice.  Readership will grow, as it has every year since 1950 or so, but those readers won’t all be reading the same books.

Like modern television viewers, readers will now find their own niche.  They will read bestsellers and midlist writers whose work the readers can find again.  It’s a boon for readers, but bestsellers—particularly those who are good enough to fill a void between (say) Scott Turow books, but not the kind that inspire passion among their readers ala Stephenie Meyer—will see their overall sales numbers decrease.

Some bestsellers will blame higher prices.  Others might blame e-books.  But in actually, it will be the availability of content that will cause some bestselling writers’ numbers to go down.

And because of that—and because of their contracts (and the fact that their books don’t go out of print)—I believe bestselling writers have the most to fear from the e-book revolution.  Should it be a major fear for them?  I don’t think so.  Some of them might see a decline in revenue, but it won’t be significant enough for their publisher to drop them.

And I believe that e-books and the rise of digital devices from phones to dedicated e-reader will bring in even more readers.  So for every reader lost, there’s probably one or two new readers who can now find books (and time to read) when they couldn’t before.

So is Scott Turow right when he says that the digital revolution has the potential to harm writers? If all writers’ works stayed in print and the old contracts remained in force, he would be right. But the backlist of most writers isn’t in print and the old contracts are no longer valid.  Most writers have different issues than those Turow and other bestsellers are dealing with.

And I will start to deal with those issues next week.

“The Business Rusch: Those Pesky Bestselling Writers Again” copyright 2010 by Kristine Kathryn Rusch.