The Business Rusch: Trust Me
The Business Rusch: Trust Me
Kristine Kathryn Rusch
Last week, I declared The Changing Times in Publishing series finished primarily so I could stop using that subheader in my posts. The times continue to change, and I’m going to stick with the topic for a while.
I had hoped to make The Changing Times in Publishing another book, like The Freelancer’s Survival Guide, but so many of the changes are happening so quickly that even if I release the book as an e-book—after I’ve organized everything, edited it, had someone else edit it, copy edit it, and put it up (a month’s work, minimum)—a goodly portion of the information in the posts might need updating.
I’ve had a few publishers ask me for parts of the book, and I’m even hesitant to do that, just because I’m worried about the data lasting beyond a few months.
Things are changing in publishing that quickly.
Which is why I’m going to stick with the publishing topic for a while.
Let me apologize to those of you who don’t work in publishing, and who’ve been following this blog. I’ll still be discussing business, but I’ll be doing it with the focus on publishing, at least for now. I hope I don’t lose too many of you because you’ve been great and loyal readers. I hope you stick around or at least check back from time to time to see if I’m discussing something else.
Knowing me, I’ll probably insert a general business post from time to time because business fascinates me, and understanding it is all important. I initially thought of adding a second weekly blog post on business all by itself (actually, when I thought of this, I thought of doing it on publishing and keeping the business blog just business), but I honestly don’t have the time. I suspect these posts are costing me one novel or a series of short stories per year, and I can’t justify adding another weekly project. I’m happy to revive my nonfiction career, but I don’t want to write nonfiction at the detriment of my fiction.
I also know that the publishing topics have brought a lot of new readers to this blog, and most of you have decided to stick around. Thanks for that. I already have half a dozen topics slated, with more on the way. There’s a lot to cover these days, as we’re in such a period of dynamic change.
Some events in late January, early February started me on this path to keeping the blog about publishing. Things happened behind the scenes on several listserves that I participate in, as well as in the industry itself, that caused me to have a realization: Most of us long-time writers aren’t prepared for the shift in publishing.
Why are we unprepared? Because the change in publishing requires a radical change in thinking.
People can change their business practices easily if the change requires a new skill set or a new way to do the same old thing. But what’s happening to publishing now requires a new way of thinking, and most established writers haven’t realized that.
I’m not sure some of them are even capable of making the shift. And it’s important that writers do so, or they will lose in the end.
Here’s the problem: For decades now, all of publishing has been set up on a “trust me” basis—at least as far as the writer is concerned. At first, I thought this trust-me thing was unique to book agents, but it’s not. It’s part of the industry, which has become quite paternalistic to its artists.
Think about this: A writer is often (usually [hell, always]) the last to know how well her book from Big Publishing is doing. (If you don’t know what I mean by Big Publishing, see this post. I have a specific definition that you need to know before you go any further.)
Let me briefly explain how this process works. Up until a few years ago, this is how writers reached readers:
Writers provide content (product) to Publishers.
Publishers distribute that content to Distributors.
Distributors distribute books to Bookstores.
Bookstores distribute that content to Readers.
In order to reach those readers, a writer had to pay the publisher a percentage of the book’s earnings. That percentage could be as high as 94% of the book’s earnings (on a mass market paperback).
In return, the writer received quite a lot. First, the writer received an advance, which was essentially a loan against future royalties. Aside from overhead, that advance was often the first money spent on a book and that advance—that loan—arrived two, sometimes three, years before the book appeared on store shelves.
In those two-three years, a publisher invested a minimum of $200,000 on that single title without earning a penny. In fact, the publisher would not recoup its expenditures for at least six months after the book’s publication, sometimes more. In the end, the publisher would hope (on average) for a 4% profit margin on every book it published. (Sometimes the publisher would lose money, and sometimes it would make money, but the average was [and still is] 4%.) In other words, the publisher took all of the financial risk.
Back then, writers could self-publish, but it cost a fortune and the self-published writers wouldn’t get nationwide distribution even if they spent that fortune. So if a writer wanted an audience for her book that went beyond her friends and family, she had to go to Big Publishing. There was no other game in town.
Now there is. And self-publishing in two years has gone from being somewhat shameful and the province of dupes to a practical matter for savvy authors, particularly authors who already have an audience. But before I go too far down this side road, let me return to the past because it’s important to what I’m trying to describe.
When the author sold that book to Big Publishing, she automatically entered the world of “trust me.” Writers had a hell of a time getting any information out of their publishers at all.
If the author wanted to know what her projected print run was, she would be told “it hadn’t been determined yet.” If the book had shipped and she wanted to know how many copies went to bookstores, she would hear that this number “isn’t available yet.”
Every six months, depending on the accounting schedule of the publishing house, the writer would receive a royalty statement, which was supposed to be an accounting of what had happened with that book. But the statement wasn’t very straightforward. In fact, it was news in the late 1990s when a publisher instituted a “readable” royalty statement.
Too much information was hidden from the writer, including—once again—the print run, the actual sales, the discounted sales, the number of books behind held as a reserve against returns, and so on.
Sidebar: Let me explain why a print run is a tricky thing. Because bookstores are allowed to return books, the number of books shipped does not mean that number of books sold. Bookstores have months to return books for full credit. So the publisher is reluctant to give out any numbers at all. If the book is successful, it sells 80-90% of its print run. The average is 60-70%. Satisfactory used to be 50%, but that isn’t satisfactory any longer.
So…to calculate the book’s actual sales, the publisher had to wait until the reserves were in. Somewhere in the dark distant past, and I don’t know exactly when, some publisher instituted a reserve against returns. Basically, the publisher wouldn’t count a certain percentage of the books as sold until months (sometimes years) after the book was published. The publisher would “release” those books over time.
So, if your book sold 20,000 copies (actual sales), the publisher could withhold based on the terms of your contract (so this number always changes per author) as much as 10,000 copies (actual sales ) of that book for a period of six months to two years. Gradually, during that time, the publisher would “release” those books or count them against the sales. Say, at a rate of 2,000 books per royalty period.
See how confusing this gets? See why just finding out how many copies of a book actually sold is tough?
Writers learned that the only way to know exact sales figures of an in-print book was to audit the publisher. And then, sometimes, the audit wouldn’t work. Because the publisher doesn’t always know.
For example, when a book is actually printed, the printer is allowed to deliver the ordered amount plus or minus 10%. So if you order 50,000 books from printer A, printer A by his contract could give you 45,000 books or 55,000 books. This isn’t because printers are inherently lazy or shady. It’s because shutting off the older presses at a precise number was impossible. You had to guess and let the machine either short the run or add to the run.
Doing short print runs (of, say 100 copies) was next to impossible.
This, by the way, is one of the technological changes that has enabled cheap and easy print-on-demand books. Now a printer can print as few as 100 or as many as 10,000 and do so accurately.
But remember my post on how Big Publishing actually works? Many Big Publishers have printing contracts that predate the change in technology, so they still get the print run plus or minus 10% from their printer, and accurate information is still impossible.
Remember that this print run problem is compounded by the returns system. And human error. Exact numbers up until a few years ago were impossible to get.
And yet, writers were being paid a percentage of those exact numbers. A writer’s royalty rate was counted against each book. For a standard midlist mass market, the writer would get 6/8/10% of the book. (6% up to, say, 25,000 copies, 8% to 50,000 copies, and 10% for all copies sold after that. Again, this is determined per author, per book contract, so it’s not the same for every writer on every book let alone all writers.) And yet, how would the writer know when she sold 25,000 copies or 50,000 copies or 5,000 copies?
Well, she would have to trust her publisher to accurately report those numbers.
I’ll be honest. Most publishers do their best. It’s just not in their best interest to skim off the top, particularly once the Romance Writers of America made it easy (well, easier) for writers to audit the publishers. (RWA used to help writers foot the bill of doing so; I’m no longer a member of RWA, so I don’t know if this practice still exists.)
But still, the point here is this: the writer had to trust the publisher, her business partner, to give her accurate numbers about her sales. Writers rarely question this. Most writers, in fact, don’t even look at their royalty statements. Many writers who do look at their royalty statements don’t compare the new one with the old one. And rarely do most writers understand those statements.
In fact, most agents don’t even send the writer unearned royalty statements, which is good for the agent and bad for the writer. Because if the writer never gets royalty statements, how does she know if her advance has earned out and the publisher has paid her money?
Um…her agent says, “Trust me. I’ll tell you when there’s money due.”
Considering I know of three reputable agents, one of which is still in business, who embezzled routinely from their clients, I think this trust-me thing with an agent is absolutely ridiculous.
When I asked two of my previous agents for the unearned royalty statements, I was told that sending them to me was too much work for the agency. I then said that not sending them was a firing offense. I got the unearned royalty statements and eventually fired the agents anyway. Those agents didn’t embezzle, but the laziness with regard to my accounts showed up in other business practices. I should have seen the handwriting on the wall with that very first conversation.
And that does bring me to agents who are the ultimate in trust-me. Agents rose to prominence in publishing 50-60 years ago primarily to fight the trust-me attitude of the publisher. Agents were in New York; writers weren’t. The agents swore they could find out things like print runs and ferret out royalties due to the writer. Agents wanted a percentage of any money they recovered. Eventually agents moved from assisting the writer in information gathering to marketing the writer’s work, brokering the deals, and getting a percentage of any deal the agent made.
Again, that made some kind of sense, because the agent would continue to act in service of the writer, making certain that the print runs were accurate, the royalties got paid, and so on.
However, long about 1970 or so, publishers got the bright idea that it would be easier on their accounting system if they paid one check to an agent for all of the agent’s various clients, rather than hundreds of piddly checks to dozens of writers. So the publishers offered to pay the agent first, and the agents (not dumb) agreed. The writers (dumb) agreed as well.
Which meant that the person who was earning 10% (not 15% like agents now) got 100% of the check and then divided it—90% to the writer; 10% to the agent. That is, if the agent was trustworthy, which most are, but some are not.
(Remember, there are no laws that govern agents and there certainly weren’t any then.)
See how this trust-me attitude permeated publishing? But notice that attitude was only on the writer’s side. The creator, the initiator of the product, got told repeatedly that the information wasn’t available and that the creator needed to trust the business people to accurately report the information. Or at least to do their very best to report it.
And because Big Publishing was the only game in town, the writer had two choices: go along with the trust-me game or not get published on a national level. The writer could audit, but back when I came into the business in the mid-1980s, any writer who audited a publisher got quietly blacklisted. RWA changed that by doing the audits en masse. In fact, we writers owe a lot of the improvements made in the trust-me relationship between publishers and writers to RWA and the businesswomen who ran it in the early years.
I could go on about the errors in the trust-me side of things forever and I did in The Freelancer’s Survival Guide in the sections on employees and money. If you are a writer who has an agent, you need to read those sections, particularly the ones on employees (or as I call them “people who work for you”).
But we’re talking about attitudes and the changes in publishing, not about agents or Big Publishing practices.
In January, a well-published writer whom I respect greatly posted information on a listserve about a start-up business that would help busy writers get their backlist up electronically. If the business actually uploaded the file, the business would get a percentage of that book’s earnings as long as the book was for sale electronically. More egregious, in my mind, was that the business would put the book up under the business’s name, so that all the tracking information would go to the business getting the percentage, not to the creator of the book.
Does this sound familiar?
I was trying to explain why this is a bad thing on the listserve, as more and more midlist writers jumped in saying that they didn’t have time to upload their work and they didn’t see what the problem was. I was getting pissed that these very bright people didn’t understand a simple business practice, when something else happened.
Barnes & Noble’s electronic publishing site, PubIt, stopped reporting real time sales. B&N’s tracking system completely broke down in the wake of the escalating book sales in December. B&N had to redesign their entire system, which meant that for most of January, sales numbers were unavailable to anyone who had work on B&N’s electronic server.
I was bitching about this with a savvy writer friend, and we wondered how many sales were lost in this transition. I went from that discussion to the listserve discussion, often within the same afternoon.
And that’s when I realized the problem.
For thirty years or more, the writers on the listserve operated in a 100% trust-me environment. They have no idea how many copies their books have sold over those decades. They have no idea if their agents have embezzled from them.
Those writers and everyone else like them have gotten used to trusting other people to handle the business side of their careers. These writers have also gotten used to the fact that in publishing there are no real numbers. Only estimates.
So the thing that my friend and I were bitching about—inaccurate tracking on B&N for one month—is the norm in Big Publishing. And has been as long as every writer working today has been in the business.
In order for existing writers to understand the benefits of self-publishing electronically, of not giving away a percentage in order to be published, that writer has to understand how real business works, as opposed to the publishing business.
And most writers—even those who are somewhat business savvy and have had long-term careers—do not understand how real business works.
They have taken their business model, the one they grew up in, the trust-me model, and moved it to all of those new businesses that promise to put up an electronic book for the writer in exchange for a percentage for the lifetime of that book. And the writer should let the trust-me e-pub business handle all that messy accounting, so that it will go directly through the trust-me e-pub business.
Which is really, really sad, because places like Amazon.com and Barnes & Noble actually report sales the day the sales get made. Yep, there might be errors. But there are fewer errors than there are in any Big Publishing accounting office on any book ever. There is no plus or minus 10% of the print run, no reserve against returns. There are only the actual sales made.
And that means there is no reason to trust anyone.
That’s what I’ve had the hardest time with in discussions with established writers. They now have the ability to control their own careers—to know the numbers that their books sell, to control the money and have it come directly to them, to go directly to their readers without the pile of middlemen that Big Publishing has. And yet these writers refuse to do take control in the name of convenience.
I understand why a writer would still go to Big Publishing for new books. I still do, for a variety of reasons (none of them relevant here). There are things that Big Publishing can do that small publishing or self-publishing can’t (although those things are getting fewer and fewer with each passing day). But for out-of-print backlist, for books that didn’t sell into Big Publishing, I do not understand why these writers insist on going into an unnecessary system that will only hurt them in the long run.
Or at least, I didn’t understand until I realized that it will take a shift of thinking—a movement out of the old paradigm—that so many of these writers are unable to do. (There are psychological studies about the difficulties of making a paradigm shift; I’m too lazy to search for them at the moment—I’m still on massive deadline with my novel.)
This paradigm shift is unique to writers who started in the old system, be they unpublished or published writers. Eventually this whole attitude will go away—provided the trust-me electronic “publishers” don’t get a huge foothold into the market.
Because that’s my secondary fear. Too many writers will be too lazy to learn the basic business, and will give up everything to trust-me electronic “publishers.” Those businesses will become the norm, and the writers who go it alone will again become unusual.
I don’t like seeing my fellow writers volunteer for a lifetime of trust-me, particularly when that attitude is no longer necessary to get published on a national scale. Once upon a time, we all had to survive in that model. We don’t need to any longer.
Yet the writers are the ones who are perpetuating it.
I hope, over the next few years, that the writers who are smart about business—real business, not publishing business—will prevail. But I have my doubts.
You see, when I was coming in, writers were having these same discussions about agents, and look who won that battle. It wasn’t the writers. It was the agents, who run the biggest trust-me businesses in publishing.
And that makes me sad.
Once again, I have taken hours I don’t have to write this blog. Usually I don’t mind doing the nonfiction, but as I’m approaching a massive spring-time crush period of amazing proportions, I resent everything that takes time from my fiction, from sleeping to cooking dinner to conversing on the phone. Right now, your encouragement will help me make it to next week’s post. Please donate, comment, e-mail or share this blog. Let me know I’m not whistling into the darkness. Thanks for all the support in the past, and all the great words. I appreciate it all.
“The Business Rusch: Trust Me” copyright 2011 by Kristine Kathryn Rusch.