The Business Rusch: The Fear Chronicles

The Business Rusch: The Fear Chronicles

Kristine Kathryn Rusch

Last week, as the stock market took yet another tumble, I saw a big-name trader get interviewed on the evening news. The trader said—not flippantly, but tiredly—“You know how it goes in the markets. Traders either respond with greed or terror.”

Economic analysts have been talking about fear a lot in the past three years. Ever since the stock markets took a horrible nosedive in the fall of 2008, we’ve seen the effect of fear and panic on the markets.  Fear does feed on itself, and sometimes, not even greed can overcome it.

Last week, I wrote a rather scathing post about writers accepting crap deals from their publishers. The post got a lot of hits and a lot of comments—apparently, y’all love a good rant. But I was angry. And still am.  The column didn’t lance a boil.  Instead, it revealed a layer of molten lava underneath. Fury? Yeah, I’m mad—at the entire traditional publishing system.

As the week continued, more stuff happened. I exchanged e-mails with several  more writers, some of whom remain deliberately obtuse. Others see the problems, but for some reason either believe it is personal or it doesn’t apply to them.

The rest of you have been marvelous, just marvelous. Seriously. You’ve sent nice letters, you’ve donated, you’ve made great comments on the blog. And if I had a different genetic makeup, I’d write only for y’all, because you get this stuff:

Writers Are Responsible For Their Own Careers.

Writers Are Professionals.

Writers Are In Business, And Should Behave Like Business People.

Thanks to all of you who do get it. I’ll continue to write for you, but I can’t entirely shut up about everything else (Oh, such great understatement there.)

In private e-mails, in person, and in the comments section, so many of you have mentioned the word “fear.” You’re frightened you’ll make mistakes. You have made mistakes because you’re afraid to take risks. You continue to make mistakes because you “don’t have as much courage” as I do. It’s ironic really, because what are you afraid of? Making mistakes.

So I figured I’d jump back on the “Unexpected Gold in Self-Help Books” series with a piece on Fear. (In fact, it was the piece on Fear I planned to write last week that started this fine mess. I jettisoned that piece.)

The problem with the “Self-Help” series is that it’s geared to writers, and fear, right now, isn’t exclusive to us. In fact, a lot of what’s happening to writers is happening because everyone else is terrified.

On the same day that I’m writing this, Amazon has unveiled its new tablet.  We all knew it was coming, and there’s been a lot of discussion about it. But the thing no one saw was the price point.

Essentially, at $199, Amazon is giving the Kindle Fire away. And what’s more, Amazon has lowered the price of the Kindle to $79.  Now, granted, that Kindle is wi-fi only and lacks most of the bells and whistles.  But Kindle has moved from an expensive purchase for most people to a purchase that can be repaid by foregoing three hardcover books. And if you download a few books for free to replace those three on your Kindle, well, then you’ve more than paid for the reading device.

That’s what Amazon wants. As one analyst said today, Amazon is the mirror image of Apple. Apple, a device maker, has low-priced content to encourage you to buy devices.  Amazon, a content provider, has low-priced devices to encourage you to buy content.

I know, without doing much websearching, that the Amazon announcement has struck fear into the hearts of traditional publishing. Traditional publishing still hasn’t figured out how to make money on e-books, and traditional publishers are doing their best to piss off readers.

Even Mike Shatzkin, whom many in traditional publishing consider the guru of the e-publishing world, doesn’t completely understand the importance of readers. I usually don’t recommend his blog because, although he often has good stuff, he’s so entrenched in traditional-publishing think that his blogs are only about 50% useful for the way that publishing is going—and I don’t want to explain which 50% of what article is worth your time.

This time I will provide a link and explain some of it, because Shatzkin is the guy that traditional publishers listen to.  Remember, as you read his work that he’s a traditional publishing guy writing for traditional publishers.  He’s not writing for professional writers, like I am. That makes a lot in his various blog posts irrelevant to us (or just plain offensive).  I am pointing it out to you in this case because I want you to see how traditional publishers—even forward-looking folk—think.

Witness: “We know that agents and authors will accept an e-book royalty rate of 25% of net receipts in today’s environment, where 70% or more of the sales are still made in print.  We don’t know if the threat of the alternate publishing options will force the royalty rate up if sales fall below 50% print or 30% print.”

Honestly, what he discounts here are midlist writers. So many of us have projects and series that traditional publishing abandoned, so we decided to do it ourselves. Then we discovered that we could sell consistently and at good numbers, which is now making most of us wonder what we will get out of traditional publishing at all.

What Shatzkin and his ilk don’t recognize are the professional writers who have decided that 25% of net is a ridiculous number, writers who have decided that we’re not even going to offer our books to any traditional publisher who wants to give us no more than 25% of net as a deal breaker.  Some authors are fighting this, but most are simply walking away.

The writers who remain either don’t realize they have options or are operating in a fear-based way (like those six authors mentioned last week).  But I’m getting ahead of myself.

Because there’s some interesting stuff in Shatzkin’s blog, that I don’t even think he realizes is there. I had to parse out this part: “We know that content-creating brands that are not book publishers are using the relative ease of publication of e-books to deliver their own content to the e-book marketplace.”

In English? “We know that writers are self-publishing e-books.”

Then he writes: “We don’t know if book publishers will develop an e-book publishing expertise that will make them able to persuade those brands in time to go through them, the way they have in the print book world, rather than disintermediating them.”

Okay, that’s where I had to parse it out because of all the unclear antecedents and the garbled business jargon.

In English: “We don’t know if book publishers can develop ‘e-book publishing expertise’ that will convince writers to abandon the direct-to-consumer marketing through the internet and let book publishers continue to publish e-books.”

That’s a fact, folks. And the facts are why publishing professionals love Shatzkin’s blog. But beneath all of that factual business language is sheer terror.  Because if traditional publishers can’t convince writers to return to the traditional publishing fold, then what will happen to traditional publishers?

They will become insignificant—or at least, less significant than they are now.

It’s rather astonishing to me that the traditional publishing guru of e-publishing ignores the trends among the indies. Right now, indie publishers and self-publishing writers are way ahead of traditional publishers—on e-book design, on pricing, on marketing, and on distribution.

Let me use one more example from Shatzkin’s blog: He tells general trade publishers to “reconsider your commitment to publish illustrated books in any time frame more extended than a year or two and think about sticking to straight text, unless you have paths to customers for those books that do not go through bookstores. If we do end up in an 80% e-book world anytime soon, and we very well  might, you’ll want to own the content you know works (for the consumer) in that format, not in what you don’t know works in any way other than print.”

It sounds sensible. He’s saying that illustrated books don’t work as ebooks yet, that customers don’t want them, and that publishers should, for the short term, reconsider what they’re doing with illustrated books (but publishers! try to hold onto the rights of those books so you can publish them once we figure out what we’re doing).

The problem is that his premise is wrong. Illustrated books do sell. At least, on the indie side. The problem in illustrated book sales is price point: illustrated children’s ebooks from traditional publishers are too expensive.

Indie authors are selling illustrated children’s books at good New York numbers.  For example, Rebecca Shelley has sold thousands of e-books per month of her illustrated middle grade Bees in My Butt since Christmas, on Nook alone, a platform that favors illustrations.  She doesn’t have the figures for the same period from her iBookstore sales, but she’s convinced her sales will increase this Christmas because of the iPad. (I’m sure the Kindle Fire will help her here as well.)

She is not alone. There are a lot of successful children’s writers, and a lot of successful illustrated books, many of them indie-published.  As Rebecca and I exchanged e-mails tonight (with me asking to use her name so I could promote her work), she mentioned this:

“Up to this point, all of my illustrations have been black and white. But the Nook color has the  most amazing interactive children’s picture books. You turn the Nook sideways and it gives the full picture book double-page layout. Plus it has a read-to-me feature, that reads the book to the children as they turn the pages. Every child (even the older ones) that I’ve shown these Nook picture books to has gone crazy over them.”

The advice that Shatzkin gives here shows both the fear and the arrogance of traditional publishing. Stick to print books until we know there’s a market. But of course, they’re not looking at the self- or indie-published titles, so how does traditional publishing know whether there’s a market or not?  And somehow Shatzkin and others are ignoring things like the Nook picture books—because…why? I have no idea.

Shatzkin advises that it’s best to stick to the print book until we know if there is an e-book market for illustrated books.  But the indie authors aren’t ignoring print. Many authors like Rebecca Shelley are also doing their own paper books as print-on-demand.  As Dave Bricker said in the comments to the Shatzkin blog, “While retail outlets shrivel and big publishers figure  out how to reinvent themselves, other players like Amazon and LSI [Lightning Source Inc] have already stepped in to solve the printing and distribution problems for indie publishers.”

And traditional publishing has its eyes closed and its fingers in its ears as it’s singing “la-la-la” to pretend that the indie and self published world is full of unsalable crap that is…inexplicably…selling.

Over the weekend, I saw Moneyball with Brad Pitt (based on Michael Lewis’s book, which I really need to read).  Moneyball is less of a sports movie than a business movie, and there’s this marvelous sequence in the early part of the film.  Pitt’s character has decided to use a statistical analysis to “buy” cheaper players to round out his roster, a job traditionally reserved to the baseball scouts.

A scout, knowing that he is about to lose his job, gives Pitt the Speech: We scouts know how players work, we find the talent, you won’t have a team without us, we have history and arcane knowledge that you (puny human) could never ever know…

Of course, in the sequence of the movie, we come to realize that the scout is wrong. That his arcane knowledge is as useful to baseball as alchemy is to physics.

The thing is, as the scout gave that speech, I was laughing so hard I nearly hurt myself. Make the scout a traditional book publisher. Make Pitt a reader.  You have read a version of “The Speech” all over the internet—you readers won’t survive without traditional publishing, because you won’t know the good from the bad.

But here’s the thing: traditional publishing has forgotten that they’re in the market of pleasing their audience—and their audience is readers, who don’t care if they buy a book from Bantam or directly from Rebecca Shelley, so long as that book is good. If the book is good (and trust me, Bees in My Butt is good), then the readers will buy the next Rebecca Shelley book, whether it is published by Rebecca Shelley or by Bantam Books.

Take a look at Shatzkin’s article, then realize that fear usually comes from fear of the unknown.  And then realize how much he admits that traditional publishing doesn’t know right now. Granted, most of us don’t know how this marketing shakeout in publishing will work.  But much of what traditional publishing doesn’t know is because of willful ignorance.

I’m rather astonished at all the ignorance. I’m going to pick on Shatzkin again, not because I have a grudge against him, but because he’s out there as the most progressive voice in traditional publishing. (Honestly, I wish he could take a lot of his blinders off, because when he does get a clear vision, it’s worth listening to.)  I’m also picking on him because this one post makes things easier for me to use as an example for you.

In the post, he mentions that the Borders bankruptcy has decreased the  number of brick-and-mortar bookstores. He also mentions that shelf space is decreasing for books and the link he uses to cite that is from Powell’s Bookstore in Portland, Oregon. Powell’s, a gigantic independent, has cut staff all year, citing decreased sales because of e-books.

Shatzkin ignores the real threat to the number of books on shelves. The way that Barnes & Noble has decreased the books it carries, replacing them with toys, and games, and scented candles (Yep, even scented candles).  A number of B&N employees are furious about this. As one wrote to me a few weeks ago, “I got hired to sell books. Now I sell ‘book-related merchandise.’” A B&N manager went further, sending me photographs of the interior of the store as this change from bookshelves to toy shelves is occurring.  The manager wrote, “Anyone who tells you that B&N’s [brick-and-mortar] stores will carry the same number of books as before is lying.”

B&N isn’t the only brick-and-mortar bookstore to abandon books. Indigo Books and Music has been Canada’s largest chain bookstore since the merger with Chapters in 2001.  In addition to trying an e-book model through Kobo, Indigo is also diversifying the products in its brick-and-mortar stores.  Indigo will offer its own line of “home décor and lifestyle products” because, clearly, there aren’t enough stores in Canada offering that sort of thing. (Okay, everything after “clearly” is my personal opinion. But jeez, how stupid is this?)

Any mention of this from Shatzkin or anyone in traditional publishing? Not that I’ve seen. I can’t help but feel that traditional publishers will be blindsided by just how few retail outlets they now have for paper books.

And the fewer outlets for paper books, the fewer reasons for writers to go with traditional publishers. Because all traditional publishers know how to do is produce books for a bookstore marketplace.

Several years ago, a packager contacted my husband Dean Wesley Smith to ghost write a thriller for a major media personality. The personality had fingers in a dozen pies, from casinos in Vegas to well-known music palaces in the South to several major TV markets and several niche religious markets. Dean was to write a thriller; the packager, with the assistance of the major media personality’s empire, would market that thriller to traditional bookstores, yes, but also to casino shops, the marketing booths at the personality’s public appearances, at the gift shops of major hotels, through the religious sites, and of course, through the multimedia empire.

The packager took this deal to traditional publishers, with a guaranteed sale of several hundred thousand copies of the book itself.  All the publisher had to do was print the thing, and ship to bookstores and the various outlets. The multimedia empire would take care of the rest.

No publisher would take the deal. Not even for a reduced advance (this personality didn’t care about upfront money).  The publishers “had no idea” how to market to these areas, so didn’t even want to try.

A year or so later, another friend tried this with one of his own books. Again, the publishers shut him down. They didn’t want to venture into new markets.

The problem is that all the old markets are going away. Yeah, the Publishers Weekly article on Indigo ended with a vaguely hopeful note: “But if Indigo has less space for books and less time* on the shelves to sell them, one…possible silver lining is that it might present opportunities for independent booksellers.” Exactly the conclusion I had about B&N several  months ago.

Still, that’s all traditional publishing sees. If they can’t market books to bookstores and to some discounters, like Wal-Mart, where can they market books? And if they can’t see where to market books, if they can’t figure out how to find new places to do so, places that are fairly obvious if you just look around (depending on your product), then they’re of no use to the “content-creating brands”…um…I mean the writers.

And deep down, the traditional publishers know that. It makes them afraid.

And they are afraid. Just the fact that Shatzkin mentions the 25% of net as something that “agents and authors” might not accept in the future means that traditional publishing knows the deal is a bad one for us “content-creating brands.” The publishers are worried that we’ll figure it out, just like they’re worried about their entire industry.

Let’s go back to my opening: fear begets fear.  And the fear in this industry is trickling through all parts of it.

Agents have it the worst right now. Agents can’t make a living if they follow traditional agency models. Why?

Pretty simple if you do the math. Over the past month, I have heard from writers across the board that advances are down 50%.  Several bestsellers have told me that on the next book they’ve offered their traditional publisher, the bestseller has been offered an advance 10-50% of the previous advance.

In real numbers, let’s use a non-bestseller advance for Kris’s poor mathematically challenged brain. Let’s say that the bestseller’s advance was $100,000 five years ago.  On the new contract, the bestseller is being offered half—or $50,000—all the way down to one-tenth—or $10,000.

Writers are balking at this, particularly since the publishers are asking for more rights, worse terms, at these lower advances. (I just turned down one such deal myself.  My negotiation wasn’t for more money, which I knew the traditional publisher wouldn’t do, but to have the contract be a print-only contract—no e-rights. The publisher (who does a crap job on e-books and doesn’t even publish them on time) said e-rights or nothing. I walked.)

If the writers are getting one-tenth to one-half of what they got before, a traditional agent is also getting one-tenth to one-half of what they got before. The agent’s income is based on 15% of the writer’s income. So instead of getting $15,000 from the writer’s $100,000 deal, the agent is now getting $1500 to $7500 on that writer if that writer even takes the deal, which many of us are not.

Add to that, this problem: because hardcover sales are down significantly and e-book sales are up, royalty payments are way down. That 25% of net on ebooks means that the publisher pays very few royalties on huge numbers of books sold, whereas in the past, if those books had sold as hardcovers, the publisher would have had to pay 15% of cover price, even if the book sold below cover.

Agents are, in a word, screwed.

I didn’t think about this too closely until this week also, because Trident Media Group, the big Kahuna of agencies, has decided to become  publisher.  Yeah, Trident contorts itself by saying it’s not a publisher, but it is. They’re going to publish writers’ backlists and probably front lists. We’ve discussed why this is a bad idea for writers, not to mention illegal under agency law, but the point here isn’t the fact that Trident is out to screw its writers.

Trident is out to save its business. Because the old model—based almost entirely on bestsellers—isn’t functioning any  more. And this publishing model from Trident is a Hail Mary Pass from a company trying to pay its (huge) overhead and keep its prestige in an industry that doesn’t need it any more. (Not two months ago, Trident’s chairman called agents doing e-publishing a conflict of interest. And now Trident is doing it. What can this strategy be except a desperation ploy?)

Fear, fear, fear.

As the fear trickles from the publisher to the agent, imagine how the traditional writer feels. The writer who doesn’t want anything to do with indie publishing, who sees self-publishing as something horrible. Those writers are only hearing about the fear from their traditional publishers and agents.  As a result, these uninformed writers believe that “publishing” is collapsing, when in reality, it is the old business model that is failing.

Because the writers are afraid that publishing is collapsing, they’re grabbing onto whatever gets thrown their way, no matter how bad it is.

These are the writers (for the most part) that Shatzkin and his friends are doing business with. The writers who have no idea that next to the sinking Titanic are small yachts available to any writer who will leap from the Titanic’s deck to the waiting yacht.

The bad business deals that I  mentioned last week? They’re proposed by publishers who are terrified they will no longer have product to sell (and no place to sell that product, even if they produce it). They’re advocated by agents who are scrounging for every single dime they can find to save their own smaller sinking ships (those suckers are nearly underwater now, maybe the smokestack visible).  And they’re being accepted by writers who have blinders on and refuse to look around.

For writers, we are in the best publishing environment we’ve ever been in. We just have to learn a few new skills—or pay a flat fee to someone who already has that skill. Then we will make more money and get our books to more customers than we ever have before.

But so many writers indoctrinated in traditional publishing refuse to see it. Case in point? After I wrote my blog last week, I got ten private e-mails from various writers, all of whom had friends who had signed those free short story deals with traditional publishers. About half of those writer friends were romance writers, which shocked me. Because up until a few years ago, if you wanted to learn business, you went to the romance writers. They knew business better than anyone.

But  now, they’re just as scared as their mainstream, nonfiction, sf, and mystery counterparts.

Fear is no way to run any business, be it a traditional publishing house, a literary agency, or a writing career.  Operating out of fear means that you’ll make mistake after mistake after mistake.

Sometimes mistakes are good; you’ll learn from them. But mostly, mistakes made out of fear are the kind of mistakes that destroy businesses.

I have said repeatedly that I don’t expect traditional publishing to go away. I do believe it will be greatly diminished, and several companies will disappear. It’s becoming very clear that many literary agencies are on the ropes as well. Trying a business model that is illegal and unethical isn’t the way to save a dying business—it’s one of those business-killing mistakes. (If your agency has just added an e-pub arm, run. That business is clearly in trouble and trying to save itself.  It’s not going to be thinking of your business at all.)

A lot of writers will lose their careers in this fear-climate. Not because it’s a bad time for writers, but because the writers haven’t learned how to operate in the new environment. Above, I said that traditional publishing has its eyes closed and its fingers in its ears as it’s singing “la-la-la.” A lot of writers are doing the same thing.

The sad part about that is that if the writers just open their eyes, stop singing, and listen for a few minutes, they’ll have a better career in five years than they have now.

But so many of them are afraid to change. There’s too much they “don’t know.” And, like traditional publishing, they’ll ignore the information around them, and will figure out what to do—much too  late.

Thanks everyone for the great comments last week, the informative e-mails, and the behind-the-scenes letters. I appreciate it all. I also appreciate the donations, which help me fund my nonfiction habit.

If this blog has helped you in any way, please consider leaving a tip on the way out.  Thanks!

*The article mentions that the amount of time books will be on the shelf has decreased from 90 days to 45.

“The Business Rusch: The Fear Chronicles” copyright 2011 by Kristine Kathryn Rusch.