The Business Rusch: The Changing Playing Field
In the first quarter of 2013, brick-and-mortar bookstores saw a 27% increase in foot traffic over the same period in 2012. Combine that with the number of independent brick-and-mortar booksellers increasing for the past four years, and you see an actual trend. People are going back to bookstores, including a return to Barnes & Noble brick-and-mortar stores, which moved 8 spots up the list of most visited stores in the U.S. In Q1 of 2012, Barnes & Noble was the 25th most visited retail store. In Q1 of 2013, it’s the 17th most visited retail store. Note, people, that a bookseller is in the top twenty of all stores that received foot traffic in the United States. Pretty damn neat-o, huh?
Maybe, just maybe, some of the massive decline we saw in brick-and-mortar retail book sales had nothing to do with e-books. Maybe it had to do with the closing of Borders locations (and contrary to what you believe, Borders closed because it was mismanaged, not because of the growth of digital) and with the recession. As the recession is easing in various parts of the country, consumers have returned to actual stores, including the bookstore.
Great news for all of us who write and read, in my opinion. The print book, which still remains anywhere from 70-90% of the market for book sales (depending on which statistic you’re looking at this week), is alive and well and its death has been greatly exaggerated.
The second really cool statistic isn’t nearly as reliable because it’s based on e-book sales. The two of the biggest e-book vendors, Amazon and Apple, will not release actual information on their sales figures, calling that information proprietary. (And they don’t have to release that stuff, y’all. So go fight with them about this, not me.) Here’s that second statistic:
In the past five years, e-book sales in the United States have gone from zero to (conservatively) 706 million, with no sign of slowing down.
About 30% of those e-book sales come from independent (self-published) authors. That’s about 210 million ebook sales that did not come out of traditional publishing. The bulk of those sales, as we all know, came in the last few years, not in the early years.
Here’s the conclusion from that article which gave us our second and third really cool statistics. The article, by the way, comes from The Bookseller’s blog Futurebook, and was written by Sam Missingham. Missingham writes:
The expanding use of the phrases “ebook plateauing” or “ebook slowdown” are signs of a negative narrative that many in the industry seem to be pursuing – a narrative that is simply not backed up by the data. Show me any other area of publishing that has seen 43% revenue growth year on year. In fact, show me any area of any industry that has. Growth is good. We are in a booming market. Exciting? Positive? I’d say unequivocally YES.
Our industry is growing. We are getting new bookstores, new readers, new writers, and we haven’t hit the peak of the market yet. Why not? Because traditional publishers dropped the ball decades ago. Traditional publishers forgot that they sell books to consumers. Instead, they changed their business model to sell books to bookstores. When the independent bookstores declined at the turn of this century, traditional publishers started marketing to the big distributors and to the chain bookstores, which was why you heard such industry-wide panic when Borders went down. It wasn’t because the readers went away; it was because traditional publishers had no idea how to sell their books to people other than the ten to twenty buyers for national distributors and chain bookstores.
In the early 2000s, I had books rejected by big publishers with these comments. We love it, but we know we can’t sell this title to Walmart. We love it, but we checked with the buyer for Borders, and he doesn’t think the book will sell so we must decline. I’m not the only writer who experienced such things. When your business model is based on selling to ten or twenty people who act as the only gateway to millions of consumers, then those ten or twenty people wield a disproportionate amount of power.
That power is dissipating because of the rise in online book sales. As we discussed two weeks ago, by online book sales, I don’t just mean e-books or books sold on the big chain store sites like Amazon or Barnes & Noble. Small booksellers are also putting their inventories online, and they’re using online catalogues from the big distributors to introduce flexibility into the brick-and-mortar stores.
Let me give you an example.
Pretend you own a small bookstore that rents 500 square feet of space in the local strip mall. You cram as many bookshelves in that space as possible and maybe, like one of our local used bookstores, you use floor space as well.
Five years ago, when you ordered books, you ordered them in groups. If you thought John Q. Writer’s relatively thin Newthriller would sell well, you’d order five copies, and put them all on the shelf. If you thought Susie Fantasist’s fat fantasy Seriesbook12 would sell well, you’d order three copies because that would be all that could fit in the slot you had designated for new fat fantasy novels.
If you gambled wrong on Newthriller, you could return four copies of that book for full price at the end of the month or six weeks. But for that month, Newthriller wasted shelf space you could have used for other books.
Now, you would put one copy of Newthriller on the shelf. You might order two copies of Seriesbook 12 because, the previous year, Seriesbook 11 sold fifteen copies from your store over the space of two months. If you sell one copy of Seriesbook 12, you can order two more and get those books with a day or two from your favorite distributor.
This way, you have room for Karl Kid’s Debut, and Megan Unknown’s Attempt. You only have one copy of those books and you have no idea how they’ll sell, but you figure you can devote a little shelf space to writers whose work has never appeared in your store before.
Unfortunately for John Q. Writer and Susie Fantasist, you have just ordered fewer copies of their books. It doesn’t matter that you would have returned four copies of the five you’d ordered for John Q. Writer. Those books would have appeared in a different portion of John Q. Writer’s royalty statement nearly a year away.
Right now, what John Q. Writer and Susie Fantasist see is that the initial print orders for their books have declined precipitously. It doesn’t matter that they are probably selling the same number of actual copies. Because John Q. Writer and Susie Fantasist are bestsellers, they publish at least one book per year, and have been trained to look at initial print orders instead of actual sales.
Why? Because actual sales can’t be determined for years. Some high-volume bookstores can return books after six months and receive full credit. In the old system, no one knew how well a book actually sold for at least three years after publication. By then, the hardcover was off the shelf, the mass market was doing its thing, and bestselling writer was looking at initial print orders for the mass market, if she was even looking at initial print sales for a book that was three books back. Most bestsellers don’t look back that far.
This change, which favors the newer writer, the midlist writer, and the bookstore itself, is why you will hear so many long-time bestselling writers complain about the decline in book sales. It’s also why you’ll hear traditional book editors, who don’t see the long-range sales figures, make that same claim. They base all of their decisions on initial print orders, not on actual sales.
The fact that other writers are now going to have brick-and-mortar shelf space also means that readers will discover writers they’ve never heard of. As we discussed in the comments of the last three blogs, readers now have the option of picking the exact book they want to read when they want to read it. Instead of buying the latest James Patterson in the airport bookstore while running to catch a plane because you finished the book you’d brought with you and he was the only author there who you marginally liked, you can download a dozen books on your e-reader. Or, you might find someone new on the shelves, because this new ordering system means that a lot of writers who are new to you will share physical shelf space with the bestsellers.
I know you’re all familiar with this, because I’ve been discussing it for the past few weeks. But here’s a chart (scroll down to the bottom of the page) that shows you exactly how this change will impact the major bestsellers, and through them, traditional publishers.
Those of you who clicked on the link were probably surprised to see that I just gave you a Wikipedia chart of Top-rated TV programs throughout the history of Nielsen ratings. But the parallels are instructive.
Back in the 1950s, there were only three television channels, which meant that only three programs competed with each other in the prime time slots. From 1952 to 1955, I Love Lucy cornered anywhere from 49.3% of available viewers to 67.3% of available viewers.
As you calculate available viewers, remember this statistic (from livinghistoryfarm.org):
Between 1949 and 1969, the number of households in the U.S. with at least one TV set rose from less than a million to 44 million…. Between 1959 and 1970, the percentage of households in the U.S. with at least one TV went from 88 percent to 96 percent.
This is actually important, because if you think about it, most non-urban areas within the United States do not have a bookstore of any stripe within 1 hour driving distance. The book suppliers to those places were grocery stores or places like Walmart, which in the last decade, cut back the number of books they carried. Many readers went without new books at all. Some used local libraries. Others found different forms of entertainment.
The brilliant thing about Amazon and other online print booksellers is that they started to tap that unseen book market. Metaphorically, they’re increasing the number of book buyers across the U.S. just like the drop in TV prices (and rise in local stations) increased the number of television viewers in the 1960s.
As viewership increases, as deregulation happened, and cable channels proliferated, allowing such a rise in programming that in prime time, a television viewer now has hundreds of choices, you’ll note that the top-rated program for 2013, NCIS, got 21.3% of total television viewers. Let’s compare that to All in The Family, the top-rated show in the early 1970s when there were still three main channels and 96% of homes had a TV. All in the Family never got less than a 30% viewership in its time slot. An average episode drew 21 million people. A recent NCIS episode brought about 17 million viewers to CBS. Add to this the fact that the United States has about 100 million more potential viewers than it did in 1970.
I know, I’m throwing a lot of numbers at you. And if I knew how to draw, I would give you a chart that shows how—with increased choices and viewership reaching all markets—the “bestselling” or most popular shows have fewer viewers than they did in television’s heyday.
This is because of choice. When you only have a choice of three programs, and you want to watch television, you watch the best of the three. When you have a choice of 200 programs, and you want to watch television, you watch the show you want to watch. And this doesn’t even count recording an episode for later or live-streaming or all those other things that are changing viewership patterns as I write this.
What happened to the big TV networks and the major producers of TV programs over the last 35 years is what’s happening to the big traditional publishers and their major bestselling writers right now.
Readers used to have a choice of the books on a brick-and-mortar store shelf or, if they were lucky, the thousands of titles (some old) in their local library. Now, readers can choose from millions of books at touch of a button, and receive those books in any format they want, from audio to e-book to print. (And those of you who are new to this blog who now want to ask me how to get discovered, please look at last week’s post.)
Traditionally published writers–whether they are bestsellers or not–are watching their initial print orders shrink. Bestsellers will see their actual sales decline, while midlist writers might see an increase in actual sales. Why? Because of that brick-and-mortar shelf space thing. Now shelf space that used to house ten Nora Roberts novels now holds only five, and the remaining five slots go to one copy each of a new writer (or new-to-you) writer that the bookstore deems worthy of inclusion in its small store.
Readers don’t care what business published a writer. Readers want a good story. Readers want easy access to the writer’s entire backlist. Readers now want books at their fingertips.
If you’re a traditionally published writer, you have already heard about smaller print runs and how that’s “worrisome” for the business. Publishers are asking their writers to take pay cuts, smaller royalties, tiny advances, and draconian contract terms because “the readers just aren’t there.”
Most traditional publishers do not understand how the change in ordering from brick-and-mortar store has impacted their bottom line. They don’t understand why readers have turned fickle and aren’t buying the Big Names in as big numbers as before. Traditional publishers think they need to advertise more or push harder, when in fact, they’re seeing that same leveling that the TV networks started to see in the 1980s.
With the exception of one or two cultural phenomenon books per year (think the last episode of M*A*S*H), few books will sell at the numbers they commanded at the beginning of the century. Yes, the number of readers is growing, and yes, the numbers of books being bought (in all formats) is increasing dramatically, but not all sales will go to traditional publishers.
Remember, 30% of ebook sales are, conservatively, going to indie writers. When those writers get their print publishing programs going, with this new change among the big distributors, the print sales for non-traditional publishers will also rise.
So if you’re traditionally published, your royalty statements for the next few years will look dismal, especially if you’re publishing a series. You’ll see that initial print order will have gone way down and it’ll look like you’re selling fewer books. The ebooks on your royalty statements won’t cover the difference between that initial print order from a few years ago and the one you’re seeing now.
Wait, you say. My royalty statement doesn’t have an initial print order.
Yes, it does. It lists books shipped. Then it has a place for returns. Those returns happen long after the book has been published. Once all the returns are in, you will see what your book actually sold.
The difference now is that your initial print order and your actual sales will be relatively close. In the past, the initial print order was usually double (and sometimes triple) the actual sales number.
The problem here for the traditionally published writer is this: All of traditional publishing’s systems, from deciding an advance to how many copies of a book to print, are based on the initial print order of the author’s previous book.
With initial print orders going way down due to increased efficiency in bookstores, advances will go down and some writers will get bumped from their publisher because their sales fell “dramatically.” No one ever looked at the returns.
So yes, traditionally published writers, it looks like you’re selling fewer copies of your book when you see your initial royalty statements. In truth, you might be selling more actual copies than you ever did, because your returns have been cut in half (or more. In some genres, returns were as high as 70% at one point.)
Traditional writers are going to have to survive a very ugly transition as traditional publishing companies change their systems from working off initial print orders and ignoring returns to working from actual sales.
I don’t expect this transition to happen any time soon. Traditional publishers are wedded to ancient ways of conducting business, as Kevin J. Anderson pointed out in a funny and sad post on his blog this week.
I have no idea how to tell you traditionally published writers how to survive this change except to understand that it’s happening. You should also police your contracts well so that you can get out of your traditional publisher quickly. Even if you move to another traditional publisher, you need to make sure that your options are open.
The next two or three years in traditional publishing will see a lot of casualties. Writers will have to take smaller advances. (This is already happening.) Writers will also find themselves without a publisher much quicker than before. Traditional publishers won’t change their accounting practices quickly, and that too will hurt writers. It’s hard to negotiate from a position of strength when you have no idea if your actual book sales this year compare well or poorly to the book sales for your previous titles. Right now, royalty statements aren’t giving you (or the publisher) that information.
Hang on. Explore your options. Remember that indie publishing is getting easier and might be a good stop-gap between traditional publishers. Or it might be where you end up. Because other numbers are trickling in, numbers that are very startling (rather like that 30% figure above) which show that indie (self-published) writers are actually getting traction in the marketplace.
This next week, as the news comes out of traditional publishing’s biggest annual party, you’ll hear a lot of negativity about the state of publishing. Remember, for many in traditional publishing, the sales decline is very real. If you’re traditionally published, brace yourself for a bumpy few years.
If you’re indie-published, ignore the negativity. It doesn’t concern you. Your business is very different from that of traditional publishing. Facts and figures support the case that publishing is dying and the case that publishing is thriving.
It all depends on where you stand, how you define publishing, and what kind of business you’re actually in.
But do remember this: for readers, we’re heading into a new golden age. We have more choices than ever before. Have you asked yourself why television has had so many excellent programs these last ten years? It’s because of competition. And the best programs usually aren’t on the networks. The groundbreaking shows, the beloved shows, the scripted shows that are still water-cooler topics, have migrated to cable and premium channels.
Yeah, those shows might not have the initial viewership that All in the Family did. But many of them have the same cultural impact that All in the Family had.
Personally, I think choice is a good thing. Readers can now choose between a small subgenre novel that will never sell in the tens of millions of copies and the latest blockbuster. I don’t know about you, but I have both on my to-be-read pile. And that’s different from ten years ago. Ten years ago, I could only choose the blockbuster. Now I can read what I want to read when I want to read it.
It’s a new world.
I love it.
One part of this new world is this blog. I can write it at my desk, hit “publish” on my website, and within seconds, people from all over the world can read it. Right now, the blog has more readers than major magazines that I edited in the 1990s. That astonishes me and makes me very grateful.
Thank you for coming. I put this blog up for free so that you can have the information, but I do need to have these words pay at least a little bit toward my writing income.
So, if you’ve learned something or are getting something from this blog, please leave a tip on the way out. Thanks!
“The Business Rusch: The Changing Playing Field” copyright © 2013 by Kristine Kathryn Rusch.