Business Musings: Money Talks

Want to know the future of publishing? You’ll find it in TV.

I know, I know, a bunch of you just went, “Huh?” But seriously, the entertainment industry is the entertainment industry is the entertainment industry, and those of us who write and publish have a small corner of it.

I often use examples from the music industry on this blog, especially as I look a decade or more out, but the shorter term model for the future can be found in television.

Like the traditional publishing industry, network television had a lock on the content that consumers received. Sure, there was the occasional small publication and the occasional vanity press (note the derogatory term) published book. But if you wanted to be relevant, if you wanted to be important, if you wanted to be the center of the culture, you had to be published through traditional publishing companies.

In television, it was the same thing. If you wanted anyone to watch what you did on a national level, then you had to sell your content to the Big 3 Networks and PBS. (Yes, I’ll be dealing with U.S. TV since it’s what I know.) You had the best chance of getting your documentaries onto PBS, but if you wanted to do a scripted fictional show, then you had to get through the network executives.

There was a lot of local content in TV, mostly in children’s programming, and in news and news-talk programming. A few shows would get national syndication, mostly weird shows like the goofy hosts who introduced Friday night movies or the occasional regional drama. Mostly, though, you didn’t have a chance of producing national content without being in New York or Hollywood.

The gatekeeper system in TV was harsher than the gatekeeper system in publishing back in the day. Before the massive consolidation started in publishing in the late 1970s, there were hundreds of national publishing companies. By the late 1990s, the consolidation had brought the national companies down to a maybe a hundred. And now, as we know, there are the Big 5 companies—and a whole bunch of medium-sized companies that managed to get their books into the national bookstore chains or the national distributors.

In the 1980s, the rise of cable TV was a shock to the network TV execs, but they coped. Cable boomed in the 1990s, along with cable access stations, and a lot of national original scripted programming started on a regional or local level. The networks weren’t worried, though. They could hire the talent away from those shows—and often did—because at that time, nothing paid as well as the networks.

One TV producer that I worked with a lot during that period of time kept repeating to me that we’d take cable on this deal we were working, but if we really wanted eyeballs, we needed a network. (I still see that phrase “if we really wanted eyeballs” and I keep imagining it literally….)

And it stayed that way, until Netflix decided to stream an entire season of its original programming on one day so that consumers could binge if they wanted or parse out the episodes if that worked better for them.

We all know what happened with House of Cards, and how it changed the way consumers watch their original content. Or rather, the way that Netflix figured out (from its algorithms) that consumers prefer to binge on original content.

But what isn’t as well known as the impact these new streaming shows had on network television.

Eyeballs Versus Dollars

In December, the folks at FX complained publically that there was too much TV, too much competition. The network calculated that there were 409 dramas, comedies and limited series, not counting unscripted shows and TV movies. Entertainment Weekly took that information one step further, and calculated this:

If you assume each show is 13 hours (which is really conservative given that many hour-long broadcast dramas have 22-episode seasons), that would mean there were 5,317 hours of potential scripted TV to watch this year. 

FX has been harping on this for some time now, with CEO John Landgraf complaining last summer to the Television Critics Association that “There is too much competition … It is hard to find good shows … and I believe it’s impossible to maintain quality control.”

Landgraf got a lot of flak for that statement. But he was speaking from a different place than the television critics and television watchers. While all of the consumers are happily consuming their own personal segment of those 5,000 hours of television—and sharing information about those shows via word of mouth—Landgraf was talking about a different problem altogether.

He was trying to deal with something that made his brain hurt. Remember the eyeballs comment? The number of eyeballs per scripted series has gone down, and what that used to mean in the past was that the shows with the fewest eyeballs paid the least.

Now, the limited shows pay as well as or better than the networks—and—bonus!—give the show runners creative freedom. Not only can you say “fuck” on streaming shows, you can show sex scenes so graphic that they wouldn’t have been able to air on network TV at all. You can have a comic book show, like Daredevil or Jessica Jones, aimed at adults, without worrying that children will stumble on Daredevil’s excessive violence or Jessica Jones’ (not quite as graphic as Outlander) sex scenes.

Plus, the topics are often about things forbidden on network television or from the point of view of characters that the network executives believed would offend that mythical old lady in Poughkeepsie who apparently controlled all content on network TV from about 1960 onward. (Maybe she finally died.)

The end result? Show runners chose money and creative freedom over eyeballs. Or, as some unnamed execs at broadcast networks in a print Entertainment Weekly article that I could not find online (anywhere) complained, the development season for new series is coming up one big fat bust.

In the January 8, 2016 paper edition of the magazine, an article by Lynette Rice titled “Is Network Television Stuck in a Talent Drought?” had these revealing (if unattributed) quotes:

“All the broadcast nets struggle with being the low man on the totem pole,” laments an exec at one of the Big Four. “Scripts go to Showtime, then to AMC, then they show up at the networks. We’re left with what’s left over.” Adds a high-powered TV agent: “It’s thin out there. It’s hard to motivate someone to write an NCIS.” [Entertainment Weekly, January 8, 2016, P. 22]

With TV, the change in attitude has happened over about ten years now. When show runners get paid as well or better and retain creative control, they’re willing to sacrifice eyeballs. (Sorry, had to write that sentence.) Because, here’s the other thing: Nothing goes away any more.

These shows—even with their initially small audiences—become part of the national (or international) conversation. They are what used to be called “water cooler shows.” People will discuss them, although everyone has now learned to give spoiler alerts, a habit once reserved to major geeks.

So if, after the umpteenth discussion of The Walking Dead, I finally decide to see what all the fuss is about, I don’t have to start with this week’s or this month’s or this year’s episodes. I can start at the very beginning at the moment I decide to watch it. I don’t even have to wait for a DVD to arrive in my mailbox.

I don’t think anyone in the executive suites at the major TV networks ever expected this. The goal was always eyeballs. Eyeballs equaled advertising revenue. Advertising revenue was the way that everyone got paid.

Now, streaming services get paid monthly, whether the consumer watches anything or not. Some consumers pay per episode, which is yet another revenue stream. And older content often gets consumed as often as new content.

Hulu has a new ad that I can’t find on their website (and frankly, I’m running behind as I write this, so I’m not searching as much as usual) that shows how many hours of content you can watch on their site. Their “About Hulu” claims that so far, consumers have streamed over 700 million hours of content since its launch in 2008.

That’s just one streaming service and, let me remind you, it was late jumping on the original content bandwagon. So this is mostly content developed elsewhere—the older stuff.

Show runners and content developers in a TV format now realize that they might not get the eyeballs up front, but they’ll get eyeballs someday (yes, I’m having fun with this). And since show runners are making money and having creative freedom, they’re willing to wait to develop their audience.

That attitude makes the networks – in the words of one of their executives—“the low man on the totem pole.” Who’da thunk it as recently as ten years ago?

Which brings us to the latest Author Earnings report. Now, Data Guy and Hugh Howey have two years of information on sales at Amazon.com (in the U.S.). Statistics become more reliable when there’s more data, and two years’ worth is a good start. (We’re not 8 years in like streaming TV services are or 13 years in like the digital music download industry (I’m dating it from the advent of iTunes, if you’re wondering), so we don’t have a lot of data yet because not much is available.)

In addition to the two years of data, Data Guy and Hugh have continued to tweak their algorithms so their statistics are much improved. I really like what they’re doing now. Some of their earlier stuff had weaknesses which I mentioned on this blog, as well as to Data Guy. He’s constantly striven to improve the methodology—and (geek-out coolness!), he went back and retooled the old data using the new methodology.

Everything is much smoother than it was before.

This time, Data Guy and Hugh also looked at print book sales and audio book sales—and figured out what I’ve been saying all along. Those things sell even in (especially in) the modern market. But that’s another post.

This post is about eyeballs and money.

Because…Data Guy and Hugh have shown definitively that the book sales for traditional publishers are on a steep decline. Book sales for small and medium publishers as well as indie writers are climbing quickly.

Some of what Data Guy and Hugh have discovered this go-around is not a surprise. The fact that ebook sales have declined for traditional publishers once they returned the ebook prices to astronomical levels isn’t a surprise.

The surprise in the data is something else: the high ebook prices have sent buyers back to print books, just like the traditional publishers planned. They wanted to shore up the brick-and-mortar stores by making sure consumers bought print books.

However, according to this report, consumers simply made a second click on their screen and ordered the print book from Amazon.

I’d been talking about this for a while now. I had noticed that hardcovers on Amazon were often deeply discounted, so that a consumer could get the latest release by their favorite traditionally published author for several dollars cheaper than the ebook edition. This is not an accident. You know that Amazon has been doing this on purpose to make sure their consumers get the best possible price. (And possibly to screw with traditional publishers, particularly on ebooks.)

But the upshot of all that is — well, let me excerpt the report, because Hugh and Data Guy say it so clearly:

According to both our data and Amazon’s own public statements, despite the Big Five’s return to agency ebook pricing, Amazon’s overall US ebook sales have continued to grow throughout 2015 in both unit terms and dollar terms. On the other hand, the Big Five’s share of those ebook sales has plunged precipitously in both dollars terms, and even more precipitously in unit terms.

That particular outcome was easily predicted — and probably inevitable. Perhaps the Big Five viewed it as a strategic sacrifice.

But at the same time, Amazon’s online print sales — driven by steeply discounted hardcovers and paperbacks, which in many cases were priced even lower than the ebook editions — ALSO went up. Significantly. In fact, our data points toward Amazon seeing even greater growth in their 2015 print sales than in their 2015 ebook sales.

As of mid-January 2016, Amazon.com’s print sales were running at a rate of 969,000 print books a day.

With the largest bookstore chains reporting 2015 book sales as flat or down, and book sales also down significantly for warehouse and club outlets, an uptick in local independent bookstore sales is a small brick-and-mortar bright spot. But it’s extremely likely that most if not all of print’s reported 2015 “resurgence” took the form of increased online print sales… at Amazon.com.

We suspect that the Big Five’s high ebook agency pricing, and Amazon’s steeper online discounting of print books, may well have had the opposite of the intended effect. It may have encouraged traditional hardcover and paperback buyers — including those who had zero interest in buying digital editions — to take advantage of those steeper discounts and purchase more of their books online, while buying fewer in brick-and-mortar bookstores….

…it means that more print-book buyers are now shopping at a storefront where indie print books share a significant portion of shelf space alongside books from traditional publishers, and where indie print books are now fast-approaching a double-digit percentage of print sales.

It’ll be interesting to see in coming quarters if indie print sales continue to gain ground as more and more consumers are funneled into a marketplace that provides more equitable access to all authors.

As far as consumers are concerned, books are books are books. They can get great paper books or great ebooks, and consumers really don’t care who published them. Just like consumers don’t care who produced the TV show they’re watching. If the show is good, the consumer will enjoy it and recommend it. If the book is good, the consumer will enjoy it and recommend it. Word of mouth will build. Readers will come to the book over time.

I’ll be honest with you: this is the concept I have had the hardest time wrapping my brain around. Like those TV executives mentioned above, I was raised in a world of eyeballs. (Okay, still fun.) I was willing—as a writer—to sacrifice the bulk of the money made on my books to get my books into national distribution, so that my books could reach the widest audience possible.

Of course, in those days, that was my only option as a published writer, unless I wanted to be one of those sad sacks who begged bookstores to take a few copies of my self-published books out of a box in the trunk of my car. I didn’t want to be that person. I wanted people to read my book.

Which meant that I had to put up with low pay, and a lot of shitty treatment. I lost some creative control as well, which was irritating, although I lost less creative control than my fellow writers because I’m just ornery, and I’ll walk away from anyone who tries too hard to stick a finger in what I do. (This is why, despite invitation after invitation, I never wrote for TV series in Hollywood.)

I figured out quickly that I could make a lot more money indie publishing my work. A lot more money. In 2010, I published The Freelancer’s Survival Guide, compiled from a bunch of my blog posts. Readers had told me they were going to buy it. A lot of people asked me to have it ready for Christmas that year, which we somehow managed to do. (It was a daunting task.)

I gave a free copy of ebook to everyone who had donated to the blog. And then the book sold a whopping…100 copies in its first month.

I just about fell off my chair. That was a lot lower than I expected. Dean didn’t try to talk me down. Instead, he looked at the same thing I did. I wrote the book, I received money to write it weekly from people reading the blog, and with that money, I made 5 times what I would have made as an advance on a similar (if shorter) book from a traditional publishing house.

The fact that the book was on sale, we figured, would be just gravy.

Fast forward five years. The Freelancer’s Survival Guide is in its third edition. It’s one of WMG Publishing’s top selling books. It has sold more copies than it would have sold through a traditional publisher—we think.

Here’s how we calculate that. The book would have gone out as a midlist nonfiction title. It would have sold maybe 20,000 copies in its only year of existence. Then it would have been taken out of print unless some college professor picked it up for a business class or the book got struck by publishing lightning. (At the time, we did not think it would have had an ebook edition. Dunno about that now.)

The book has left 20,000 copies in the dust long ago, even though it’s still free on the website. It’s still selling.

And I’m making more money on that book than I ever would have through the royalty system in traditional publishing.

It’s astonishing, and hard to think about, from that eyeballs’ point of view. I made, selling 100 copies and writing online, more money than I would have from my traditional publishing advance. (We almost went that way. My then-agent had the book, and talked to some editors. They were willing to publish the book small—and I decided to try it on my own instead.)

I wasn’t happy with fewer eyeballs and more money, even though I always say that my goal as a writer is to make a living at it. But my training as a long-time writer was that eyeballs equaled dollars—and quickly.

That’s not true any more. As Hugh and Data Guy have repeatedly shown, writers publishing indie make significantly more money per title (and in general) than writers who go traditional. Not too long ago, traditional publishing’s argument was that they brought the books to more eyeballs.

They don’t. Now the playing field is level. If indie writers publish trade paper books, audio books and ebooks on all platforms, then the writers will make more money on (good well-written well-produced) books than they would if they went to traditional publishing.

Period.

Those of us who have been in this side of the field have known it for a long time. We finally have more than our personal numbers. We have two years of data.

Now, let’s cycle back to TV.

For a long time, show runners wanted eyeballs more than money. Then the tide shifted because that creative control meant better television, appearing on a variety of non-network channels. Those shows got rewarded with awards, which started word of mouth, which got other cash streams moving (DVD purchases, streaming, merchandising).

It took time, but eventually, the creators of television shows realized that they were better off with fewer eyeballs (at the beginning), more money, and creative control. Now, it’s really hard for network executives to find someone willing to lose money and control just for the “honor” of working with the long-established TV networks.

That’s what will happen with traditional publishing. It’s already happening. Blog after blog after blog appears at nearly the rate of one per week by writers who started indie and who went to traditional and who are now returning to indie for the control. Even more blogs appear from traditional writers who have become fed up with their treatment from their traditional publishing “partners” and are moving to indie.

Within the next five years, or maybe ten, as the word gets out (writers are slow on the uptake), traditional publishing will find itself in the same position as the Big 4 TV networks. The Big 5 traditional publishers will get the clueless and the one-shot wonders.

Writers who have actually learned business, writers who want money, control, and yes, eyeballs, will go indie (or start their own small press). It’s already happening, and it’s starting to speed up.

The publishing industry is probably where TV was in 2005.

Here’s the future, folks: The traditional publishers aren’t going away. But they are becoming irrelevant to anyone who cares about doing their very best work and getting paid the most for it.

And those eyeballs—well, they will find you. Just not in the first month.

We’re going back to word of mouth, which is always the best way to sell anything.

Yes, I’m pleased with this month’s Author Earnings Report. I think you should go to the site and read all of the insights.

But mostly, I like the glimpse of the future it gave me. Because now I have numbers to go with my gut sense, and my gut had been telling me for a while that we were on the same path as the TV industry.

So cool to have that confirmed.

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Thanks!

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“Business Musings: Money Talks,” copyright © 2016 by Kristine Kathryn Rusch. Image at the top of the blog copyright © 2016 by Canstock Photo/ frenta.