Business Musings: The Big Five (2017 in Review)

Business Musings: The Big Five (2017 in Review)

As I prepare for 2018, I’m reviewing what changed in publishing in 2017. I’m writing all of these blogs during the last week of December, 2017, and will stagger them on my website throughout January of 2018. If you want to read them all right now, go to my Patreon Page. I explain more about what I’m doing, with a bit of an overview, in the previous post.

Please remember, as you go through these posts, that everything I write is geared toward professional, career-oriented writers. (Unless I tell you otherwise.) That’s the perspective I take here.

I mentioned in the previous post that I’m having trouble wrapping my arms around what happened in traditional publishing in 2017. As I got deeper into the research for this post, however, I realized I was only having trouble with the Big Five here in the U.S. Their business model was opaque to me—and I suspect it is to many of their employees as well.

However, once I separated the Big Five out of traditional publishing as their own category, it became easier for me to examine what’s going on in the traditional marketplace.

Before I go any further, I do want to apologize to those of you in countries other than the U.S. When I talk about indie publishing, much of what I discuss applies to indie publishing throughout the world. But traditional publishing is still stuck in rights and territories, artificially making it difficult for English language readers to find the books they want without paying a premium to have those books shipped to a different country.

Even those publishers who have bought world rights to a property still seem to prevent those books from appearing in most markets in English at the same time. You’d think they would change that policy. But no. Of course not. Because that’s logical.

Anyway…

The Big Five

As I said in a number of posts in 2017, the disruption in publishing has moved to a new phase. The worst of it—the most unsettling part—is behind us: that part occurred when we were startled at the disruption, trying to adjust, and not certain what it all means. See the first post in this series for the complete analogy.

In the fall of 2017, the CEO of Penguin Random House, Markus Dohle, gave a rousing, optimistic speech about the future of publishing at Frankfurt Book Fair. Some of what he said was directed at the trade, but some of it was in code, and much of it pointed to the direction that traditional publishing will take in the next five years.

Dohle’s speech discusses the new phase, in some depth, in fact. He said,

…we have relatively stable business models for selling and delivering print and e-books to readers. Amazon’s Kindle will be celebrating its tenth birthday next month. The Kindle launch in November 2007 marked a breakthrough for digital books in the mass market. The business model for e-books was “in flux” for some years, to put it mildly, especially in the large Anglo-American markets. After some disruption and a lengthy lawsuit in the U.S., we have had a widespread business model, in terms of media content, for the past two years…

I love it when business people put a positive spin on ugly. “In flux” indeed. And “a lengthy lawsuit,” as if his company had nothing to do with it.

But I agree with him about stability. In the Anglo-American market in particular, the publishing business model has settled down and is now in the process of poking around, trying to find profit centers.

The Big Five publishers have a completely different problem with their profits than other traditional publishers. The Big Five answer to international conglomerates, which means that the Big Five need to generate profits for their corporate overlords. Depending on the setup of the conglomerate, those profits must appear on a quarterly or biannual basis.

And in certain corporate environments, those profits must show an annual upward trend. (A few even demand an upward quarterly trend, which truly stifles innovation.)

So the business setup is different for the Big Five than it is for other, smaller traditional publishers. And when I say smaller traditional publishers, I mean publishers who generate tens of millions of dollars in annual revenue.  These companies aren’t part of an international conglomerate but are either closely held corporations or family businesses.

A smaller traditional publisher has its own corporate culture which usually comes from the owner or board of directors. The owners are knowable, and the focus of the company understandable.

The Big Five, on the other hand, are not in charge of their own fate. They might have a corporate culture that comes from within, but a change in the winds from the international conglomerate could change the entire culture inside the publishing house within a few years.

In his speech, Dohle said this about traditional publishing:

The fundamental challenge posed by the digital transformation is the change from a B2B-oriented, publisher to bookstore publishing industry to one that is B2C-oriented (publisher to reader). In an online-dominated world, we publishers must become more reader-centric and we need to establish a direct connection with the reader.

 

Let’s move this out of corporate speak into real people speak, shall we? What he means is that traditional publishing’s focus used to be all about selling its product to other businesses—generally to bookstores or large distribution companies. All of traditional publishing’s marketing was geared toward getting those businesses to carry that publishing house’s books. It was up to the bookstore to sell the books to consumers.

Now, Dohle says, traditional publishers must communicate directly with the reader. They’re stymied about how to do that, since most of these companies haven’t done anything like it in corporate memory.

But a Business-to-Consumer (B2C) model doesn’t work in the kind of corporate environment that the Big Five are in. B2C models generally require slow build, with lots of focus on the consumer experience. B2C models often sustain heavy losses, sometimes for years, as the company builds its reputation (which cannot change on a whim) and then eventually makes small profits which (one hopes) turns into large profits.

I don’t see how these Big Five publishers can make the shift to B2C. In fact, I don’t think they can, not with their overall business structure.

I think Dohle knows that. I think he was being disingenuous in his comments. I think he’s telling the employees at Penguin Random House that they need to figure out how to change to a B2C model, so that they can increase sales, while he and others in the company are working on a completely different way of increasing profits.

He alludes to that different way in this part of his speech:

Furthermore, every good film and every good television series is based on a good story, and in most cases, those stories begin with a great book. Hollywood’s thirst for stories, from established studios as well as new players in the business—among them Netflix, Amazon and Apple, Hulu, Facebook and Google—has never been greater than it is today. And each iteration of a story as a film or a TV series increases sales of the original story, namely, in the form of the book.

Just before that quote, he had talked about the growth in audio books and how audio books harken back to having stories read to us as children or listening to tale told over the camp fire.

What he does not mention is that these sub-rights are on his mind, and in his negotiating strategies.

In December, Alice Luytens, a literary agent and the audio rights manager at Curtis Brown, wrote in The Bookseller that the publishing deals for audio rights have changed in the past three years.  She has seen what she calls “a significant drop in separate/independent audio rights deals.”

She writes,

This is not because the market is shrinking or offering fewer options. Far from it. It is because book publishers now believe that audio rights are “part of the package.” I do not altogether agree. Audio rights and e-book rights are not the same. … They utilize different skills and are created for an audience not limited to the reading public. So why are we in a position where we are pressured to lump together two distinct sets of rights into one package?

She asks an excellent question at the end of that quote, and means the question almost rhetorically. While her entire article points out a problem for writers (and, in theory, agents), it also shows a lack of understanding as to why these deals are changing, and changing rapidly.

The money in super-large traditional book publishing no longer comes from straight book sales. If you look at the sales figures for the big bestsellers, they’re abysmal compared with just ten years ago.

To prep for these posts, I went through months of Publisher’s Weekly, which showed the BookScan numbers, and found that books by writers like John Grisham and Stephen King were selling monthly what they used to sell on a weekly basis.

Now, these sales numbers did not include ebooks, as Publisher’s Weekly happily pointed out, but those tradionally published ebook sales numbers have gone down dramatically as prices have gone up. Traditional publishing has bitched about declining ebook sales all year.

The reason is obvious to anyone with an eyeball. The prices for the ebook version of a traditionally published book are ridiculous.

For example, the Kindle edition of John Grisham’s The Rooster Bar sells for $14.99, two months after the book first appeared.

In fairness, the book is (as I write this) #7 on Amazon Charts in Most Read, and #4 in Most Sold. So the book is still selling well. I suspect a lot of the paper sales have moved to ebook, particularly since it’s become harder and harder to find paper books in the wild these days.

But that paper-to-ebook shift means that Grisham and the other big name writers are making significantly less money. They don’t generally receive a percentage of cover price on ebooks; they receive part of the net profits (unless they had a really savvy agent/lawyer way aback when). Those profits fluctuate.

And the profits fluctuate for the traditional publishers too. Because it’s become harder and harder to funnel readers into a handful of books. There has been a leveling in publishing. The mountain peaks of the bestsellers have become hills as people find other books to their tastes.

(The same thing happened with television shows as the choices expanded, and with music, which is why the Billboard charts bifurcated into a million different charts years ago.)

Dohle has been complaining for years that discoverability is getting harder, and he’s right. For traditional publishing, which had a stranglehold on what was published, the open floodgates of indie publishing have been a complete nightmare.

Add to that the easy access to the backlist of any writer, not just the big names, and traditional publishing finds itself unable to force bestsellers at huge, huge, huge numbers any more.

Those huge bestsellers happen—witness what’s going on with John Green and Jeff Kinney—but, for the most part, not weekly, not any more.

But the Big Five publishers have to be making their money somewhere. Right now, they’re making it by cutting back on expenses and employees, and on how much they publish.

Penguin Random House is clearing out almost all of its genre fiction, destroying successful book lines like its cozy mystery line. That line works best in mass market, and the retail space for mass market has declined precipitously in the past two years, so the cut makes some kind of crazy sense, kinda sorta, if it had been paired with cuts in almost every single genre.

I’ve been witnessing this for the past eight years from Penguin Random, getting rid of authors whose growth wasn’t big enough (even though their sales were growing) and in 2016-2017, failing to renew the contracts of New York Times bestselling genre authors because their sales weren’t at blockbuster levels.

You can cut your way to short-term profitability, but you can’t cut your way into a sustainable business. Cutting like this will grow quarterly profits, particularly in tough years, but at some point, the company has to make real revenue or the international conglomerate will cut the company loose.

So it’s no coincidence that in big traditional publishing, there have been large and somewhat frightening (for writers) contract changes.

The Big Five are asking for the equivalent of all-rights contracts from their writers. The Big Five demand world rights, all the subsidiary rights, and add non-competes. The contracts are awful, and getting worse.

You see complaints from agents about this, which is pretty amazing, considering how many agents are working hand-in-glove with big publishers. Agent Andrew Wylie showed just how out of touch New York is when it comes to reader-centric publishing when he bitched at Frankfurt about HarperCollins’ Global Publishing Program as the company that “has pursued [all-territory publishing] the most vigorously.” He said,

I do think the HarperCollins model is more bewildering than anything else. And the authors it has chosen are so ridiculous… No one else would want to publish them [globally]. Most of them are romance authors, right? But ultimately, what it does is take authors off the table in a lot of territories. God bless competition.

Stinky romance authors don’t sell apparently, particularly overseas. Of course, we can all forgive a life-long agent like Wylie for not knowing that Harlequin, the main publisher of romance for decades, has had a global reach for generations.

In fact, when HarperCollins bought Harlequin in 2014, 40% of Harlequin’s revenue came from international sales in translation, whereas 99% percent of HarperCollins revenue came from sales in English only.

Of course, a long-term agent wouldn’t know that, or even understand that HarperCollins snatched up Harlequin at bargain basement prices to acquire the global reach that Harlequin had nurtured. (And yes, I’m being sarcastic. Those of you who believe in agents as the be-all know-all of publishing should really stop.)

Let’s step out of the writer perspective for a moment, and look at that global reach from an international conglomerate’s perspective.

Gigantic conglomerates like the ones that own the Big Five are all about profit, in particular earnings and dividends for the stockholders. The subsidiaries of these conglomerates, corporations in and of themselves, have their own valuation, which must be computed on a regular basis.

Those corporations add to the value of the conglomerate or subtract from the value of the conglomerate.

It makes complete sense for those corporations to do whatever they can to increase their value; think of it as survival of the fittest.

That determination to survive will have an impact on anyone who does business with that corporation. For the most part, the corporation is not in the business of helping or partnering with anyone else. It needs to increase its own value, and partnering does not increase value in any meaningful way.

Instead, the corporation becomes a voracious consumer in its own right. It wants as many things as possible that will increase its value to the conglomerate and the stockholders.

One thing that will greatly increase that value is intellectual property on the balance sheets. This is a relatively new thing for publishing companies. The film industry has known about the value owning intellectual property outright for more than twenty years.

The music industry is ahead of both industries; the music industry starting owning intellectual property outright a hundred years ago, and became more rapacious about it in the 1950s. They have refined their acquisition of intellectual property into such an amazing weapon that unsuspecting artists can lose the rights to their own name and likeness if they are not careful.

Publishing was a “gentleman’s business” for much too long, and never concerned itself with this kind of behavior, not until the mergers of the 1980s. Things got ugly slowly, and now, as the rest of the world is figuring out that IP valuation is about more than just exploiting the rights in a property, but is an item on the balance sheet all by itself, publishing companies find themselves behind the curve. (I wrote a very testy blog on this topic in 2017. Check it out here.)

You’d think that the Big Five would be sitting on a mountain of intellectual property, and you’d be wrong. Because contracts were—well, not fair, but fair enough—until fifteen years ago, the Big Five don’t own as much intellectual property as they should, given how greedy the industry has become.

The movement inside publishing to own IP started years ago with some companies, while others have been slower. As I researched this article and was looking for confirmation of my memory of Harlequin’s purchase, I found this quote from HarperCollins CEO Brian Murray in Publisher’s Weekly back in 2014 (also at Frankfurt Book Fair):

In this day and age, [new] companies come up seemingly overnight with billion dollar valuations, and next thing you know they’re trying to get into the publishing business. So you have to be at the forefront. You have to try things. And we’re going to continue to do that.

I want to break that quote down for you just a little. He knows that the billion-dollar valuations of the companies he’s discussing come from various forms of intellectual property, be they tech patents or systems for doing things online. Then I want you to note the next part of that sentence.

These non-publishing companies he’s talking about are “trying to get into the publishing business.” Why? Because they have ready access to IP.

The impetus for the blog of mine that I mentioned came when a fairly new production company, known for its purchase of IP to rapidly increase its value, tried to buy the entire copyright to one of my properties for less than $100,000. I wouldn’t have sold that copyright for any price. But less than $100,000 isn’t even close to what the property will earn in its lifetime. And if properly exploited by the production company, the property would have been worth even more.

I doubt they would have done anything with it, however, because that’s not their M.O. They would have sat on it, and it still would have increased their valuation.

It’s hard to wrap your mind around the way these large conglomerates look at IP, so let me give you two examples that will help you think about it.

The first is Marvel. They went from bankruptcy twenty years ago to a major power player now. They do so by exploiting all of their properties across as many entertainment venues as possible.

My husband, a comic fan since he was a kid, heard that Marvel was making a movie called Guardians of the Galaxy and refused to see it. The property first appeared in 1969 in Marvel Super-Heroes, and if you talked to any long-time comic fan, they would give you chapter and verse about how awful Guardians was and how it didn’t deserve a movie. I had to drag him to the theater (not quite kicking and screaming) to make him see the film, which was a huge hit, and has led to all kinds of other sales from toys to games to more comics.

Guardians was a lesser Marvel property, because Marvel had exploited all of the larger ones. They’re still taking the lesser properties—characters, superheroes, worlds—and making them into things other than comics—quite successfully too. Marvel is exploiting as many different levels of storytelling, entertainment, and spinoffs as it can.

Disney is doing the same with Star Wars. Disney could have sat on the LucasFilm purchase and the value of the IP would have risen anyway, but Disney is aggressively growing that IP’s value. This is a top-down property—the movies came first, then the books and the comics and the toys and the clothes and the…and the…

But Marvel and Disney are just two models of the way that entertainment companies are looking at their properties. The best and quickest way for a company to get IP is to buy a whole bunch of intellectual property all at once.

Publishing houses, with modern contracts, provide that opportunity. Simon & Schuster was one of the first to figure out that it needed to control as much of the copyright as possible. It tried to get video rights to books from the 1980s forward, back when it was owned by Gulf + Western. That didn’t work, but over the years, more and more film and TV properties became part of the S&S umbrella.

After lots of corporate mergers and buyouts, Simon & Schuster is now part of the CBS Corporation. CBS Corporation is the world’s fourth largest entertainment company in terms of revenue, behind Comcast, Disney, and Time Warner.

I can tell you, from personal experience, that getting a copyright license reverted from S&S is damn near impossible. S&S is not exploiting my copyright in any way; in fact, the only original novel I have with them is poorly produced (in a POD version) and overpriced (in its ebook edition). My novel is not on their books to make sales. It’s there to add to their IP valuation.

Clinging to rights, buying the copyright outright or tying up the copyright (and the writer), is the way of the future for the Big Five. It’s the only way they’ll maintain their value for their corporate overlords.

At some point, someone at the Big Five will grow a brain and will send minions back into the paper contracts to see what properties the company still has licensed, and how many of those properties could be exploited in other ways (TV, comics, games, subsidiary rights, ebooks).

If I were running the company, in fact, I would be keeping in mind that most writers and their agents are stupid when it comes to business (see Wylie, above) and probably wouldn’t even realize if my company exploited rights it didn’t have. If I did exploit them incorrectly, well, let the writers sue. Most wouldn’t. Most would cave.

Fortunately for all the Big Five writers (past and present), I don’t run those companies.

The Big Five publishers have bumpy years ahead. They’ve cut too far, and haven’t moved forward enough to figure out how to exploit the rights they do own.

But they’re figuring it out. It’s not a coincidence that the first rights fair on American soil in decades will occur at the same time as Book Expo in New York at the end of May. Publishers are all talking about licensing as much copyright as possible and then turning around and licensing those rights to other companies for a tidy profit.

Or, in the case of HarperCollins, exploiting the rights on their own. Because here’s how HarperCollins describes Brian Murray on their website:

Since being appointed CEO in 2008, Murray has led the transformation of HarperCollins from a traditional print publishing company focused only on English language publishing, to a dynamic print and digital publisher with broad expertise in foreign language publishing and more than $350M in digital revenues. Murray has led six acquisitions including Thomas Nelson and Harlequin. The acquisition of Harlequin in 2014 extended the company’s global platform and digital presence, resulting in the ability to publish in more than 30 languages and publishing operations in a dozen new countries.

I think he’s one of the most farsighted CEOs of the Big Five. I’m not sure about the CEO of S&S, simply because they’re part of CBS, which knows a thing or two about exploiting IP.

But Murray’s been extremely successful. And others should probably follow in his footsteps, if they want to keep their little corporations alive inside the big conglomerates.

So…if you’ve come with me this far, you’re wondering why I’m telling you all of this.

I’m telling you this because many writers still want to be traditionally published. The beginners who think that they “need” traditional publishing and won’t consider indie are lost. Maybe they’ll learn that’s wrong, like the musicians do after their first big success which makes them almost zero dollars.

But this post is for the hybrid writers, the ones who want to be part indie and part traditional.

What will you get if you go with the Big Five? Not money. Your book might become a Netflix series. You might become a household word. And you’ll probably still need your day job.

These companies are designed to pay the writer as little as possible.

I was going to say something about the much-discussed “quality” aspect of traditional publishing, but I’m almost out of room for the very first part of this traditional publishing post. I have to move the smaller traditionals to the next post as it is, and I don’t want to taint them with the brush I would use to discuss quality.

So let me leave you instead with this Twitter thread by Courtney Milan. The only reason I’m using this thread and not a million others (and I swear, there have been threads like this every week) is because it crossed my eyeballs during the week I’m writing this post.

Her initial link is to a Romance Writers of America blog post that shows how Simon & Schuster, as recently as 2015, handled books by writers of color. Essentially, if the book came from a writer of color, it went to a speciality line for only books about people of color like (African-American books or Latina books) even if the book did not fit the line. As in, no romance or mystery in those lines, just literary fiction. Yet romance books went the editors of the specialty line as a matter of course if the writer or POV characters were people of color. Yep, no racism here. (And yes, that’s sarcasm again.)

If you think the problem is solved, go back up and read Wylie’s quote about romance fiction. Romance fiction and women’s fiction is thought of, by traditional publishers, as something soiled. Wylie is a prime example of that.

The “quality” that writers are aspiring to is of a certain WASPy inbred New York type. That “quality” is finally facing change since Frankfurt, as more of the editors of that type are resigning due to sexual misconduct (Paris Review, anyone?) Not to mention all of the women who are now coming forward about publishing itself.

I had experiences with both the sexual harassment sides of publishing—too many to fit into a single blog post or a #MeToo Tweet (maybe a book)—and in the racism sides of publishing, which are also exceptionally numerous and eye-crossingly blatant (and disgusting).

Racist and sexist attitudes like those trickle down into the books bought or not bought, the much-praised “quality” of the various lines. So quality, I’m afraid is not now, and never really was, a reason to go to traditional publishing houses, especially the Big Five.

So…given what’s happening in Big Five publishing, should writers submit their books to the Big Five?

No. The contracts are bad. For all intents and purposes, you’ll lose the copyright to your book (at least for 35 years), and you won’t be able to control its earning potential. If the book is a huge success, you’ll earn pennies while your traditional publisher and/or the international conglomerate rakes in millions.

If you sign the wrong contract, you will lose the right to publish similar books and, in some cases, you will no longer control the world you created or the name you published under.

So, in my opinion, given the direction the Big Five are going in, writers should avoid them at all costs.

The savvy readers here are noticing that I’m saying the Big Five, and not all of traditional publishing.

And there’s a reason for that. Because once I took the Big Five out of the traditional publishing equation, I found some fascinating things for writers, publishing, and readers in 2017, that will have a greater impact in 2018 and beyond.

I’ll save all of that for the next post.

***

If you’ve stuck with me through the last two posts, you’ll see that I’m moving slowly through my 2017 analysis. That’s because I’m actually doing some digging that I’m finding fascinating. It’s crystallizing where the publishing industry is as we step into the last two years of the decade.

I still have a few more posts to go. I’ll be posting them on my Patreon page as I finish them. (And never fear, Patreon supporters. I’ll be doing other posts in January as well.)

As for those of you who read weekly on the blog, you’ll see these posts throughout January.

Thank you for your support of the blog. I appreciate the shares, comments, thoughts, and the donations, which keep the blog alive.

If you want to contribute and don’t want to go to Patreon, use the PayPal link below.

And thank you!

Click paypal.me/kristinekathrynrusch to go to PayPal.

“Business Musings: The Big Five 2017,” copyright © 2018 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / alexskopje.




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28 responses to “Business Musings: The Big Five (2017 in Review)”

  1. Hey Kris,
    I’m right with you. For years, I’ve been telling indie authors, hybrid is the way to go. You need at least one sale to the big-five, recently I’ve changed that stance. Indies should remain indies, and traditional published authors should SERIOUSLY consider never signing another big-five contract.

    For those that don’t know I self-published my first 5 novels of the Riyria Revelations. I then sold those rights to Orbit and that started what was pretty much a 100% traditional career. I released 8 books from 2011 – 2017 and they were all with either Orbit or Del Rey.

    Going forward all my books will be self. Why?The biggest reason is audio (which the big-five are now requiring). My last contract I was able to keep audio – a decision which made me more of an advance on the audio than the print/ebook deal – and that was a deal for more than 1/2 a million! In fact, the only seven-figure advance I’ve ever received was for audio (for a trilogy). For me, maximizing audio has become my #1 priority, and that has forced me to go to indie for ebook – great profit margins, and yet I still have my books on bookstores shelves (thanks to distribution partner agreements).

    It’s interesting, that everyone in the industry is quick to point out how traditional publishing is a dinosaur – how they don’t adapt, are too slow to embrace new models. But can’t the same be said about traditionally published authors that just keep signing each contract that is put in front of them even though their income is going down because of (a) more print sales sold at dee-discount royalty rates and (b) when the publisher owns the audio right, the author is getting a % of a % of % rather than a % of the whole?

    Personally, I’m predicting the next rights grab will be a requirement on translation rights which is why your quote from Brian Murray is so striking.

    I think I hit the timing just about right. When I got my first traditional contracts, they “weren’t great” but the exposure made up for the difference. Now, when you look at the money indies are making (while still controlling their IP), and the real costs (in lost revenue) when signing with traditional, I can see no reason why anyone would sign another big-five contract. As I said, I won’t be.

    • Good to hear, Michael. It’s better to control your own IP. I stopped going to traditional when they tried to lock up everything, including the rights to my name and image. Not to mention the stupid non-competes. Or their determination to hang onto everything for the life of the copyright.

  2. […] What does the future look like for the Big Five? […]

  3. Wow! Tellin’ it like it is! Thank you, Kristine Kathryn Rusch, for your terrific insight, your thorough detail (and links), and your honesty. One of the biggest points you make, to me, is that the Biggies have lost sight of the most important aspect of publishing — the people who write the stories and the people who read them. Everything is about the bottom line, and not connecting the writer and the reader. If publishers would focus more on getting the two together, they’d score. Now all they talk about is acquisition and screwing each other, and the people who are the very blood in their veins are cut out. It is a recipe for failure. No wonder the Big Britches are in trouble……

  4. Steve Fischer says:

    Perhaps something got ground up during editing but this is not correct: ‘I think he’s [Brian Murray] one of the most farsighted CEOs of the Big Five. I’m not sure about the CEO of S&S, simply because they’re part of CBS, which is part of Rupert Murdoch’s News Corp.”
    An otherwise really good and very illuminating article.

  5. […] Related: I’ve also been enjoying Kristine Rusch’s overview of what happened across publishing in 2017. (Here’s the installment on Big Five traditional publishing.) […]

  6. Kris: This comment made me think: “The fundamental challenge posed by the digital transformation is the change from a B2B-oriented, publisher to bookstore publishing industry to one that is B2C-oriented (publisher to reader).”

    Actually, indie authors are in the B2B business, or we wouldn’t care so much about Amazon’s algorithm. Yes, we add a B2C component to the marketing as we focus on connecting with readers. But still, we play by the various distributor’s rules.

    We’ll only be truly B2C when we start selling directly from our websites.
    It made me realize, though, that B2C means many things including better customer service, willing to ship paper books, and so on. I clearly lays out the choices when you think of it this way: Do I want to be B2B and play by Amazon’s rules, or do I want to be B2C? Or is there a happy combination of the two somewhere?

    Darcy

  7. Thad McIlroy says:

    What a great post! Thank you.
    The one observation I’d challenge is “All of traditional publishing’s marketing was geared toward getting those businesses to carry that publishing house’s books. It was up to the bookstore to sell the books to consumers.” When I worked in book retail earlier in my career, yes, there was a lot of marketing directed specifically at retailers, but that was a fraction of the marketing dollars spent on advertising, author tours and the endless pursuit for front page book reviews in the New York Times and elsewhere. The model for the publisher was (i) decide which books to emphasize that season (spring or fall), thereby signalling to booksellers which ones they should stack on the front table and which ones could sit in small piles at the back of the store, and then (ii) spend like crazy to try to drive readers into stores to buy the ordained titles. In that sense the publisher was communicating directly with readers, even if via emissaries. Actual verbal recommendations by booksellers directly to readers has never been more than a fraction of book sales.

    • That wasn’t for readers, Thad. That was to get velocity up so the book could hit the bestseller list. It’s called partner marketing. In theory it helps the bookstore by getting people in the door, and it helps the publisher by creating a bestseller. Those titles had paid placement up front, by the way.

      Marketing to the reader takes time, and a slow build. All of the things you mentioned are not slow-build, but designed to create a “frenzy.” Think of first weekend box office for movies. Same thing.

  8. Nina says:

    One correction: Unless I’m mistaken one of the big 5 publishers you refer to, the smallest of the bunch, is privately owned and not beholden to a board of directors. They shouldn’t be lumped in with the other 4 as I’m sure that affects how they do business.

  9. amyshojai says:

    Excellent as always. Sharing the link with a number of authors just now debating whether to stay or go. Oh, and soon as I hit “post” will visit your donate button. s

  10. Isabo Kelly says:

    Excellent post, Kris! Thanks so much for this series.

  11. Cynthia Lee says:

    Excellent post, as always!

    On a side note, I am always appalled by Andrew Wylie’s remarks. They seem so . . . stupid. And isn’t he supposedly a legend in the publishing world? I just read this NYT article about him from 1996. I thought it was really interesting. Wylie seems pretty nuts, quite frankly.

    http://www.nytimes.com/1996/08/11/magazine/the-literary-agent-as-zelig.html

    The article also mentions, in passing, that Scott Meredith was once Norman Mailer’s literary agent. Scott Meredith was the literary agent that a young Lawrence Block worked for in the 50s or 60s ( I forget the decade). According to Lawrence Block, Scott Meredith was a stone-cold rip-off artist who made lots of money deceiving baby writers.

    As the years wear on, I am grateful that I successfully dodged the traditional publishing bullet.

  12. tony says:

    Donate button just drops you at Paypal’s home page, not the link to your address.

  13. This was an absolutely top-notch article. Thank you for all the research and sources. I always enjoy your clear writing in these posts, but this one especially kept me fascinated, even though I already knew I would never consider publishing with the Big 5.

    Now the concept of a rights grab really clicks – under this model, even the authors whose books actually got made into movies and shows likely wouldn’t see any financial return.

  14. Yonatan says:

    Kris,

    This was a riveting, and somewhat horrifying, post. I have to wonder, though, is it impossible for a new writer to make real money with the Big Five? What happens to writers of mega-bestsellers, like Gone Girl or The Girl on The Train? What sort of money are they seeing from their books? Do they get bigger advances of following books? What sort of leverage do they have, if any?

    • Every contract is different, Yonatan. I know of a major NYT bestseller who makes $20K per book, and her publisher then pays her a “salary” (unchanged through a decade) while the rest of her money goes into an escrow account to be released incrementally. (Not kidding.) She has hardly any money. I know of another who gets one million per book up front in a lump sum, because he’s a good negotiator. (I have no idea what his sub rights look like.) I do not know what his 2019 contracts will look like, because like most Big 5 megabestsellers, he hasn’t renegotiated in 10 years. He’s up for renewal soon, and they won’t be able to pay him as much, given what’s going on. It’ll be interesting.

      Generally, a breakout bestseller, like a Gone Girl, will initially make low six figures on the advance ($100K-$250K paid over 3-6 years on one book), and then royalties, but those are being manipulated to be the lowest possible, so I have no idea what kind of money the writer will make now. But this ain’t the way to become rich (any more.)

    • Oh, I forgot to ask your question on leverage. Not much. See Michael J. Sullivan’s comment on the previous post. All you can do is walk, and often they don’t mind if you walk, because they’re not interested in you or your books, but in the IP, and any writer can provide IP.

  15. Wim says:

    Hi Kris,

    You wrote:
    “In December, Alice Luytens, a literary agent and the audio rights manager at Curtis Brown, wrote in The Bookseller that the publishing deals for audio rights have changed in the past three years. She has seen what she calls “a significant drop in separate/independent audio rights deals.””

    This reminds me of the 360 contracts the music industry started using again a while ago, in response to the changing landscape:
    https://en.wikipedia.org/wiki/360_deal
    You touch upon the music industry in this blog post, so you probably know this. The point I think is worth stating explicitly for the other readers is this: those music industry contracts have the artist pay upfront for everything he’s “getting” re. production, marketing, etc. These costs are recouped from the sales later on, which means an artist is unlikely to earn much (if anything) if the label doesn’t want him to (they can keep on “promoting” and increase the debt that way).
    I’m guessing the new book contracts that have audio as a package deal work the same way. Which would mean the author gets shafted once again.

    • Yeah, I thought about mentioning the 360 deals, Wim, but decided it was too complicated. But those were on my mind as I wrote this. And you understand exactly how it is now working on all if this in traditional Big 5 publishing as well. Sigh

      • Wim says:

        Understood and agreed.
        To my mind, the music industry is where the publishing industry (big five) will perhaps be in a few years time: owning artists, body and soul. They had their disruption with MP3s and Napster a long time ago and have adapted (for better and worse).
        Not to end on a bitter note: one of my publishers (Paladin Press) just closed down and all rights reverted to me five days ago. One book and eight instructional videos. Guess who’s self-publishing all that now? 🙂
        They priced the book at 35$ for both the paper and ebook version. It quite predictably didn’t sell well. I’m looking forward to breathing new life into it now that I control pricing.

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