Business Musings: The Trainwreck

Business Musings: The Trainwreck

I’m sure you’ve all gotten the question lately: How are you going to survive as a writer with the crisis in the publishing industry? Every news outlet —well, at least every news outlet that reports news other than the latest virus statistics—has done at least one story on the decimation of the publishing industry.

And let me be honest here: The traditional publishing industry is in grave danger. Not of the kind of disruption it saw in 2009 with the Kindle and ebook reading, but of actual mergers, closures, consolidations, and complete lack of payment to all of its suppliers.

Brick-and-mortar bookstores are shut down, deemed non-essential. Just like libraries, also non-essential. Unlike libraries, which have pivoted to ebooks in a startling and amazing way, many bookstores have no online capability at all. Some have only minimal online capability. Our local indie bookstore here in Las Vegas is offering curbside pickup of preordered books, as if the store was a restaurant, as well as free shipping on any book they carry.

Their website is not built for this, especially if it’s going to compete with a juggernaut like Amazon…which delayed a lot of books until it realized its original customers were getting pissed at the idea of paper books being non-essential.

There’s a shortage of paper, because it comes from China. The two largest printers of magazines and books in the U.S., Quad/Graphics and LSC Communications were going to merge last summer, but something got in the way. Now, LSC Communications has filed for bankruptcy. The second largest printer, Quad, has shut its book printing facilities entirely.

In some regions, major distributors have shut down or disappeared, while although others, like Ingram, are still operating, although with reduced staff.

Not that it matters, since most bookstores are closed, and not shipping books to their customers. To make matters worse, the books that are being delivered will remain in their boxes, only to be returned for full price credit when this crisis is over. That was a policy established to help bookstores in the Great Depression of the 1930s, and the policy never got changed afterwards.

When bookstores do reopen, they’ll need to send the books back, because they will have the same gap in their cash flow that the rest of us will have—or maybe worse. Many independent bookstores will not survive this crisis, because bookselling has always been a marginal business.

Audiobooks—the brightest light in the traditional publishing firmament—stopped selling when we all sheltered in place. According to Beth Meacham, an editor at Tor who gave an amazing report from the front lines at the beginning of April, commuters account for damn near 100% of audiobook sales, and since no one is driving, no one is listening to audiobooks. The sales didn’t just dry up. They stopped.

As you would expect, though, ebook sales have gone through the roof. Just not for traditional publishers.

Remember way back when the Justice Department went after traditional publishers for price-fixing?  The entire idea behind fixing prices was to protect hardcover book sales. The traditional publishers were trying to establish a high price for ebooks, so people would buy the hardcovers first.

Even though trad pub lost that suit and the publicity wars from it, they kept a version of the pricing. Just today, as I was going through my collected research for this piece, I looked at the ebook prices for backlist ebooks from traditional publishers and only found one book—thirty years old—that had a price below $9.99. Most of the ebook prices ranged from $12.99 to $15.99. And in one case, the ebook I looked at (nonfiction, from a major press) was $23.99. Um…wow.

Ebook sales are up to what some people are called “holiday season levels.” Open Road Media, which works with traditional publishers and does backlist ebooks for established traditional authors, was one of the few bright spots in the traditional publishing news of the past week. Open Road Media’s sales went up 50%.

But it’s too late for most traditional publishers to capitalize on the increased ebook sales. Traditional publishers’ prices are just too high, and they don’t have the manpower right now to change thousands of prices on the handful of platforms where they sell ebooks.

The traditional publishers are running into the same problem with libraries. In the past month, libraries have moved most, if not all, of their book purchasing dollars to ebooks. That makes perfect sense. Since the physical library is closed at the moment, the digital one is not. Everyone with a library card is ordering ebooks from the library at the moment—and often as not, those ebooks are not traditionally published.

Because, yet again, traditional publishers screwed the pooch. Traditional publishers blamed libraries for stealing hardcover sales from them. (I will not go into just how damn stupid this is), and so had policies restricting the number of books that libraries could purchase, and that readers could lease from libraries, and in the case of Macmillan, when the library could get the book. (Months after release.) Almost all of the traditional publishers have tried to change these policies once it became clear that there was no place except the internet to get hardcover books during this quarantine, but traditional publishers had already trained librarians to stay away from the traditional product. So a lot of libraries are buying indie writers now, because we aren’t putting those heavy restrictions on books.

Finally, and this is something I’ll expand on in the next blog post, traditional publishers are pushing as many books as they can to a fall or early winter release. Publisher’s Lunch is maintaining a list of the books that have had their publication dates changed from May/June to much later in the year. More books get added all the time.

But you’ll note that the changes didn’t start until books that were supposed to be released this week—and even then, there were damn few of those. You’d think that traditional publishers would have immediately halted expenditures. If they thought books weren’t going to sell, they should have moved March and April books immediately.

But they couldn’t. The contracts were already at the printer. The books were already printed, bound, and stored in a warehouse, being boxed and ready to ship…to the closed bookstores.

Oh, the returns later this year will be astronomical. I’ll wager that normal huge sellers in hardcover like John Grisham and Stephen King, who have books hitting this month, will have the largest returns of their careers.

I would like to say that traditional publishers are smart enough to know what happened, but they won’t see the actual results of this period for months. And if history is our guide, they’ll blame the authors. That’s what happened to the authors whose books debuted in September, 2001. Those writers had to struggle to maintain careers, and most failed because of a precipitous drop in sales that had nothing to do with them or their books and everything to do with the terror attacks.

What does all of this mean? Well, I will deal with what this means for indie (self) published writers in the next blog post.

But in this post, I’m going to talk directly to the traditionally published writer and the wannabe traditionally published writer.

First, to you wannabes. The traditional publishing industry is falling into two or three years of complete reorganization. It’ll be a mess. The Big Five might not be five any longer. Viacom/CBS Corporation talked about selling Simon & Schuster before the plague hit the fan. Now, a corporation like Viacom/CBS might simply cut its losses. It might not be able to sell the book publisher. Or if it does, it might be a fire sale prices.

There will be mergers, consolidations, sales, and of course, job losses. Beloved editors will leave, and their books will be orphaned…or returned to the authors. For a while, the lists of books published every month will be a complete mess.

I have no idea if traditional publishers will even have room to buy new books for a while, with all of this pushback. Agents aren’t even sure if they should market books/authors to publishers right now. And let’s not talk about all the qualms I have about agents. Their fingers will get stickier as their incomes tank—because, remember, the film industry is also shut down. The places where agents think they can get big money are all closed for the virus.

Worldwide.

Hard to fathom, but this is a worldwide problem. You can’t pivot and sell books to the E.U. or any other large market right now, because they’re in the same situation as the rest of the world.

I’d recommend that writers who aren’t published yet start exploring their self-publishing options. Indie (self) published writers are the ones who will survive as fulltime writers, not traditionally published writers—even if they get a big payday. If you look at Publisher’s Weekly right now, you’ll find list after list of places that are stepping in to help traditional writers who are already feeling the pinch of this virus.

One of those organizations, the Author’s Guild (and oh, don’t get me started on them), claims that their writers aren’t seeing payment slowdowns or other problems with their publishers. However, that’s not what I’m hearing from writers who’ve talked to me.

Already, several larger publishers have missed their initial payment dates, citing the virus. Although, in full disclosure mode, I heard about this from writers who all are with the same literary agency. That very big agency might be having money troubles, and the checks might have come from the publishers and stalled at the agency.

Other reasons for the delays might simply be that traditional publishing is a non-essential business, so its employees are working from home. The accounting department is working from home just like everyone else, and payments might simply be delayed because of the new systems.

Or…traditional publishers are hoarding their resources.

There are a number of traditional publishers who were tottering on a financial edge when this whole thing started. I expect them to fall off that edge and shatter, but it’ll take to the fall, soonest, for the repercussions of that to show up with the writers.

If you’re traditionally published, let me give you a short to-do list.

1. Your job right now is to split payments from your agent—meaning have the publisher pay you your 85% and your agent their 15% separately. Agents have always pocketed money. They’ll pocket more right now, and many of them will go out of business.

Don’t let them go bankrupt with your money in their accounts. Change this now.

2. Learn how to be loud. If a big publisher owes you money right now, harangue them for it. Accept no excuses. You have bills; they have bills. The difference between you is this: they have access to lines of credit as well as funds from other departments in their corporation.

You do not.

So don’t feel for them. Don’t shrug and say, never mind.

Some writers will get paid in 2020, and many won’t. The ones who will get paid will either have good lawyers, lots of clout, or loud mouths. Most of the people who read this blog don’t have lots of clout or the money for lawyers, but all of you can learn how to stand up for yourself.

Now is the time to do so.

Money will get tight in traditional publishing, particularly at the end of 2020, and into 2021. The carnage will be…I’m sorry to tell you…awful to behold.

No one in that industry knows how to think long-term. And right now, the trainwreck is happening in slow motion. All of us who understand business have been stunned at how long traditional publishing has managed to remain viable.

But they’ve finally come to a washed-out bridge. A lot of the train will topple over the edge and into oblivion, taking its passengers—the writers—with it.

There’s no way to avoid it. With the surviving bookstores sending back books for full credit (which I would do if I still owned a bookstore), the audiobooks vanishing as a market right in the middle of this crisis, and the overpriced ebooks unable to sell well enough to make up for the other mismanagement, traditional publishers are headed for an economic hole that is much larger than the one most of the economy will see.

Traditional publishers will survive. But not all of them. And in this case, the bigger they are, the more likely they are to fail. Not because of the old “bigger they are, the harder they fall” but because most of those publishers are part of an international conglomerate that does not specialize in books. Those companies specialize in many things, some of them entertainment, some of them not. These companies have no special love for books, so the CEOs won’t work hard to save the book publishers.

Will someone step up to buy them? Who knows? Some will shut down. Others will limp along for years. And some will go into bankruptcy, which is a really bad scenario for the writer.

I wish this post was more upbeat for you traditional writers, but you need to know what’s going on. Your part of the industry is in a world of hurt, and that will rebound on you.

As for indie (self) published writers, the future actually looks bright. You’ll need to do some planning. You’ll need a different business plan than you had at the beginning of the year. But you’re nimble. You can make changes.

And we’ll discuss all of that in the next post.

***

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“Business Musings: The Trainwreck,” copyright © 2020 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / Lucian3D.

 

28 responses to “Business Musings: The Trainwreck”

  1. Kate Rooney says:

    Reading this is sad, but unsurprising. I’m reminded of one of your contract posts about what rights are owned by which publishers from when and I fear for the authors who don’t control their backlists. Even assuming the bankruptcy judges see them as equal creditors to the printers and real estate agents, disentangling all those contracts will be the lifetime work product of an enormous law firm.

  2. JR Handley says:

    Another winner, thank you for sharing this!

  3. Jeffrey F. Smith says:

    Simple question here. How do you think this is going to affect the biggest independent publisher of all Baen. With how much they have embraced ebooks I would say not much. However I’d love your take on it. I’m not a writer myself, but I love your blog and the insights it gives me to the business of publishing and reading.

    • I have no idea. I know that Baen did a lot of things right years ago, like leaving NYC for less expensive digs and doubling down on ebooks, but I don’t know what their business practices are regarding print. So I guess it’s just a wait and see with them. I hope they’ll be all right. They’re in better position than most.

      • Jeffrey F. Smith says:

        Thank you for your answer that is about what I expected without asking Toni Weisskopf directly on the Baen’s Bar web forums. Their readers are hoping they’ll be all right as well.

  4. To add to my earlier post about becoming a Secured Creditor, this may also apply to agents and agencies. Some of them are gonna go belly up, too. File on them, too, if the royalty payment holdup is due to them. May also consider naming both publisher and agent/agency if filing for non-payment judgement. Casting a wider net is often a good legal tactic.

  5. Kris,
    Something I’d like to add — especially regarding non-payment of author royalties and incipient possible TradPub bankruptcy filings — is for unpaid authors to take immediate steps to become a Secured Creditor if a BK is filed. If payment is late, file to get a judgement lien against the publisher. Don’t delay. This is usually done in state courts.

    Once the judgement is found in the writer’s favor by the court, it may need to be recorded (states vary). After 90 days, that judgement is “cured” and the writer will be a BK Secured Creditor, and near the head of the line to get any assets. BK is under Federal statute, so applies to all states and territories equally.

  6. “As you would expect, though, ebook sales have gone through the roof. Just not for traditional publishers.”

    Nothing new to see here, folks. TradPub has been overpricing their ebook offerings for a loooong time. So as not to compete with their pbook sales. Now scant TradPub pbook sales. Ditto TradPub ebook sales. Now what? I think the Great CV Shutdown will have lasting effects. Only the quick and agile will survive and prosper. And TradPub has never exhibited those two traits. Popcorn, anyone?

  7. Issac Robledo says:

    Kristine Kathryn Rusch is providing a great service here. The best time to prepare for a worldwide disaster is before that disaster. The next best time is during it. I generally check out these posts occasionally. But during these rough times I will be tuning in closely to every word she says.

  8. acflory says:

    The Offspring and I have been self-isolating since early March [health issues], so I can confirm that we’re reading more than ever. I’ve finished the entire Retrieval Artist series, and I’m working my way through the Fey. I like the basic premise but…I’d love another Retrieval Artist book. -cough- no pressure.

    On the writing front, I poured an entire trilogy into an omnibus version [for ebooks only], and I’m keeping it free, or as close to free as possible for readers like me who eat books for lunch. So long as we can escape into another world, we’ll be fine.

    Here in Australia we’re getting odd stories about the major of Las Vegas wanting to reopen casinos? I know everyone’s hurting financially but…that’s a worry. Please take care when you go for your runs.

    • Thank you for reading the books! I’m glad you’re enjoying them! And as to our idiot mayor…she’s a figurehead. The city council has to agree with anything she does, and right now, they’re hoping for a recall election to get rid of her. Besides that, she has no control over the Strip, which is where most of the casinos are. The Strip isn’t even in the City of Las Vegas. It’s in unincorporated Clark County, and the Clark County Commissioners control that…oh, and our very, very, very sensible governor. We’ll be fine.

      I appreciate the concern, though.

  9. C.D. Watson says:

    My audiobook sales are doing great, thanks to a promo the narrator did on an Urban Fantasy series earlier this month. Most of my listeners are stay-at-home types who listen to audiobooks while they putter around the house.

    My ebook sales, on the other hand, have completely tanked. I suspect it’s because a lot of the bigger name indies dropped the prices on their ebooks, but I could be off on the cause.

  10. John Meaney says:

    Thanks, Kris, for another timely and well considered analysis.

    Here in the UK, the Society of Authors has highlighted the cancellation of contracts (and payment delays) by traditional publishers as a major problem, and has issued guidelines for members. And will offer advice in individual cases.

    That document also points out that publishers may well be able to claim from their insurers, much more easily than writers, for sure.

    Thanks to everything I’ve learned from you and Dean (not in person, though we do have mutual acquaintances), I’ve been full-on indie for a good while now, I’m happy to say. Hope all is well with you.

  11. Kessie says:

    Sharing with all of my friends who have been trying to land agents and traditionally publish. I doubt they’ll listen, but at least they can’t say they weren’t warned.

  12. Kris, in an unusual twist of fate, the Forsyth County NC libraries were declared essential services. Wake Forest Baptist Hospital reviewed the operating procedures we had put in place when COVID-19 became a concern and said they were happy with them (we’re basically doing take-out, with patrons ordering books online or by phone, and quarantining materials for 72 hours when they are returned) plus they received so much positive feedback from the community that they kept us operating. Apparently the ability to check out books and movies at no cost became very important to families that were losing their jobs. We’re also doing some simple video versions of regular library programs, and they’re getting positive feedback as well.

    During this shutdown, it looks like libraries still have something to offer that people need.

    • I keep trying to convince my system that we should be doing this, but I live in pure quill Bluetopia. I keep hammering on digital Equity though so maybe, maybe soon…

      As for libraries, if you indie are willing to simply sell your book to us at 9.99 without any arcane leasing deal we’d be overjoyed. But the larger systems are at the mercy of middlemen – if you can’t (or won’t) get into Overdrive or Hoopla, we’re out of luck.

      I wonder if Audible will finally stop disdaining libraries around, now?

  13. Just got an email from Draft2digital today, summarizing the troubles at Barnes & Noble

    Just as each of us has individually faced unexpected challenges during this worldwide crisis, so have major retailers. With many of B&N’s storefronts closing during the pandemic, the retailer has seen a dramatic drop in cashflow. One result of this has been a delay in paying publishers for ebooks sold via their Nook Platform.

    We’ve been informed that these delayed payments are being done for larger accounts, such as Draft2Digital, and not necessarily for all smaller accounts.

    Barnes & Noble has advised us that full payment may be delayed up to 90 days. However, B&N has agreed to pay us 1/3 of the total for February sales now, and to pay the remaining 2/3 of funds at a future date.

    As a demonstration of faith in our distribution partners, we at Draft2Digital have decided to establish a line of credit, so that we may cover the remaining 2/3 immediately. As such, once we receive the 1/3 payment from Barnes & Noble, D2D will immediately initiate the full 100% of payments owed to our authors for the month of February.

    While we cannot predict what may come, and we have no way of knowing how Barnes & Noble will handle future payments, we are confident that B&N will resolve their cashflow difficulties. We will also continue to honor our terms of service and pay our authors once we have received funds on their behalf. We will never delay payments due to you.

    We have had a strong relationship with B&N in the past. Considering that relationship, along with our own financial position, we believe it is worthwhile for us to take this risk and ensure our authors are paid.

    We expect that B&N will overcome their current cashflow challenges and continue to be an excellent distribution partner for our authors and their work.

    We would like to ask you to extend the same faith, and to continue to keep distributing to Barnes & Noble, during this time.

    To me, this is a HUGE red flag, and I don’t think I am over-reacting when I wonder if Barnes & Noble will be able to pay off the line of credit extended to them.

    Kris, your thoughts please?

  14. And if you have something indie written that just needs a polish to the contents and the cover, I’d guess NOW is the time to get it out there. Lighting fire under myself.

    Thanks for pointing out what really should have been obvious: there are MORE people with reading time right now, libraries are CLOSED, and the READERS can get ebooks from Amazon, etc., just fine. This is NOT a good time to keep wishing for a traditional contract.

  15. Maree says:

    It’s interesting that you said that libraries are non-essential but have pivoted to ebooks. I know it’s not the point of this post but…

    My local library system here in California has long ago pivoted to being more than a book borrowing place, and offer so many services. They’ve certainly been fast to respond to our lockdown. The most essential service they’ve been providing now (at least for me) is paper books for curbside pickup. They already had an excellent online system, so it’s easy to place a book hold and then get notified that it’s ready.

    Here the local schools offer language immersion classes in several languages and the library caters to that need. Let me tell you that I could not financially keep up with my children’s reading in Spanish without the library letting us check out paper books. (My kids hate reading ebooks. And too much screen time makes them unpleasant people.) For me the local library has been such an essential service right now.

    Anyway I have to disagree that libraries are non-essential. That’s the opinion of someone who can afford to buy all the books they want to read. And also enough for their paper book devouring children. My library is so essential not only right now, but it has been all along. The lockdown just made me realize how much I rely on it.

  16. (Context: Hybrid author here. We implemented our disaster plan in mid-February.)

    Your royalty payments are more important to you, than any one author’s royalties are to any publisher.

    Unless a “pay no author” order has come down from above, if you raise sufficient stink, you will get paid. You might need to make it easier to pay you than put up with you, but that’s the publisher’s choice.

    And establishing a reputation as “quality books done ahead of schedule, but you better pay them” is an excellent long-term career move.

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