Business Musings: The Split (The Year in Review 2)

2021 marks the year that most of us who jumped into what I’ve been calling the New World of Publishing have been at this for at least ten years. A few of us, very few really, have been doing it longer. But in 2011, the numbers for indie (self) publishers became real. New venues, like Barnes & Noble’s Nook, made indie publishing look like more than a flash in the pan. It became clear that what I’ve been calling the New World of Publishing was really the future of publishing.

At least, to those of us with an eye toward and an understanding of the future.

I’ve done some version of the year in review for more than a decade now. (This Thursday blog actually started in 2009.) And I’ve been waiting to see when the two versions of publishing—traditional and indie—would actually split into two drastically different industries.

It’s happened slower than I thought it would. Some of it is because indie writers who’ve had a lot of success still feel the need to be “validated” by traditional publishers and editors, often selling an entire backlist to a company that has no idea how to promote that backlist or even how to use the IP it has.

But that’s a future post in this series.

The other reason the change has gone slowly, though, is that the two industries look similar. After all, writers write books. Writers get those books published somehow. Then those published books get distributed.

The differences have been on the backend, really. Not on the end that the readers see. More and more programs have come into existence, making paper book design, especially for interiors, easy (easier, anyway). Audio books can now be distributed by someone other than traditional audio book publishers. And there’s even more, some of which we will get to later in the series.

Now, unless someone royally screws up their book design (and believe me, I’ve seen some indies do that just this month), the readers can’t tell whether the book was published by the author, by a small or specialty press, or by one of the Big 5. The problems in the supply chain have made the only way to tell the difference between a well-produced indie paperback and a standard trad pub paperback—the time it takes for the book to be delivered, usually from an online retailer—insignificant. There is no difference now.

If the traditional publisher didn’t plan well, their book will reach the reader in about two weeks, just like some indie books. Other indie books, with more of a demand, reach the reader as fast as most traditional books.

The two industries shadow each other, but they are not the same. And they haven’t been the same for years now. Finally, though, that lack of similarity has finally showed up in the numbers.

The press that covers traditional publishing has declared ebook growth over. They use statistics to prove their point, but the statistics are suspect.

I’ve seen the numbers reflected in two different accounts. The Association of American Publishers show that ebook revenues in the trade (or consumer) category were down 5.6%  in the first ten months of 2021, compared with 2020. Ebook revenues were down in October, the most recent month they tracked, a whopping 12.3% compared with 2020.

Analysis I’ve seen, and I’m not going to link to it, has postulated one major reason for the sales decline. The thinking is that people are back out in the world, here in the States anyway, and so they’re buying print books in bookstores and other places again.

Some of the statistics bear that out. All paper book sales, from hardbacks to mass market, were up from 2020, a total of 14.1%. Some categories sold better than others—hardcover sales, for example, went up 15.7%.

However, those two statistics are comparing apples with car parts. When you’re comparing paper sales in 2021 to paper sales in 2020 and you include the first few months of the year, well then, yes, the sales are up dramatically in 2021. That’s because bookstores were closed in 2020 for months. Most had reopened in one capacity or another by fall, which is barely represented in these statistics.

Due to political books and a few other surprise bestsellers, the paper book sales were up in the last half of 2020 as compared to 2019. The news was actually quite good when it came to print sales.

So, trad pub analysts are assuming that print sales rebounded the moment that lockdown ended and everyone was back in the stores, happy to dump their ebooks and move back to paper.

Um…that’s not what the statistics are saying. Because they’re incomplete.

Here’s what AAP says about its own number-crunching:

The AAP industry statistics program is made possible by the ongoing support and participation of more than 1,300 U.S. publisher and distributor participants. U.S. publishers and distributors interested in participating in AAP statistics programs should contact info@publishers.org

So the AAP numbers are incomplete, even for traditional publishing. It only covers publishers and distributors who self-report. This is really not the best way to compile statistics. But if you understand what you’re getting, then okay, that helps.

What you’re getting here is an incomplete snapshot of an industry much broader and complex than the one AAP represents.

However, if you look, you can find similar numbers from NPD Bookscan. Similar, but not the same. Bookscan claims that through October of 2021, ebook sales have declined by 8%, although the write-up that I see is confusingly written. So I’ll share the paragraph with you, and see if you can figure out what this word-salad actually means.

However, so far in 2021 e-book growth has slowed and monthly levels were more consistent with 2019 pre-pandemic sales. For the year-to-date through June 2021, unit sales declined by 8%, versus last year, but sales were still 8% higher than they were in 2019 before the pandemic.

So, according to NDP Bookscan, are the ebook sales up or down? Down compared to 2020, from what I can tell. Up from 2019.

Just like the AAP, NDP Bookscan only tracks traditional publishers, even though they claim they track indie as well. I have no idea how, because their methodology is behind a paywall, which I am not about to breach.

Suffice to say that their numbers are incomplete.

I’m sure there is a pandemic factor. During the early part of lockdown, a lot of people were afraid to touch anything. So they ordered their books online and often settled for ebooks.

I use the word “settled” not because these readers dislike ebooks, but because they paid a ridiculous price for their ebooks. Traditionally published ebooks are still woefully overpriced, trying to encourage trad pub readers to buy paper books.

A spot check of ebook prices for traditionally published bestsellers still finds these books in the $12.99 to $14.99 range. Which is plain stupid for an ebook…unless you’re still trying to drive the reader to print books.

Only dedicated readers of a particular writer—or dedicated ebook-only readers—are going to pay that price to get a traditionally published book.

I looked at the ebook stats when I first saw them and thought What? That can’t be true. Which is really not the ground you should base a statistical analysis on.

But I dug into those numbers and saw that they were trad pub only. AAP didn’t count any indie books at all. NDP Bookscan says it does count indie books, but I don’t see how. Their numbers always align with traditional publishing numbers, and never with known indie numbers.

At first, I thought that Penguin/Random would use the indie numbers to help them defend their anti trust claim with the Department of Justice, but except for mentioning that self-published books don’t usually get an advance, and that Amazon is the Big Kahuna and they’re terrified of it, they don’t mention self-publishing much at all in their response to the complaint. Initially, Penguin/Random floated a trial balloon that they would say that they weren’t as influential in the market as everyone thought because of self-publishing, but the DOJ’s complaint is about advances and up-front payments to authors, so that initial argument wouldn’t have helped.

But the idea that Penguin/Random was going to use the vast unwashed of indie publishing as part of their defense should a DOJ case happen lets us all know that book publishing has changed.

There are a lot of books that aren’t counted in those ebook numbers. How many, I’m not sure. No one really is.

And the books aren’t always counted as one-to-one sales. There are ebook streaming services, from Kindle Unlimited to Wattpad, and they allow readers to consume a lot of books that aren’t counted as “sales.” Not to mention the books sold to libraries. Books checked out of libraries don’t count either.

I couldn’t find current data on the ISBNs used for self-published books. I admit, I didn’t look hard, since I’m behind on getting this series of blogs underway.

But by Bowker’s numbers (and Bowker is the company that sells ISBNs) released in 2019, 1.7 million ebooks were self-published, meaning not connected to an active publishing house. That also means, for example, Bowker wasn’t counting WMG Publishing as self-publishing.(Which is accurate. We are not, but we are an indie company.)

If you use that 1.7 million number, you start to realize that ebook sales are much larger than AAP or NDP Bookscan realize. Much bigger than Amazon too.

Fortunately for me, and for you all, I remembered reading The New Publishing Standard last week (which, considering 2 finals and finishing a novel is damn near a miracle). Mark Williams had the same reaction I did to AAP’s numbers, so he did the math I was unwilling to do.

You really need to read the entire article. I’m not sure I agree with his last line because it’s just speculation, but it’s speculation I’m willing to entertain.

But here are his takeaways.

AAP reports October ebook revenue at $84 million. Amazon paid out $39.8 million in royalties for its Kindle Unlimited program. That’s the ebook streaming service not, as Mark calls it, the a la carte books.

By a la carte, he means that books which sell to the consumer, rather than books that you get as part of your monthly reading package. Writers in KU are paid by the page read using an algorithm that I don’t pay attention to.

Also, as Mark points out, the KU numbers are for the U.S. and Germany. So, he argues this:

But even were we to err on the side of abundant caution and say just half of that KU payout is in the US that would still mean $20 million in royalties – not gross revenue per the AAP stats but actual cash – being handed over to US authors that in being untracked by the AAP.

He points out that the a la carte Amazon numbers for indies are also not included in AAP, nor are the numbers from the other ebook vendors like Apple, Nook, Kobo, and Google Play. He also mentions the large number of library downloads from Overdrive.

The revenue figures he’s using from KU, by the way, are net revenue—payment in royalties—not gross revenue, like the revenue reported by AAP.

So his conclusion was my conclusion upon seeing those numbers:

No, we cannot know just how big the US ebook market is, but we can say with certainty it is way, way bigger than the AAP’s Stashots and the selected reporting from the industry journals would have us believe.

Exactly.

And here’s the thing. I’ve written a version of this blog before, saying that the ebook market is much, much bigger than traditional publishers and the publishing industry press would have us believe.

But that’s not my point here.

My point here is that traditional publishing is still struggling to contain its ebook sales, thinking that they are hurting paper book sales and bookstores. Traditional publishers make most of their money up front, when a book is initially published, and truly hate trying to track later sales.

In fact, books that sell hundreds of thousands of copies over a year but only a few thousand at first publication are considered failures in traditional book publishing. Books that sell one hundred thousand copies upon first publication and then drop to a thousand or so units over the year are considered successes.

That’s because traditional publishing always moves onto the newest product with no eye to the older products at all. While indie, done right, is about consistent sales, and consistent sales growth.

Mark also reminds us that ebook sales are not seasonal the way that print book sales are. Ebook sales are not driven by newest, because the readers know the ebook will be there for them when they’re ready for it. Unlike a paper book, which might not be in the bookstore the next time they visit.

Savvy readers are figuring out that they can get their paper book online as well, and that will skew the figures down the road. For many readers, though, buying paper at any point was a 2020 discovery, not something they had realized before the forced closure of the brick-and-mortar stores.

Here’s the 2021 takeaway.

The numbers are finally starting to show the massive disparity between indie book sales and traditional book sales. Traditional publishers are clearly seeing a decline in ebook revenues. Indies are not.

Whether that decline comes, as traditional publishing believes, because the readers are returning to paper books or whether that comes, as Mark believes, because more readers are signing up for ebook streaming services remains to be seen.

Or maybe readers are migrating according to price point. I know I often buy traditional books in hardcover, which is usually cheaper than the matching ebook (stupid, just plain stupid). I often buy indie books in ebook, though, because I’ve purchased too many unreadable paper editions of a self-published book. That’s damn annoying. I prefer to read in paper. (I’m old and set in my ways.) But I will read an ebook of someone whose book I love.

Whatever the reason for the difference in ebook numbers between traditional and indie, it’s indicative of the way the market is moving.

We need to stop complaining that indie ebook numbers aren’t being included in the reporting from the traditional industry. Think of traditional publishing as network television. Indie is the upstart streaming services (Netflix and Hulu and so on) as well as the smaller but interesting less corporate venues like someone’s YouTube Channel.

We look like part of the same industry, but we’re really not. And the split between the two is showing.

Usually, when I write a year-end essay about the differences between the two different sides of the industry, I have to look at tea leaves. This year’s tea leaves include, for example, the fact that the most prolific writers from traditional, folks who write books under many pen names and in many genres, turned up at 20BooksTo50K this year.

I didn’t get to talk to them, due to my own caution about 20Books Covid policy, but I think their appearance is an important tea leaf. There are fewer bread-and-butter books for those writers these days. Also, royalties on smaller titles have become a thing of the past.

We don’t need tea leaves, though, thanks to Mark. He thought quickly and decided to compare a few revenue streams.

We are, as I said, two different industries and the numbers are bearing that out.

Which means that for my year-end posts, I’m going to concentrate less on traditional than I have in the past and more on indie. There are a few reasons for that.

The first reason is that the majority of my readers are self-published or own their own publishing company. The traditionally published writers who would go hybrid already have. The ones who should be hybrid or maybe should be entirely indie are not even trying. They dismiss everything they hear from writers who self-publish.

The information has been out there for ten years now. I feel that if a writer chooses to go the traditional route, then it’s not because they’re ignorant (although I’m willing to concede that they’re probably not going to research the industry they’re in). It’s because going traditional is their choice.

That’s fine. I really don’t want to facilitate that choice, nor do I think I can change their minds, so I’m not even going to try.

The next reason I’m not going to deal with traditional publishing as much is that I’m just not that interested. The industry is going to change in ways it’s not foreseeing at the moment, although the writing is on the wall.

Those essays don’t belong in the year’s end. They’ll show up as the changes hit traditional publishing. Frankly, I expect to see quite a few in 2022.

Thirdly, the interesting stuff—the hopeful, fun, and fascinating material—is on the indie side of things. Traditional publishing is strangling itself. Most writers can no longer earn a living in traditional publishing, and even the bestsellers see their sales figures decreasing over the highs of 20 years ago.

That the bestsellers are mostly folks who were publishing 20 years ago shows just how moribund that industry has become.

There are some things that I found interesting in traditional publishing this year, and I’ll do one or two blogs on that. But after that, it’s all indie, baby. Because I’m truly fascinated by the direction we’re going in.

I think there’s a lot of great stuff happening on the indie front, and I can’t wait to dig into it.

So stay tuned. We’ve got some analysis ahead.

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I’m writing these year-end blogs in the next two weeks, and they’ll appear on my Patreon page first. All of the year-end blogs that I finish before the year’s end will be on Patreon. The rest will show up on my website in the usual one-per-week fashion, which will take us deep in to January.

I have an entire list of things to cover in 2022. I can’t wait to dig into them. I’m feeling my usual optimism at year’s end, which is nice after 2020. I know that 2022 can bite us on the ass the way that 2021 did, but at least I’m prepared for said ass-biting. And for me, that makes all the difference in the world.

Here’s where the usual disclaimer comes in. This weekly blog is reader-supported. If you want to support what I do, you can do it with a one-time payment through PayPal (see below) or with a regular donation on Patreon. Patreon folks are getting some extras that I’m not going to be able to cram in here.

As I reach the end of my 12^th year doing this (!), I am happy and grateful at your continued support. Thank you ever so much.

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“Business Musings: The Split,” copyright © 2021 by Kristine Kathryn Rusch. Image at the top of the blog © Can Stock Photo / Baz777.