Business Musings: The Year in Review Part 2: Traditional Publishing

In the course of this insane year, in which the news cycle was on overdrive in every single industry, and the Western world (which is what I mostly follow) spent all of its time splitting into factions and screaming at each other. In a year that had a moment of holy crap, are we really going to slide into World War III?  followed by the return of inflation, and in America a realization that there’s a segment in this country that thinks Margaret Atwood’s Handmaid’s Tale is a utopia (shudder), publishing news took a backseat.

Which is unfortunate for the bulk of writers who are still striving to get their work published “for real.” Not self publishing or indie or any of that. But in the system we all grew up in.

The news from the publishing sector arrived at a furious pace too, appearing and disappearing in a nanosecond.

For example:

• In May, the American Association of Literary Agents changed their cannon of ethics. (Yeah, apparently, they think they have ethics.) The reason? They wanted to make it possible for agents to count other income toward their qualifications for membership, including providing paid editorial services for non-clients. The very thing that made the entire industry consider the Scott Meredith Agency shady enough to maybe be criminal, back in the day.

The reason for this change is in the press release. It says, “While AALA continues to advocate for a future where commissions on royalties and advances will sustain an agent, many literary agents currently struggle to support themselves by agenting alone.”

In other words, literary agents can no longer make enough money on 15% to sustain their business and their own livelihood. I blogged about this in July (as well as some other agenting news), all of which is very important for writers—traditional and indie—to understand.

• In July, Ad Astra, which is part of a Beijing conglomerate, bought DAW books, making it the publishing house’s only sf imprint. The sale makes sense to me from DAW’s point of view—the co-owners, Betsy Wollheim and Sheila Gilbert, are in their seventies, and need some kind of legacy for the business. But this change is part of a bigger picture of mergers and acquisitions by conglomerates that we’ll discuss below.

What the Ad Astra news means in the short term is that DAW will remain the same. In the long term, it will vanish. It had been a small company with valuable IP and a recognizable voice. Within a few years, it will be little more than an sf imprint, without much to distinguish it from any other imprint, particularly after Betsy and Sheila retire.

• And, speaking of sf imprints with strong voices, Tor, which was once an independent publisher, held tightly by its owner and namesake Tom Dohrety, has become exactly what Daw will become in the future—a meaningless stamp on some book somewhere.

In August, Tor announced that “effective immediately” the company would be rebranded as the Tor Publishing Group. As Tom lost his grip on the company, and then retired in 2018, the corporate powers that be took over, and waited until they could contractually make changes that would allow them to keep the backlist, and fiddle with the frontlist.

The announcement, which sounds all happy unless you understand corporations, included this statement from Tor president and publisher Devi Pillar:

With this name change and continued growth, the Tor name will now stand for quality in various types of genre publishing, with each imprint representing a distinct voice.

Let’s be clear here: this isn’t growth. This is dilution. The main Tor list has lost more money than it made. Sometimes I thought that was its business model, considering how many writers published two books of their three-book contract only to have that contract canceled. With the exception of the Dune books and Brandon Sanderson’s books, Tor hasn’t had a lot of major bestsellers in the past decade, and it shows.

(It is my understanding, from Tom himself years ago, that Macmillan, the parent company, can’t shut down Tor without Tom’s approval; whether or not that ends when Tom dies remains to be seen, but this move makes it clear that Tor the sf imprint wasn’t making the kind of revenue it needed to remain viable in the company, so corporate is diluting the product.)

This kind of dilution and the disappearance of once-proud companies with strong voices isn’t just happening in science fiction. It’s happening in a lot of other genres as well.

There’s a reason for all of that. Publishers truly do not understand their business. They’ve been keeping it afloat with mergers and acquisitions. That lack of understanding became clear in the dramatic trial held over the summer here in the United States.

The Department of Justice sued to block a merger between Penguin Random House and Simon & Schuster. The trial was a farce whenever the publishers took the stand. They uttered truly idiotic statements about pretty much everything.

It was embarrassing enough that Vox’s article at the end of the arguments had the headline: Book publishers just spent 3 weeks in court arguing they have no idea what they’re doing. (The article has since been revised and renamed to reflect the verdict.)

What do I mean about idiotic statements? I actually wrote a piece on my Patreon page about the laugh-out-loud stupid comments that traditional publishers made on the stand. Here’s my very favorite from page 19 of the opinion, spoken by Hachette Book Group’s CEO Michael Pietsch:

I do not consider [self-publishing] a threat at all because…[s]elf-published authors can’t pay themselves an advance against royalties.

Indies, think about that for a moment. Or maybe, everyone think about that. Who gives a rat’s flying behind about an advance when you can make money every month on your publications. And many, many, many, many writers make more than enough to sustain a good upper middle class living. (I don’t know the number, but I had dinner with a dozen of them at 20Books this year without even trying.)

Here’s another ridiculous statement that made the judge look askance. From the Vox article:

Occasionally, [the publishers] walked right up to the line of credibility in making that case. “You have to work just as hard on every book, because you have no idea which one is going to break out,” said Simon & Schuster CEO Jonathan Karp during his testimony.

Judge Pan was apparently skeptical of that statement. “If you pay a lot for a book — like one of these million-dollar books — you’re not going to market that book harder … than your run-of-the-mill books?” she asked. Karp allowed that a higher advance would mean more pressure on a publisher to try to get more sales, but he remained committed to his larger argument.

All of these points are weird and sad and show traditional publishing for how hidebound it is, how class-based and how “trust-me, honey” it has always been.

I’ve been commenting on this for more than ten years, trying to get young writers to believe me. Trying to get friends still trapped in traditional publishing to believe me.

But this trial showed the entire business world that traditional publishing isn’t what it bills itself to be.

Some of the numbers that appeared under oath were head-shaking. I commented on a few in a How Writers Fail post recently, but it’s worth repeating one here:

From Jane Friedman’s industry newsletter, The Hot Sheet, on August 31, 2022:

During the trial, a couple of depressing statistics were shared: of the 58,000 trade titles published per year, fully half of those titles “sell fewer than one dozen books.” (Not a typo, that’s one dozen.) More broadly, 90 percent of titles sell fewer than 2,000 units. Even a small advance of a few thousand dollars would not earn out at standard royalty rates.

I’ve seen a lot of articles and commentary that contradict those numbers, but none of them under oath, required to make a statement that is backed up with numbers and data. Initially when I posted that quote, I got emails from industry apologists, one of whom actually told me that he figured publishers had deliberately put people on the stand who no access to the numbers so that they wouldn’t be caught in a lie.

Which is might be how some people approach a lawsuit, but in this instance, experts were working off industry-provided figures (not just from publishers but also agents and some writers), and publishers usually had their CEOs and other top-level execs on the stand.

They were trying for a we-don’t-know-nothin’-so-how-can-we-profit? defense but lying about low numbers gained these vaunted companies nothing. It didn’t help their reputations, it didn’t help their bottom line, and it certainly didn’t help them with shareholders and higher-ups.

The judge quashed the merger, and if you read her opinion, you realize there’s a lot more going on here than low numbers and questionable promotions. There’s the continual chopping of monies that would go to the author—even the big name authors.

From audio rights to ebook rights to favorable contract terms, traditional publishers have been siphoning more and more of the profits for themselves. I’m not going to reiterate the entire case because it’s not relevant to you international readers…except that these publishers are part of multinational conglomerates, whose practices are similar in every country in which they do business.

The case shows that these companies have acted like the soulless corporations that they are. They’re working to improve their bottom line without considering product at all. In fact, they haven’t bothered to learn how the business has changed.

They’ve survived the changes through mergers and acquisitions, acquiring more and more backlist. Honestly, I had given them a lot more credit at the start of these mergers: I figured that they were padding their corporate earnings with intellectual property.

Instead, they grew their title list with an eye to individual book sales, which is just one aspect of how those titles can be valued. Clearly, I expected too much of them.

There isn’t a business mind among them, which is what annoyed the judge.

The person with a clear-eyed view of what the verdict means for traditional publishing is, surprisingly, Mike Shatzkin, who used to be quite obtuse about the changes in publishing. (Mike, it seems, is a lot less obtuse than his colleagues.)

On the day the verdict came down, he wrote a fascinating analysis on his website, The Idea Logical Company.

Noting that he (and I) and execs of the publishing companies entered the business thirty or more years ago, when the only route to sell a book was through a brick-and-mortar store, he offered this:

…only publishers with a selling relationship with the stores and the operations capability to deliver to them could play. There was a moat around their activity that prevented interlopers or amateurs (or “self-publishers”) from being truly competitive. For that reason, for many years, established publishers could reliably push out some thousands of copies of every title they issued and, in fact, achieved positive cash flow on a very high percentage of them. And then some stuck around to become longterm backlist.

In those days, he said, there were only 500,000 titles available at any one time, almost all of which were controlled by traditional publishers. Now, he says, using Ingram’s numbers, there are 20 million available titles.

Bookstores have shrunk in number and in size so that perhaps as little as 20-25 percent (or perhaps as much as 30-35 percent, but no more…)  of print book sales are made at actual retail stores. All the rest of it, print and (of course) ebooks, is transacted online.

Because of these numbers, and because anyone—literally—can publish a book these days, he writes,

…the moat is gone. The inherently advantaged position of a title issued by an established publisher is diluted to near meaninglessness.

I‘m going to repeat that for emphasis.

A major industry insider, who has argued for years that traditional publishing was still relevant, wrote, The inherently advantaged position of a title issued by an established publisher is diluted to near meaninglessness.

In other words, my friends, it’s clear to anyone who has eyes that there is absolutely no reason at all to go to traditional publishing. They provide almost no added value. (Except advances. LOL)

On the day of the decision, he wrote that the traditional publishers (as they exist today) “ are probably at their high water mark for market share.”

He adds,

The only way to expand a publishing house is to have a larger number of active titles. Publishing new titles profitably has become exceedingly difficult [for traditional publishers]. But publishers can increasingly milk sales out of the long tail of backlist, thanks to the new digital marketing world we live in. So the biggest publishers have grown their title base by acquisition. This decision would appear to cut off that avenue, or at least cut publishers off from the biggest potential additions.

Now, I want you to check back on my note about Daw. They were acquired by a Beijing conglomerate, Thinkingdom Media Group, that has, according to Publisher’s Weekly, “quickly expanded, adding numerous imprints and acquiring companies. The most recent of these was the acquisition of TOON Books in February this year.”

Thinkingdom Media Group is growing by acquisition, just like Shatzkin mentioned, a route no longer available here in the U.S.

It’ll be interesting to watch from a distance as traditional publishing changes. I have thoughts on how it will.

But I agree with Shatzkin. This is the highwater mark for these companies. There will be others, and a growth that will be obvious to us all thirty years from now.

The death knell for the old traditional publishing is being sounded in all quarters. They can’t survive any longer with the old playbook.

Those of us who have watched this industry for a long time know that the mergers and acquisitions had already destroyed what we loved about traditional publishing—the unique voices of the publishing companies.

Stephen King put it best during the trial:

When I started in this business, there were literally hundreds of imprints, and some of them were run by people with extremely idiosyncratic tastes, one might say. Those businesses were either subsumed one by one or they ran out of business.

King, by the way, was testifying for the government, against the merger. But he saw, as we all have, that it’s too late.

Here’s the thing. There is no reason to go to traditional publishing any more. Even people who defended it as recently as three years ago are saying so.

The advantage a traditional publisher gives a book these days is, in Shatzkin’s words, “meaningless.”

Meaningless.

It has been for years—at least fifteen for writers, maybe more. It’s become impossible for them to make a living, and as a result, impossible for agents to piggyback off of them…in traditional publishing.

Thank heavens for indie.

But we’re talking about 2022 right now. And I think, when we look back, that 2022 will be hailed as yes, the high water mark for those big publishers, but more than that. It will be hailed as the year that everyone, finally, realized that the emperor had no clothes.

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“Business Musings: The Year in Review Part 2: Traditional Publishing,” copyright © 2022 by Kristine Kathryn Rusch. Image at the top of the blog copyright © 2022 by Kristine K. Rusch.