Business Musings: Direct: The Year in Review Part 8

Business Musings: Direct: The Year in Review Part 8

On January 6, 2023, Michael W. Lucas made a rather important announcement on his blog. He wrote, in all caps:

AMAZON IS NO LONGER MY BIGGEST INCOME SOURCE.

It’s not that he added a consulting business to his writing income, or started doing in-person speaking gigs. He didn’t get a day job. Instead, he’s been, in his words, disintermediating.

He’s been consciously moving his readers away from Amazon (and other sources of revenue) and moved those readers to his website. He posted his 2022 sales, in percentages, and noted that, for the first time, revenue that came through his website outpaced revenue that came through Amazon.

Full disclosure: He also announced that his income was down, but that he had expected that, after the online pandemic buying frenzies of 2020 and 2021.

What, exactly, did he filter through his website?

Here’s his breakdown (along with percentages).

Direct sales, 18.57%. Direct Patronizers, 6.34%. Sponsorships, 5.33%, and direct preorders, 2.38%. Taken all together, 32.62% of my income coming from sales through my web site.

Amazon provides 31.35%.

Yes, that is, as he says, a slim percentage difference. (The remaining 36% comes from places like IngramSpark, Kobo, and his old books still mired in traditional publishing.) It’s worth noting that over 10% of his income came from Kickstarter, which he does not count as website sales (appropriately because it takes a percentage and the people you bring to that site grows that site.). However, Kickstarter is a one-time fundraising platform, which provides another way to sell direct to the consumer, without a percentage taken from each book. As such, that means that more than 42% of Michael’s income has come from direct reader engagement.

He’s not the only writer who has made note of this. I’ve talked with several who are taking more and more control of their own product and sales. Dean and I had a dinner with two other couples at 20Books in which we discussed a Shopify store. We’d been doing WooCommerce and weren’t that happy with it. Because we’re early adapters, we’d had our initial WooCommerce store in (jeez, I think) 2013 or 2014. Long ago, when everything was clunky and hard.

Now it’s not.

A few weeks ago, I wrote a post on this site that scared the crap out of most of you. It was about Amazon’s year, and the fact that Amazon is rethinking much of the way that its website and sales platform works.  Amazon’s innovation enabled writers to self-publish and make a solid living (if not more), but that was more than a decade ago. Since then, Amazon has been changing the algorithms. It has new management, and it’s just not that interested in books. It will, at some point, maybe in the near future, cease being the biggest beast in the American bookselling sphere. (If you want to argue with me, do me a favor and read the other post first, then argue there.)

A number of writers responded in the comments and also to me personally, some denying that anything was happening (and of course, they thought I was making this all up).  Other writers responded with some great and useful comments.

After a decade of dealing with delusional self-published writers (after two decades of dealing with delusional traditionally published writers), I’ve learned to shut those poor deniers out. You can’t convince people who stick their fingers in their ears, close their eyes, and sing every time you show them evidence.

But others? People who want to continue as writers and get the largest audience they can? Those folks are well worth my time. Many of them were panicked and wondering what was next.

I knew how I was setting up the year-end blogs, and I knew that I would be talking about going direct after I did the traditional stuff, the Amazon post, and two other important posts.

The next important post was last week’s. The demise of Twitter and the changing landscape of social media convinced me (and thousands of others) to look at how we promote our work. More than that, it reminded us that something we have built over a decade or more can go away in the space of a month. (Yes, I know, I could have downloaded my Twitter followers onto a spreadsheet and uploaded them elsewhere, then invited them…and that presupposes a lot of things such as the fact that I have developed an elsewhere and that I have that kind of time.)

Michael’s discussion of disintermediation is the key here. The more that we control, the better we are as writers. I have known this for decades, but in the pre-Kindle world, what I could control was pretty limited or very hard. (Dean and I did direct sales with Pulphouse Publishing in the late 1980s and early 1990s and that required a ton of work convincing distributors to take our products and selling on our own at conventions and doing mail order. Yikes!)

The more we writers control our own work—and that means owning our own intellectual property, which most traditionally published writers these days do not—and the more we are in control of our own income, the better off we will all be. Twitter’s slow implosion reminded me of that.

The final important post? The bestseller post. Unfortunately, bestsellers have become so 20th century. They’re a relic of a world we no longer live in. You can’t measure sales any longer, particularly with so many books being sold on so many platforms. Bestsellers were a handy way of keeping track of the books that were the most successful in a very limited marketplace. That marketplace had only a handful of books compared to now.

Of course, readers liked bestsellers as a handy way to buy books. I don’t know about you, though, but for me, I used to read a number of bestsellers because they were good enough to keep me entertained until my favorite author published something new. Now that I can find all the books, I stopped reading those “good enough” books. They were my airplane reading before the Kindle, the books I knew would get me through a three-hour flight without going stark raving mad from boredom. Once I had my Kindle, though, I read whatever I wanted when I wanted it. I didn’t have to carry big bulky books onto a plane.

The Kindle was a game-changer, and I think we hit a similar kind of game-changer in 2022. That was the year that writers discovered ways outside of the standard e-retailers to make a living at writing.

And by living, remember, I always mean a good living, which is middle class at minimum.

Three ways rose to the fore in 2022. Realize all three ways existed before 2022, but they’ve moved into a whole new realm after this past year.

The first way is crowd-funding. I wrote a number of blogs about Kickstarter in 2022, because Brandon Sanderson’s Kickstarter made a whole group of writers realize they can get a traditional publishing advance for their work by going through Kickstarter properly.

What do I mean by traditional publishing advance? Well, most midlist writers these days get about $5,000. Remove 15% for the useless agent, and the writer will then get $4250 spread over at least three payments at least two years apart.

If that same writer got $5000 on Kickstarter, they would lose Kickstarter’s fee of 5% and the credit card fee of 3% (so, 8%). That means they’d get $4600 when the Kickstarter ends. Which makes this better than a traditional advance.

Writers with a larger platform might get more than $5,000, and some writers, like Brandon, will get millions. I did two specific examinations of Brandon’s Kickstarter, the first in the middle of its run, and the second when the run ended. Then I did another Kickstarter specific post titled “How We Use Kickstarter” in September.

The crowd-funding sites all have benefits and drawbacks. I’ve seen writers use a variety of them in a variety of ways. Once the writer learns how to do so, that writer can add quite a bit of money to their annual income.

We offer a free Kickstarter Best Practices course on Teachable, and one of the best things about that course is the opportunity to interact with other writers doing Kickstarters. These writers are sharing tricks and mistakes, figuring out how to use the platform to their benefit.

The best part about that course, though, is watching dozens (maybe more) writers succeed with their Kickstarters. The Kickstarters have brought in, for first-timers, anywhere from $500 to $15,000.

Because of Brandon and all of these other writers, Kickstarter has realized that publishing is a huge category. Kickstarter sent representatives to 20Books for the first time in 2022 and is working hard at making sure writers succeed.

Now, realize, Kickstarter is not all sunshine and flowers. It’s tough to do a good crowd-funding campaign. Kickstarter says that only four out of ten projects on Kickstarter will be successful. And the category with the third highest rate of failed projects on Kickstarter? Publishing.

That’s because writers ask for how much they “deserve” rather than do the research to get the project off the ground properly. That’s why we offer the course.

If Dean and I were to move to another crowdfunding platform, we’d have to learn how to use that platform before launching something there. Each platform is different.

But the point here is that in 2022, a lot of writers have learned how to get that all important advance. In my year in review piece on traditional publishing, I mentioned how Michael Pietsch, CEO of the Hachette Group, said under oath that he did not believe that self-publishing was a threat to traditional publishing because “…[s]elf-published authors can’t pay themselves an advance against royalties.” (Still makes me giggle, that stupid quote.)

Well, through crowd-funding, writers can pay themselves an advance by going direct to their readers. And it’s not against royalties either—the royalties being the hope of future earnings. It’s an advance that’s given for an existing product, which the writer can then send to backers.

And sometimes crowd-funding can encourage writers to create something that they wouldn’t normally do. Dean and I started the Make 100 which occurs every January on Kickstarter because it sounded like a fun project. Make 100 of something and put it up and see what the backers think. We’re on our third Make 100 collection series right now, with a series of fantasy collections. (Five books, 100 stories, 50 from me and 50 from Dean. Check it out.)

So…Kickstarter and other crowd-funding platforms help writers make a good living at writing, providing the writers do their campaigns correctly.

The second thing that became big in 2022 was direct sales. Indie writers have sold direct for decades. (See Pulphouse, above.) But selling direct became easier toward the turn of the century with ebooks, but the interface was clunky and difficult for readers. Once the Kindle came along, though, and Amazon needed content to fill it, readers got used to reading ebooks.

And that meant that enterprising writers could sell ebooks direct to readers.

The problem was that, until 2020, most readers didn’t want to buy anything from smaller websites. 2020 changed that. The attitude switched from I only buy from Amazon (or Barnes & Noble) to I would rather give my money direct to the manufacturer/artist/writer. It’s a huge shift in consumer thinking, one that will not disappear, and one, I think, that has caused problems for Amazon across the board.

What hurts Amazon actually helps indie writers who have their own stores. I had seen this coming last year, and actually said this in one of my year-end posts:

If you haven’t tried any of the online store programs for the past five years or so, then you’ll be surprised at how easy it all is for writer and consumer alike. I personally think this will be one of the major growth areas of 2022.

Some business circumstances prevented us from acting on improving our store until December. Now, our direct store is a priority for the business. I’m quite excited about the tools and possibilities.

I will write a longer post about Shopify and our store later, after we’ve done some experimenting and work with it. Two things are relevant to this year-end review.

The first is this: Going direct to the consumer is not about discoverability. A new reader is probably not going to discover you on your website. That reader will need to pick up your book in a major retailer like Kobo or Barnes & Noble or Amazon. In the back of that book, you promote your own store. So the reader needs to find out about the writer somewhere else, and then come to the writer’s ecosystem.

That ecosystem includes email marketing. For about five years, email marketing had become passé. A necessity, sure, but not the main focus that social media was.

Yet with the social media implosions that I discussed a previous post, email has become a lot more important. And not in the I need to cram my list sense. But for a second part of discoverability. Each new book needs to be promoted through email, so that readers will know that the new book is out and will buy it directly from the author.

That’s all possible now. From what I understand, it’s simple, and I will be testing that more as the year progresses. But scratch a driven indie writer and you will find someone with some kind of direct sales on their site.

I know this intimidates a lot of writers. Joanna Penn has been doing a wonderful series of interviews (one with Katie Cross and one with Morgana Best) as she sets up her Shopify store to sell directly to her customers.

Joanna has sold a lot of her product directly for years, but like us, she did so through a group of sites. Then she moved to Shopify in the summer. Because she’s so great at gathering and sharing information, she has written about her struggles, but also her joy at what she’s doing.

She writes a lot about the pros and cons of having a store on your website. If you’re interested in this aspect of publishing in 2023, check out her very good posts.

Finally, there’s one last category that grew in 2022, and will grow more, I think, in 2023.

That category is just basic fan support. It comes in a variety of ways. Michael Lucas listed it in his sales percentages above. He has a category marked “Patronizer,” which he calls a Patreon-like program on his website. Instead of people paying Patreon to show him support, they pay him. (He also has a Patreon.) That cuts out the Patreon fees. His Patronizer is 6.34% of his income, and Patreon itself is 4.53% of his income, so they’re similar but not the same.

Other creatives are doing things that I suspect will slide into the writerly realm. The one that caught my eye was in The Hollywood Reporter in October. Bucket List Studios, a small company, wanted produce an animated series based on the family’s trips and adventures. They got a $10 million offer from Netflix:

But after discussing the deal — which would entail losing ownership over intellectual property — with [his wife] Jessica, Gee said the two decided to take a risk and walk away from the offer. Instead, they would embark on something more daring: launching a full entertainment studio to create content, products and experiences that embody the ethos of the Bucket List Family, which encourages others to travel and explore the world together.

To do that, they asked their fans to invest in the company, instead of finding some venture capital. Read the article to see how they set up this idea, but here’s the upshot:

In total, Bucket List Studios received $7 million from 34 investors who have put in funding in the $100,000 to $3 million range — and $3 million from around 30,000 investors at the $100 level, according to Gee. The company’s authorized share capital includes 20 million shares of common stock and 10 million shares of preferred stock, with roughly 2.5 million being designated as series seed preferred stock, according to financial documents reviewed by THR. Gee holds about 5.1 million shares of common stock, representing about a 50.4 percent stake in the company.

They also have some investments from venture capitalists, but not as much as they would have needed before.

I’m seeing this sort of thing happening more and more with large projects that require a major investment. The key to all of this is buried in that first quote.

They turned down the Netflix offer, because they would have lost their intellectual property. To hang onto their IP, they went to their fans and the fans are helping them realize this dream.

It’s not a quick or easy solution. It takes technical expertise to do something on the level of the Bucket List Family. But there are writers who are taking sponsorships—having one time patrons on major projects, for example, patrons who might pay expenses for a short time without getting ownership but who are getting something. (A private book, a dedication…I’m not sure yet. It will require more work.)

Another old/new idea. Writers, artists, musicians, sculptors often had major patrons in the past, enabling them to produce work unfettered. It looks like that might be an idea whose time has come…again.

That seems like a bit much for most writers. Most indie writers will probably be content with a few Kickstarters and an online store. Done right, those two alone can cobble together a solid income for one person. Add in the other forms of sales—from Amazon to D2D and IngramSpark—and a writer would be in good stead.

2022 has already brought a sea change in attitudes about Kickstarter and selling direct to the consumer. I expect this trend to continue in 2023, and maybe even grow.

It takes a bit of an open mind and it also takes a recalibration of mindset.

Think of it this way: if writers throw out the dream of “bestsellers” and think about getting their books to as many readers as possible, while making a good living at writing, then 2022 showed them the way.

I realize it’s not for everyone. But for the entrepreneurial writer, the world keeps opening up with more and more opportunities.

And that pleases me more than I can say.

*****

As I mentioned in the post, one of the keys to doing direct sales and Kickstarters and working with fan support is to make sure you control your intellectual property. Writers who sell to traditional publishing do not control their IP. Sometimes writers who option their work for film and TV lose their IP as well. These losses come because the writer does not understand what intellectual property is on a deep level, and does not know how to make it work for them.

This has bothered me and Dean for years. We’ve been trying to teach writers copyright since we started teaching. But writers steadfastly refuse to take the offered courses. So this year, we came up with a course called Bite-Size Copyright. It’s copyright in small doses, one per week for 52 weeks. You can find out more about the class here.

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“Business Musings: Direct: The Year in Review Part 8,” copyright © 2023 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / blueperfume.

9 responses to “Business Musings: Direct: The Year in Review Part 8”

  1. Still experimenting with my websites. I tried for a time with WooCommerce – because it was a free app. but the website weight ballooned and no sales for the reason you mentioned, people have to come by from another place.
    For now I use Mooberry Book manager on my main website, with several platforms for each book.
    As I am going to some events, I also made a lot of my sales with Square.

  2. Even though I rarely comment, I always appreciate your business insights – thank you for all your hard work!

    I’ve been looking into doing direct sales on my website, too. I’m a techie at heart, so the website integrations don’t intimidate me; but there is one issue that has made me think twice about going ahead.

    The income that we receive through distributors such as Amazon, Kobo, etc. is classified as royalties, which are treated differently in domestic taxation and international tax treaties than product sales. Selling books directly would be product sales, not royalties. So even if we’re not selling physical books, we’d still be responsible for collecting and remitting all applicable sales taxes, GST, VAT, (or whatever) on our e-books. I say ‘whatever’ because I haven’t delved into the international tax treaties for all of the 12 countries where my books are currently sold. Even if I limit direct sales from my website to only my top 4 markets (U.S., Canada, U.K., and Australia), selling direct seems like it would add a big administrative overhead. What do you think? Am I seeing an issue where none exists?

  3. Is there a platform that manages the taxes for online stores? That’s my major sticking point: the thought of filing monthly and yearly taxes for each state where the books are sold. Am I missing a platform that provides that service?

  4. SAM TURNER says:

    Excellent clarification of this business. Thank You! Most weeks, I read your Stuff! which is why Stuff is capitalized!

  5. I went full-time this year, and part of the reason why I felt confident doing so was precisely because of direct sales. I’ve been working on my website store (also Shopify) and direct sales over the past year, and it is by far my second-best sales platform after Amazon–and I hope over the course of this year to keep improving that, with the goal of it becoming my best. I did an early-bird release of my major title this year on my website (three weeks before everywhere else), and that was very successful. I have a smallish organic newsletter (under 1500 people) and an active fan Discord server, and I have a friend with an amazing Twitter presence who likes my books and helps promote them too–their social media enthusiasm was a huge stroke of luck for me, which I’ve been working to build on so it continues sustainably. And that’s without Kickstarter–which is a goal for this year.

    Thanks for all your Business Musings–they’ve been incredibly helpful to me over my journey. (I really like the WMG workshops too, I have a lifetime subscription and have been going through them as I can.)

  6. I always believed it was possible to break away from Amazon, but this is the first time I’ve ever heard of someone actually doing it. This is a great road map. Thank you for this series, and specifically this entry.

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