Selling Paper

Remember my last blog entry, where I talked about Ebook Piracy? During the Digital Book World conference, the president of Macmillan, a very large publisher, called for all publishers to fight piracy, citing some of the same tactics that were unsuccessful for the MPAA and RIAA.

Since then, Amazon has stopped selling Macmillan titles.

The reason seems to be that Macmillan wants Amazon to raise their ebook prices, and Amazon refuses to.

This is being discussed in more depth on the Amazon Forum.

As it currently stands, Amazon buys ebooks from the publisher at 50% of the hardcover price, then prices those ebooks at $9.99 or less.

In other words, Amazon is losing A LOT of money on every ebook sale.

As far as I know, Amazon hasn't come out and said why it has decided to take a loss for each ebook it sells. If I were to guess, I'd say there are several reasons for this. They want to get a large share of the growing ebook market. They want to sell Kindles. They want to price competitively, and charge what they feel their customers are willing to pay.

Personally, I think Amazon knows that $14.99 for an ebook is too much, especially considering it costs nothing to distribute and manufacture.

So, since the Kindle first appeared, Amazon has been losing a lot of money by selling ebooks.

Macmillan wants Amazon to operate like Apple, which offers publishers a way to set their own price.

But shouldn't Amazon be able to sell things for whatever they decide to sell them for?

The loss-lead has been a mainstay in retail since the beginning of retail. Black Friday doorbuster sales are a perfect example of that.

So Macmillan tried to tell Amazon what to do, and Amazon stopped selling their titles, and now the Macmillan authors are suffering.

But let's take a closer look at why Macmillan wants Amazon to charge higher prices for ebooks.

It would have really sucked to have been a buggy whip manufacturer when Henry Ford introduced the Model T. But technology changes things, and it isn't always fair.

As far as technology goes, print has had an incredible run. This single format has lasted hundreds of years. Contrast that to music. In my lifetime, I've seen reel to reel, 8 track, LP, cassette, digital audio tape, CD, mp3, and now a host of lossless formats like flac, ape, aac, wav, etc. Go back to my grandmother's time and there were 78s and Edison cylinders. Lots of format changes in just a hundred years. And during each change, there were those who lost and made money.

Print has reigned since Gutenberg. But now the times are changing.

Publishers need to figure out what it is they do. Is it ship and sell paper? If so, that costs money, and they need to price books at a high cost and pay the author a fraction of the retail price.

But if a publisher's job is to help storytellers reach a readership, through vetting, editing, formatting, cover creation, and distribution, that can now be done in a much cheaper way, digitally.

So let's look at what a publisher does, and some of the costs involved.

Print publishing has a lot of overhead, and a LOT of waste. A 50% sell through (the number of books printed vs. sold) is acceptable, and returns are acceptable (any book shipped can be returned for a full refund.)

What if Chevy only sold 1 car out of every 2 it produced? What if Costco could ship back any old bananas it couldn't sell and get a full refund from the banana grower?

This is a very bad business model, and it is what publishing uses.

Publishers acquire manuscripts, and spend a lot of time, money, and energy doing so, because acquiring and publishing a book is a big investment (an investment that often fails to earn a profit.)

In the current model, publishing is NOT about connecting storytellers and readers. It's about selling as much paper as possible. They print paper, ship paper, use paper to advertise their paper. Paper, paper, paper.

In an ebook world, there's no paper. No printing. No shipping. No catalogs. No ARCs. No print ads.

Editing, proofreading, cover art can be outsourced. How much would this reduce costs?

No expensive Manhattan offices. No editor expense accounts. No sales reps or marketing department. No employee benefits.

Print publishers see this future, and are trying to use the current system as a pricing structure for the future system, because they don't want to change.

That won't work. People don't want to pay $9.99 for a DRM restricted ebook that can only be read on a single device. That's why ebook piracy is on the rise.

Rather than figure out a strategy that will work, publishers are instead circling the wagons, making the same mistakes the RIAA and MPAA did.

Because publishers are in the business of selling paper, and they think a digital book is just another type of paper.

Why are they doing this?

One reason is because of history.

Historically, we were told what to read, watch, and listen to.

In the past, artists needed big companies behind them to manufacture and distribute their work.

When I was a child, there were three television networks. If I wanted to watch something at 7pm on Thursday, my choices were limited.

Radio and record companies decided what we listened to. Hollywood told us what to see in the theater. And publishers printed what they deemed fit for public consumption.

Gatekeepers (the few) chose what the masses (the many) got to experience.

Then along comes this internet thingy.

YouTube is one of the top ten most visited sites on the net. Why?

Because the viewer actually IS the gatekeeper.

We decide what we want to watch. We create videos ourselves.

It is an entire media empire built around the viewer. A video can get ten million views without any gatekeeper at all, because there is no cost and no risk.

Why not the same for ebooks? If the cream rises to the top on YouTube and goes viral, what is to stop an ebook from doing the same, if there was a forum for such a thing?

But instead of embracing the future, print publishers are going to try to fight to preserve the past. That's why they charge Amazon, Sony, and other retailers 50% of the price of a hardcover for an ebook. They don't want things to change. And they're inflating the price of ebooks to try and prevent that change.

That won't work. Formats change. New technology always comes out the winner. DVD beat VHS. CD beat cassettes. Cable TV beat network TV. Cell phones beat Ma Bell. And ebooks will someday beat print books.

But all isn't lost for publishers.

If I were a publisher, I'd start by acquiring out-of-print backlists. This is where Google and Amazon both dropped the ball. Google tried to scan copyrighted material without permission, and Amazon concentrated on public domain, rather than going after name authors and actually making some money off of ebooks, rather than losing money on each one sold.

There is a 4 billion dollar a year used book industry. The majority of everything ever published is out of print, and a good portion is still under copyright.

Acquire those rights (and not try to retroactively grab them like Random House did.)

A smart publisher or retailer with deep pockets could acquire thousands of books that have already been vetted and edited.

Once they did that, they'd be responsible for formatting and distribution, which is cheap and/or free. Pay fixed costs upfront, then earn forever.

But publishers can't think this way. That would mean they'd have to entirely restructure their business, and probably downsize dramatically.

Right now, rather than consider changing its business model, Macmillan wants things to stay how they are now. That makes sense. Why wouldn't they want things to stay the same?

But they're no longer the ones who decide what people must read. They don't have that control anymore in this new world. Now people have choices. One of the things that helps dictate choice is price.

Amazon understands this, and prices accordingly.

I feel terrible for Macmillan authors. Several of my close friends are being hurt by this. And I wonder if other publishers are going to desperately band together and attempt to do the same thing. I'd be deeply upset if Amazon stopped selling my Jack Daniels novels.

But then, I did figure out that I could earn more money than Hyperion is earning for me, if I had the rights to those titles back.

But that's because I figured out you can make more money selling cheap ebooks than selling expensive ebooks.

Here's a screen shot of my January sales on Amazon Kindle to emphasize my point (and it isn't fully accurate because it's only 10:40am and I'm thinking I'll make a few more sales by the end of the day.)

In June, my Amazon royalty rate will go from 35% to 70%.

So I'll be looking at 40k per year on these old titles that NY Publishing didn't want.

I'll earn almost as much on a $2.99 download than I earn on a $24.95 hardcover.

And why shouldn't I? I'm the writer.

I don't have any benefits. No heath insurance. No retirement fund. No 401k. No expense account for lunches. No holiday bonuses.

I live off of advances, and bi-annual royalty checks, and I'm one of the lucky ones. I actually am making a living at this, whereas the majority of my peers cannot.

And let me say, for the record, that I love paper books. And I've loved the publishers I've worked with, and think many of the folks in publishing are some of the smartest and coolest people I know.

But I believe publishers need to switch their focus from selling paper to connecting storytellers with readers.

Unlike the buggy whip, publishing isn't a niche market. It can change with the times. But it will be a painful change.

You can stack up sandbags against the tide. Or you can ride the wave.

C'mon, Big NY Publishing. Put down the sand, and grab your surfboards.

Booty Call

Digital Book World is a two day digital publishing conference recently held in NY. One hot topic at the event was ebook piracy. The conclusions drawn were:

1. People are stealing a lot of ebooks. (surprise surprise!)

2. Publishers need to fight this with lawsuits, better DRM, takedown pressure, anti-piracy legislation, targeting upload sites, and ultimately fighting the pirates themselves.

Apparently, publishing has paid close attention to the music and film industries, who have been successful at stopping pirates with the above tactics.

Oh, wait a second... The RIAA and MPAA have NOT been successful at stopping piracy. In fact, they've done nothing but irritate paying consumers.

It's good to know that the smart folks in publishing are ready to spend millions of dollars to make the same mistakes, no doubt with a similar outcome.

Of course, no one invited me to speak at the conference, which is a shame, because perhaps I could have saved the publishing industry the heartache and financial trouble they're about to embrace with one simple sentence.

The Only Way To Fight Piracy Is With Cost And Convenience.

How do I know this?

Because I've done extensive experiments with ebooks. The cheaper the ebook, the more you sell. And if the ebook is free, the downloads are off the charts.

I also know how pirates think, because I'm a pirate. Yes, I admit to being one of the billion people on the planet who download copyrighted material.

In fact, I've downloaded all of my own ebooks and audiobooks for free from various bit torrent and file locker sites. I'm able to do this because I too am being pirated. A lot.

Google konrath torrent and you get over 14,000 hits. These are all sites where my work is being stolen.

Does it bother me that people are sharing my books online?

No, it doesn't. Because piracy hasn't hurt me financially.

Why is that? Especially since I can account for thousands of illegal downloads of my own material?

Because I'm still making money. I don't think piracy has hurt my sales. In fact, I think it helps my sales by giving me a wider distribution network and greater brand recognition.

My self-pubbed Kindle titles are $1.99 or less. Since last April, I've sold over 20,000 books on Amazon.

Want to hear the funny thing? These same ebooks are available for free on my website. For FREE.

Does free hurt sales? Apparently not.

I've already blogged that if I had the rights to my in-print books, I could make a bigger profit selling them for $1.99 on Kindle than I'm making with the prices my publishers have set.

Cheap sells. Free sells even more. And if you make it easy for people to get your product (like pressing a button on a Kindle or an iPhone) they won't bother going to Pirate Bay or Rapidshare or Limewire or Megaupload or Isohunt.

File sharing is a pain. It can take a long time to download a file. The files can get corrupted. Sometimes they're tough to search. Often you can't find what you want. There are viruses. Seeding files takes up bandwith and harddrive space, and there's always a fear that The Man will send you a letter saying they'll sue you.

How much easier would it be if the large publishers, instead of adding extra copyright protection and hiring a team of lawyers and tech guys and lobbyists to fight piracy, just made their downloads cheaper?

Malls are dying. Main streets are dying. What's taking their place? Wal-Mart.

Wal-Mart has shown that if you offer customers inexpensive one-stop shopping, they'll spend money.

iTunes has shown the same thing.

Amazon hasn't been able to do that yet, because publishers insist on DRM (which consumers hate) and high prices for ebooks. $9.99 for a bunch of ones and zeros is overpriced. But if it were up to the publishers, they'd charge $14.99 and more for their ebooks.

Amazon is fighting back, though. In June, they'll begin paying ebook authors a 70% royalty rate.

Let's play the numbers game. Let's say a midlist author, like, oh, JA Konrath, uploads a new Jack Daniels book on Amazon and sells it at $2.99. A coffee at Starbucks costs more than that.

Let's assume JA Konrath can sell 10,000 copies per year of an Amazon title--something he's proven he can do. The 70% royalty rate will mean he earns 20k. PER YEAR. For just the erights.

This is more than most fiction writers earn on a single book for all rights: hard, soft, audio, ebook, movie, and foreign.

Shouldn't publishers try to follow Amazon's example, rather than continuing to charge hardcover prices for ebooks, which have no shipping or production cost?

That's what I'd do. But no one is asking me. No one invited me to speak at Digital Book World.

It's impossible to stop piracy. The whole reason the internet was invented was so people could share and trade information and media.

But it is possible to co-exist with pirates, and make a good living doing so, by making sure ebooks are easily and cheaply available.

Instead, it looks like we're going to see the publishing industry make the same mistakes the music and movie industries have made.

Copyright cannot be successfully defended in a digital world. Period.

Human beings are genetically wired to share information. And the internet has made it easy.

Publishers should be taking advantage of both human nature and the internet. Instead, they're gearing up for a fight they can't win.

Oh, and since I anticipate the comments saying, "If books are free, how can we make money?" I want to restate that authors will be able to make money on free downloads someday.

Let's say a well-known author releases a free ebook. But there's a catch. In the ebook, there are fifteen print ads, like you'd see in a magazine. Each ad costs the advertiser 2 cents per impression, which is comparable to other internet advertising.

That means each free download will earn the author 30 cents.

More than 100,000 people have downloaded my free ebook, SERIAL.

If I'd sold ad space for 2 cents an impression, I'd have earned 30k in less than a year. Even more money than I'd earn selling 10,000 ebooks for $2.99 each.

Of course, I've been saying this for a few years now. And I'll keep saying it until someone finally listens.

I just hope, by the time this is over, there will still be some publishers around to listen.

Good Things

Okay, so I still can't divulge specific details about what's happening in my career, but this is how the last two weeks have gone for me.

• My first sci-fi novel, TIMECASTER, was accepted by Ace/Berkley. Pub date TBA.
• German rights to AFRAID sold for a tidy amount.
• I've had a story accepted into the horror anthology BLOOD LITE 2
• I've had a story accepted into the horror anthology BATS IN THE BELFRY
• Chinese rights to the Jack Daniels books have sold to China
• I've had a story and an interview accepted by CEMETERY DANCE magazine
• I've had another story accepted into a CEMETERY DANCE anthology
• I'm in negotiations for a 7th Jack Daniels novel
• I just signed a very high six figure deal for a thriller trilogy (more on this later)
• I finished my Jack Kilborn novel ENDURANCE two days ago
  
• I just got these links in my email this morning:
  

http://ramascreen.com/the-dowdle-bros-are-afraid/

http://blodic.us/entertainment/quarantine-s-dowdle-brothers-directing-adaptaiton-of-afraid-55-0.htm

http://networkedblogs.com/p25034176

So, in a nutshell, I've gotten more good news in two weeks than I have in 19 years of struggling in this business.

I don't deserve it any of it. But I'm sure happy it's happening.

More details to come as I'm allowed to reveal them. But feel free to spread the word about the AFRAID movie deal. Building buzz is important for this project to get greenlighted by a major studio.

I'd also be curious, for those who have read AFRAID, who you think should be cast as the heroes and villains. Since I have zero say in this, it's purely a fantasy exercise.

For the good guys I'd like Tom Skerritt as the Sheriff (though I wrote it picturing an older Bruce Willis), Mark Wahlberg as Josh the firefighter, Gwyneth Paltrow as Fran the waitress.

For bad guys, Andy Serkis would be a perfect homicidal pyro Bernie, William Baldwin would do a good job as the Ted Bundyesque Taylor, Lou Diamond Phillips would be cool as South American interrogator Santiago, and the hulking Ajax should go to Kane Hodder, who is a pro at that sort of role.

As for directors, the Dowdle Brothers are already attached, and a perfect fit. I loved QUARANTINE. I also loved their first film, THE POUGHKEEPSIE TAPES, about a serial killer who videotapes his victims (anyone who has read my Jack Daniels book WHISKEY SOUR will see some strong similarities.) POUGHKEEPSIE isn't out yet, but I got a bootleg through my nefarious underground connections. It's really a chilling movie, brilliantly executed. Can't wait until it comes out so I can get an official version.

Now I've got to stop fantasizing about Hollywood and get some writing done...

Luck You

I haven't blogged in a few weeks, because I've been busy. Besides working on a deadline, I've had a ridiculous number of good things happen in my career lately.

I'll make official announcements when I can, but I will say that I'm going to be around, in various genres, for the next few years, and I'm going to make a nice amount of money.

I've told a few of my writing peers some of the details, and their remarks have been genuinely supportive. They're happy for me. This means I pick my friends well, because I haven't encountered a single smidgen of envy.

But I am noticing something they say which I don't agree with.

Everyone I've told has told me I deserve this. Every single person.

They back up their statements by saying, "You've worked so hard" and "You've done so much" and "It's about time your writing got some recognition."

They're sweet to say so, but they're wrong.

Long time readers of this blog know that I truly believe, deep in my heart, that no one deserves anything.

But sometimes, we get lucky.

If people truly deserved things in life, it would imply there is some sort of fairness in the world, and some sort of guaranteed way to get rewarded for our talents and efforts.

I'm pretty sure that's not the case. Many talented writers languish in obscurity and poverty. Some newbie writers get huge deals without "paying their dues."

It's always been about luck.

Luck dictates where you're born, and who your parents are. Luck dictates the traits you're born with. Luck plays a part in your education, your career, your love life, the friends you have, and pretty much every facet of life.

As I write this, Haiti was just hit by a massive earthquake, and tens of thousands are dead. None of them deserved that. It was just horribly bad luck.

By the same token, no one deserves to land big publishing deals.

We all want big publishing deals. And a select few get lucky.

I believe if you work hard, learn to understand the business, and work at bettering your craft, you can improve your odds.

But at the end of the day, it's still luck.

Now, I understand why my peers said this. I have worked hard. I think I write pretty good books. They're telling me my efforts have paid off.

But the writing business isn't like planting a seed and growing a tree. There are many other factors involved. This isn't science, where you can run an experiment and always get a predetermined result.

People really hate to think that we don't have complete control over our lives. In fact, even those meticulous folks who measure out their lives with coffee spoons have less control than they think.

The fact is, you never truly know what's going to happen. You can create incredible works of art, toil your entire life, and never sell a single thing. Landing a big publishing deal is not something within your control.

So focus on what is within your control.

Read. Write. Improve. Submit. Learn. Experiment. Try.

I'm not entitled to all of these good things that are happening in my career. I don't deserve success. And neither does anyone else.

But I can say, with complete candor, that getting lucky is a lot more fun when you work your ass off. :)

So ditch that poisonous sense of entitlement. Don't be bitter if things don't go your way at first. Concentrate on what is within your control, and keep at it because you love it.

Happiness isn't the destination. Where you wind up is determined by luck.

Happiness, true happiness, is the journey that takes you there.