The writing world is abuzz about Amanda Hocking, the 26-year-old self-published author who sold over 450,000 copies of her e-books in January alone, mostly priced between 99 cents and $2.99. She's now a millionaire. The writing world has been abuzz for a while about J.A. Konrath, who has very publicly blogged about the significant amount of money he has made selling inexpensive e-books.
Many people in the last week have sent me links about these authors, wondering...
What exactly is going on here? How in the heck are these self-published authors making so much money? Is this the future? And does this mean the end of the publishing industry as we know it?
The News That's Fit to Print
Before we delve into what this means for the world of books, I feel like it's important to take a deep breath and splash some cold water on our faces.
The reality: This is still a print world and probably will be for at least the next several years. Even as some publishers report e-book sales jumping to between 25% and 35% in January, the significant majority of sales are still in print. As I wrote in my recent post about record stores, over a decade after the rise of the mp3 the majority of revenue in music is still in CDs.
So let's not get out of hand (yet) about the scale of this e-book self-publishing revolution, if it is indeed one. Yes, this is real money we're talking about. Yes, these authors deserve all the credit in the world. And yes, these authors are also making money in print as well.
But we're still a ways away from self-published Kindle bestsellers making Dan Brown, James Patterson, Stephenie Meyer, J.K. Rowling kind of money, the old-fashioned way, through paper books in bookstores. It's not as exciting a story to remember that traditionally published franchise James Patterson made $70 million between June '09 and June '10, but it's still worth keeping in perspective.
Let's also not forget that Hocking, Konrath and a couple of others are the tip of a very large iceberg of self-published authors, the overwhelming majority of whom are selling the merest handful of copies. As Hocking herself writes:
I guess what I'm saying is that just because I sell a million books self-publishing, it doesn't mean everybody will. In fact, more people will sell less than 100 copies of their books self-publishing than will sell 10,000 books. I don't mean that to be mean, and just because a book doesn't sell well doesn't mean it's a bad book. It's just the nature of the business.Yes, it's new, it's a big deal, it's seriously awesome for Hocking, who seems like a super nice and humble person. But let's not also lose our perspective about the scale of the shift taking place. The book world is changing in a big way, but it still ain't done changed just yet.
The War Between the Worlds
So. Now that we are all sober and erudite, let me shock us back to life with this statement: Hocking and Konrath and others like them represent an existential threat to traditional publishers.
To understand why, we're going to need to take a look at how much it costs to make a print book vs. an e-book.
There is a perception out there, repeated endlessly around the Internet, that e-books should cost almost nothing. Electrons are (basically) free, so why should an e-book cost $11.99?
The reality, which I shall bold, italicize, and underline for some emphasis: Paper doesn't really cost very much.
Let's start with your basic $24.99 hardcover, the most profitable format. Of that cost, only approximately $1.50 goes toward the paper, printing, and distribution and all the stuff that publishers save with e-books. Repeat: $1.50 out of $24.99. E-books just don't save publishers gobs of money.
Let's look at a back-of-a-napkin breakdown of a print book vs. an e-book (all numbers approximate):
$12.50 to the bookstore (roughly 50% retail price)
$2.50 to $3.75 to the author (between 10-15% of the retail price)
$1.50 for paper, shipping, distribution (again, approximately. UPDATE this would be for a high-print-run book, HarperStudio cited $2.00 as average)
Around $8.00 to the publisher, which is split between overhead (rent, paying editors, copyeditors, etc.), marketing, other costs, and hopefully some profit assuming enough copies are sold.
$9.99 e-book (agency model):
$3.00 to the bookseller (30% of the retail price)
$1.75 to the author (25% of the publisher's share)
Around $5.24 to the publisher, split between overhead, other costs, and hopefully some profit
You can see why publishers aren't exactly leaping onto the cheap e-book bandwagon when there are hardcover sales to be had. They make a lot less money per copy sold. They're worried about cheap e-books eroding their more profitable print sales. Electrons aren't saving them much money.
Print is still where it's at for them, and they're not crazy to behave accordingly.
Here Come the Insurgents
That $8.00 vs. $5.24 per-unit print vs. e-book consideration? Overhead? "Other" costs?
Hocking and Konrath don't care.
They don't have overhead, unless you count rent, an Internet connection, the services they contract out, and a laptop. They're not paying for an army of editors, assistants, lawyers, marketing teams, sales teams, and executives. They're not beholden to shareholders.
They write books, they figure out the editing and cover design on their own, they blog to try and spread some buzz, and word of mouth does the rest. They can afford to sell their books at a low price.
And because they cut out the middle man (and because publishers' e-book royalties are low), self-published authors make more from self-publishing a $2.99 e-book (70%, or $2.10) than a traditionally published author makes from a $9.99 e-book (25% of the publisher's share, or $1.75).
You read that right. More money to the author per copy at $2.99 than a traditionally published e-book at $9.99. Many self-published authors are laughing their way to the bank on that one.
If you aren't going to be published in print in a big way and you have an entrepreneurial spirit, what's the point of going with a traditional publisher? Why not undercut the competition and make more money?
The Perception of Value Problem
Despite the glaring e-book royalty situation and some notable authors opting for self-publishing (such as Seth Godin), there has not yet been a mass exodus to self-publishing. Most of the biggest bestselling authors are sticking with traditional publishers. Not only is print still where the bulk of the audience is, publishers still provide an indispensable array of services that many authors (such as yours truly) simply don't have time to handle on their own.
But there's a problem that publishers are up against as we move inexorably into the e-book era: Perception of value.
Publishers can explain their costs and how e-books don't save them much money until they're blue in the face, but on a gut level many people simply don't believe an e-book should cost $12.99. It feels too expensive. A lot of people will simply not buy one or even go and pirate a copy because they feel like they're being ripped off.
Why could that be? Yes, you can't put your hands on an e-book or resell it, but people willingly plop down $12.99 to go to a movie and you can't put your hands on that or resell it either. Why have books suddenly become exorbitant at $12.99? Why is that too much to pay?
Well, it's partly because $12.99 is competing against the upstart $2.99 Kindle bestsellers and some other lunatics named Charles Dickens and Herman Melville and Jane Austen, who are giving away their books for free!! (Which, ahem, may be because they're long dead and in the public domain).
And therein lies a big challenge for publishers.
The Price of "Good Enough"
On the one hand you have publishers who are clinging onto the print world as long as possible and literally can't afford for prices to erode. They're counting on their quality control, their marketing, and their curation of what they feel are the top books in order to charge consumers a premium and hopefully instill a perception of value that new e-books "should" cost between $10.99-$14.99.
And on the other hand you have the self-published upstarts, who are willing and able to undercut publishers' e-book prices all the way down to 99 cents or even free.
Will publishers be able to maintain their prices or will they have to come down? And if they have to come down, how far will they have to go?
As always, the answer will be determined by consumers and their individual choices.
Stephenie Meyer's Twilight for $8.99 or Amanda Hocking's Switched for $0.99?
Harlan Coben's Live Wire for $14.99 or J.A Konrath's Shaken for $2.99?
Different people will make different choices, and I don't presume to know how that will play out (and for the record, I haven't read any of the prominent self-published authors).
Some consumers are more than willing to pay a premium for their favorite authors. I'm reading Into the Wild by Jon Krakauer right now, and it's so unbelievably incredible that no matter what I paid for the e-book it wasn't enough.
For other consumers, no book is ten times better than the other and they aren't willing to pay a premium. Many consumers just aren't that worried about the writing quality (as perceived/judged by the publishing industry), don't need the publishing industry deciding what to read for them, and just want a good story.
When the world moves toward e-books and print distribution is no longer where it's at, publishers are going to have a fight on their hands justifying the cost of their services to authors at their current e-book royalty rates.
They'll have a second fight on their hands as they try to adapt to a world where there are good books for sale for just 99 cents or less.
What do you think about the new Kindle millionaires, and what do you think it means for the future of books?