Sunday, 28 September 2014

Shifting Sands

The Rise of the Hybrid

In my earlier posts I discussed the changing marketplace for fiction, and how the changing technological platforms will shift the power balance away from traditional publishing towards smaller publishing houses and towards the author-acting-as-publisher.

I also said that before this happens, there will be a marked period of uncertainty, where traditional publishing houses, seeking to reduce costs, are likely to downsize, amalgamate or acquire. As part of this uncertainty, publishers will also seek to offset risk, by increasing the liability clauses in their agreements - pushing liability onto the author - and requiring un-met advances to be paid back.

It's a very scary moment when you see your predictions coming true.

I presented at a writer's workshop last week (the reason this blog post is a little later than usual) where two highly respected writers presented. (I presented, too, but I don't include myself as up to their calibre!)

Both writers, Philip Temple and Jackie Ballantyne, have decided to self-pub. Philip, who has been writing professionally for over forty years, has had multiple residencies, holds the New Zealand Order of Merit for Services to Literature and was awarded an honorary doctorate by the University of Otago.  Clearly, he has a long and respected literary career. And yet, and yet... Philip has experienced first hand a number of examples where publishers have been acquired by a larger house while a novel is coming out - to the detriment of the novel. He also reported that he has found terms and conditions are harsher; payments to authors are decreasing while expectations on them are increasing. So therefore, he has decided to self-publish his novel, MiStory, about climate change.

Jackie reports a similar experience. Her novel, The Silver Gaucho, has also been published this month.

Both novels are doing well, making the bestseller lists. Which, given the size of New Zealand, is unlikely to lead to fame and fortune. But it does represent something new, and something rather exciting. Jackie and Philip show that self-published novels can compete head to head in the bookstores and not only hold their own; they can do well.

These two writers represent an emerging phenomenon: the rise of the hybrid novelist.

Hybrid novelists are those writers who both self-publish and who publish through a traditional house. Some use their backlist, when their rights have reverted and discover a new readership (and income stream). Others write new works, and make a choice whether or not to self-pub.

This is the route I am interested in taking. Why?


Traditionally, publishers have been expert at:

  • identifying talent
  • quality control 
    • editing
    • formatting
    • project management
  • printing
  • distribution
  • marketing
  • talent management
These components, taken together, have constituted their brand.

But now, as we've seen, publishers have less focus on talent identification, and a greater focus on short term return. 

Editing, formatting and printing have been outsourced to freelancers. Distribution partnerships (with bricks and mortar stores) are decreasing. Marketing support is limited to the top sellers only; most authors are expected to manage the majority of their own marketing. Furthermore, much of the downsizing has meant experienced book publicists are now available as freelance. Talent management is almost non-existent.  Most publishers have outsourced almost their entire supply chain!

This means that many large publishers have only three points of difference
  • capital (money)
  • distribution
  • access to reviewers

What Does This Mean?

It means a massive brand dilution. Distribution can be replicated with technology or relationships. Reviewers are interested in the author, not the publishing house. Which leaves only money. And if the only thing differentiating you is money, you are highly, highly vulnerable. 


Because of how the business life cycle works. To survive in a declining marketplace, a business must be able to differentiate on quality. Anything else is too easily substituted by new, emerging technology.

Brand Dilution means New Opportunities

Writers are now able to purchase editorial, printing and project management support. We are able to do this in a multitude of configurations and for a competitive price. Hybrid authors like Philip and Jackie are at a particular advantage here, as they have existing relationships within the industry and their names are synonymous with quality. They already have a brand.

After all, what do readers want? They want a good product. Self-published authors are now able to provide that product. 

If what I saw this weekend is any symptom of the future, quality authors will be self-publishing quality books, and readers will be very interested.

So right now, I see definite advantages to joining the self-pub industry. 

Saturday, 20 September 2014

New Ways of Doing Business

Indie Publishers

In my last post (sounds like the army) I talked about profits per player being greatest in a growth market. And I talked about indie authors. But I forgot that there's another group of players also taking advantage of the growth market; that's indie publishers.

Indie publishers are an interesting group. These are the smart players that always emerge in a growth market, taking advantage of new technology and new processes. New players have a significant advantage; unencumbered by bureaucracy, they carry relatively little overheads and they don't have the tradition that can act as a stifler to innovation. These start ups usually operate in niche markets and often have deep knowledge and relationships within that market. These types of players are not unique to publishing - they are a consistent feature of all growth industries.

Start-ups like this are often balanced on a knife-edge. A lack of capital means that they are vulnerable to reductions in cash-flow and they can be take over targets by the big boys. Sometimes, they even operate in the big boys' space and this is really where you do not want to be, not if you're a startup. Unless, of course, you're an entrepreneur and you're wanting to be taken over, in which case you'll be happy to have an offer thank you very much and you can retire rich on your earnings.

The strength of the indie business model is demonstrated by the major players who have set up quasi-indie publication houses of their own. Examples of these can be seen in both the 'vanity' press of X-Libris and the like and the e-publishing arms of HarperCollins, or Swoonworthy, an imprint of Macmillian. 

As the e-pub market matures, which it will do, it's inevitable as death and taxes, there will be amalgamation of indie houses; some will go under; some will be acquired. others will merge. If you're a writer, pick your indie publisher carefully. They could be a ticket to a gravy train or a road to oblivion.

My gut feeling is that for me, searching for financial stability in this wide world of writing, indie publishers are unlikely to offer significant advantages. I don't write in a heavily niched space that would make them a useful partner. And an indie publisher's margins are too tight and they are too capital poor to offer me the carrots of the big publishers: security, advances, accolades and wide-scale distribution. 

However, for the start-out writer, I would really recommend the indies as an option. Because they are small, communication is easier, and because they are passionate about their niche they will be passionate about your work. Besides, you can learn a lot about publishing from them.

Publishers as Partners

In an earlier post I discussed how markets that are reliant on social capital - skills, creativity, talent - are much more stable than markets that are technology driven. Because if technology changes, the market changes. Writing is a social capital market, because good writing, great storytelling, cannot be substituted by technology. Publishing, on the other hand, has always been dominated by the technology of the printing press and the infrastructure of the distribution channels. And this technology is changing, shifting from physical to digital. I think we are only just at the beginning. See this article by Mark Coker in the Huffington Post.

Publishers are becoming commonplace. Good writing, however, is hard to find.

Economists would call this a relative scarcity.

With a shift in scarcity comes a change in price. And a change in price means a change in power.

Over the next five years it is highly likely that more and more writers will view their publishers as partners; even as suppliers. Publishers who can work with this paradigm shift will probably survive; those who don't, may not.

This means that writers now have options. We now have a variety of business models to consider - will we be supplier? or purchaser? Or a combination of the two?

I guess it depends on what we want. In my next post I'll talk more about goals and wishful thinking.

Saturday, 13 September 2014

A Rising Tide

Growth and Decline

The post last week considered the life cycle of markets, and how they grow, plateau and decline. 

In growth markets, profits per player are high; as the market plateaus, profits decrease. In a decline phase, profits for the remaining players may be high, but usually there are a lot less players. In a declining market, the players will almost always be major international corporates.

However, in a growth market, it is normal to see a lot of start-ups. Drawn by the opportunity of profits and relatively low barriers to entry, smart companies can do well. In a growth market, there is a definite advantage to be small and nimble. Growth markets change rapidly and large corporates, being infrastructure heavy, can find it hard to compete. 

Large corporates, being cash rich and highly aggressive, often lurk around the shoals of the growth market, snapping up clever smart start-ups, or creating little subsidiaries and sending them out into the wild west of the growth market, to see how they get on.

And that is exactly what we are seeing in the e-pub industry. Why? Because the e-pub industry is a classic case of a growth market.

The Wild West of Growth

The e-pub industry started quite small in 2004, when a new technology called an e-reader was introduced to the market. These e-readers took written content and digitised it; creating a virtual book. Slowly, readers moved to this new platform. New companies emerged, offering distribution services. Authors began exploring with putting their works on line. Companies developed offering print-to-digital services. And now, ten years on, Smashwords report double digit growth. The amount of books supplied in digital format is increasing at about 35 percent per annum. 

And most of these books are from authors, publishing their own work.

If the number of books are increasing so rapidly, does this mean that earnings per author is also increasing, too? 

Probably, earnings per author are not keeping up with the volume of product available. Writing is a tournament market, remember? However, I think it is safe to assume there will be a loose correlation between profit and product volume; the reason so many players are entering the market is because there is money to be made.

Large corporates are also entering the e-pub market. Corporates won't enter unless there's a reason; and this reason is always, always profit.

This suggests that profits per player are greater in the e-pub industry. 

So in my quest for financial sustainability, shouldn't I just avoid trad. publishers, with their low profit opportunities, and go straight to e-pub? Wouldn't I be best just to publish my own work?

Well, not necessarily. Because in a tournament marketplace there is no such thing as a free meal ticket.

Costs and Risks

There are less controls in a growth market; controls take time to develop, and bureaucrats are slow to respond to change. This means that small players need to be careful; unscrupulous behaviour is highly likely, and fraudulent behaviour is possible. This is particularly evident in a technologically based industry like e-pub, where authors may not be that tech-savvy, and where suppliers can operate from multiple countries. Piracy is not the only behaviour writers need to worry about.

The e-pub market is based on technology and we have already seen that markets dependant on technology go through growth and decline cycles extremely quickly.  This means that past behaviours which led to profits may rapidly out-date. Writers need to have wider skill sets now - it certainly helps if you have a grasp of the technology.

There is a high opportunity cost if e-pub. Time spent on organising formatting and distribution is time which a writer can't spend writing, and the writer will have to fund these activities themselves.

Reading is a personal experience, and quality is always important. So even if a writer can get a book out to market easily, in the end it's not quantity that matters; it's still quality and there is always a lead time to produce quality material. Self-publishing authors can't rely on advances or grants to fill this downtime.

In a crowded market, there is greater noise. How do readers find the quality material? For myself, I generally don't read self-pub work. Not because I'm snobby, but because I'm time-poor. If I read something from a trad publisher, I know it's been vetted by a panel of experts, edited professional and formatted correctly. I would rather pay more and read good material. 

Which brings me to the next post: the rise of the hybrid author. Personally, I think this will be the way of the future.   

Wednesday, 3 September 2014

Players, Markets and Pagers

First, A Warning!

I need to add a disclaimer to this post: it is quite technical.

If you hated economics at school, this is probably not the post for you.

On the other hand, if you enjoy understanding people's motivations, well, then this might be of interest. Because economics is really only about understanding why people do what they do - except economists usually view people's behaviour as aggregates, not as individuals.

This post is a very brief summary of today's publishing industry, and how writers can use this knowledge to their advantage.  You should view this as an overview only - if you want to find out more, click on the links embedded in the text.

Okay, here we go...

Fiction Marketplaces are Like Tennis

The writing marketplace is a 'Tournament Marketplace'.

Tournament marketplaces are characterised by
  1. High numbers of players
  2. Low average earnings per player
  3. Very small number generating profits
  4. However, profits for a tiny number of players are extremely high
  5. These extremely high profits act as an incentive for new players to join the marketplace
Other examples of tournament markets could include professional tennis players or (get this!) merchant bankers. Seriously. (I once read a whole economics paper on this. Personally, I would have thought merchant bankers did okay, but apparently not. Poor things... ) So - If you want to get rich, DON'T join a tournament market. Instead, be an engineer or a doctor, where both the average earnings and the profits per player are high.

However, you may still have a dream of being a paid writer. Like me, you may even know in your head that the chances of making any money are incredibly low. So, if you decide to enter a tournament marketplace, do it with your eyes open. You need to have an alternative form of income, at least until you manage to hit the jackpot!

The Product Life Cycle - What the Pager Can Teach Us

Markets generally go through recognised stages. We've all seen this happening - for example, in the personal messaging industry. In the 80s cool people wore pagers. Pagers were a sign that you were important; that people actually wanted to contact you.

Pagers were expensive, available in a wide range of colours and you could get accessories - belt clips and bags and so on. Quite a few companies made pagers.

Image from Wikimedia Commons

In the late eighties, the cell-phone emerged.

 Image from Uncyclomedia Commons

And eventually, the new technology replaced the pager.

The pager lifecycle of growth, plateau and decline, is replicated in most industries. Turnover time is faster in industries that are heavily reliant on technology, because new technology is highly disruptive to a marketplace.

Product Lifecycle. Image from Wikimedia Commons

Industries that depend on human skills are have longer life cycles. Because while it's possible to replace technology, it's much, much harder to train a person. The major disruptors to skill-based industries are social factors: fashion, wages, or demographic shifts.

How Does this Relate to Writers?

The traditional publishing industry is a classic case of an industry in the decline phase.

By 'traditional publishing industry', I mean a little more than just the publishing house. I mean the whole industry: trad publishers + printers + distributors + bricks and mortar stores. 

(I'm also talking about first world publishing of trade fiction. The story for emerging markets is a little different, as is the marketplace for non-fiction. Even within the trad. marketplace there will be variations against the type of genre. For example, children's picture book market is quite different to romantic fiction - picture books require illustrators, they are purchased by adults (not the readers) and generally, kids and playgroups prefer paper.)

Declining markets have the following characteristics

  1. Few players
  2. High barriers to entry
  3. Limited competition
  4. High consolidation (i.e. players are large, complex organisations). Mergers and acquisitions are high.
  5. There is still profit to be made, but only by large players.
Evidence for this decline can be seen across the publishing industry:
  1. Decreasing number of major publishing houses 
  2. Strong differentiation of market - major players stick to their point of difference. This suggests there are major risk factors in moving into another market, suggesting that margins are extremely tight.
  3. Decline of bricks and mortar bookstores
  4. Reducing demand for print
Therefore, profits per player in the traditional marketplace are low

Writers of traditionally published fiction would be wise to consider the following:
  • Traditional publishers are likely to be experiencing shrinking margins. This means that advances are likely to be smaller and royalties will be low. 
  • Publishers will seek to reduce risk (and therefore cost). Therefore, contracts are likely to include unlimited indemnity and liability clauses. Furthermore, if your sales are not up to forecast, you will be unlikely to get a second chance; you may even incur court action if a publisher cannot recoup its advance.
  • Support for writers such as paying for publicity (advertising, marketing) or provision of any other 'value-add' like paying for a book launch, is likely to decrease.
  • Publishers will reduce staff. This means that writers may be expected to participate more in the book-to-market process (for example, checking proofs) and that administration support is likely to be patchy. You would be wise to check everything - the cover art on Kindle, the price on ibooks - because it's likely that there won't be enough staff to monitor this properly. You could even find that your publisher downsizes or closes while your book is in press.
  • Time taken to respond to queries will take longer, as will consideration of manuscripts.

This suggests that for me, in the quest of increasing my earnings from writing, I would be better to focus my energy outside the traditional publishing market. I would be better to look for a market which is in a growth phase. 

And where is this, you ask?

Well, stay tuned. I will discuss this in my next post.