The big disruption opportunity in book publishing

Apple says it has written $ 6.5 billion in royalty checks to iOS apps developers in the last few years. While my book had a section which shows the distribution of those checks is uneven, and this NY Times article in its series on the iEconomy confirms “A quarter of the respondents said they had made less than $200 in lifetime revenue from Apple. A quarter had made more than $30,000, and 4 percent had made over $1 million.”, the total payout is pretty impressive especially when you consider  so many of the apps are free or at price points under $ 2.

It made me think about how much the more established book industry pays out in author royalties at its much higher product price points (from $ 5 to 40). Actually it made me even more curious why so many authors have told me “You don’t make money writing books”. Or why so many publishers encourage authors  to think there is no money in books  “You will make more from speaking revenues, additional consulting etc”.  Part of me accepts the bell curve that few make it big like J.K. Rowling or Tom Clancy.  But part of me also wonders how THEY, the publishers, stay fairly healthy in business if there is no money in the book itself.

Apple’s model allows for some benchmarking. 

Apple takes 30% of the apps revenue. In contrast, the average book publisher takes 80 to 90% of the net book revenues. For its smaller take, Apple still manages to provide plenty of marketing at the store level, commerce functionality to the developer (so insulation from credit card/bank charges), and certainly, to a selected few a high level (TV, highlighted web) of individual marketing exposure.

Book publishers have some unique costs like the editing process and the paper and printing costs of the hard copies. That justifies a higher take but not sure it needs to be 50-60% more. As I have found they have become very good at managing their production costs. They outsource the copy edit, so it is a variable cost. And often it is to the cheapest destination somewhere in the world. In my last book, the copy edit introduced so many errors into the manuscript that I had to  ask for a re-do. (The publisher grudgingly agreed with no apologies for the additional review time I had to put in) Similarly with the artwork and the print, the publisher has learned to manage that pretty tight. They print small lots to avoid inventory and writeoffs. They pump more books through their manufacturing process (which explains why it takes them 6, 12, 18 months to get a book out when the workplan shows tasks which lined end to end should only take 6 to 8 weeks). They mostly buy stock cover art. Best I can tell, my 400 page hardbacks cost my publisher less than $ 3 a copy to produce (compared to list prices on Amazon in the high 20s and low 30s)

Publishers have also become cautious about author advances – smaller amounts, more focus on authors sticking to time and other commitments. Yes, some authors can be unpredictable “artists” that need micro-management  - but there are also plenty like me who bring a business work ethic to the craft.

Perversely, with their lower investments per book, publishers feel less pressure to market the product, so even that cost has shrunk. I have never managed to talk live to the publisher’s PR person assigned to my books. Not once in 3 years. She  has many other books to manage. On the other hand, my publisher encouraged me to hire a PR firm on my own budget. My two books with them have had a 100 or so substantive media/blogger write ups. By my estimate, less than 5 came from the efforts of the publisher. When a $ 2 billion company can generate so little attention to a product where it has 85+% equity, you have to wonder about its marketing investment and quality. In fairness, as with Apple, some books/authors do get special attention but the average author is encouraged/expected to make their own marketing investment. I did for the first book, but dramatically scaled it  back for the second one. With just a 15% stake, I had little incentive to, and asked the publisher to free up a specific marketing budget. They said they would but if they did it was not transparent.

What this points to is a huge disruption opportunity for a new generation publisher with the attitude that books should not be loss leaders for authors. And those who think a predictable price like $ 9.99 for an eBook will build tremendous customer loyalty.

Or for an Apple or a  Google, or for Amazon to accelerate its own book publishing efforts. The 50 to 60% difference in publishing margin above is a definite reason to.  Many authors are setting up their own self-publishing companies even knowing they cannot scale beyond their own titles, so there is a definite opportunity for someone that can bring scale.

Now, I can imagine some of you must wonder why I even waste my time writing books or writing blogs about them. It’s a dying medium, after all.

Guess again. In the last few years I have become much  more aware of the huge number of people who bring along books and Kindles on planes and trains. They easily outnumber the people who play games or watch movies on their flights/cruises. I am always impressed how difficult it is to find a seat at Barnes and Nobles. When I travel overseas, I see the ease with which I can clear immigration when I show my occupation is “Author”. I am always touched to see people line up to get an author’s autograph. The scene is almost from a Norman Rockwell painting, except it is happening all over even today. There are plenty of book readers and budding authors who deserve a newer publishing model.