A Thought on the Shifting Ideal of Value and Price

I read this piece in the Bookseller today and there were a couple of comments I’d like to address. First, here’s one from everybody’s favorite literary crusader, Doug Preston:

“I think Jeff Bezos is an evangelist as much as he is a businessman. He believes he’s making the world a better place and I think he’s less concerned about making a profit. Now that might sound like a nice thing but if you study history you’ll realize it is the people who believed that they were right, believed it absolutely, who are the ones who do the most damage.”

Can’t disagree with him there. It is very true that people who believe that they’re right even in the face of mounting contradictory evidence, are capable of doing the most harm. All I can say is, as such, Preston himself needs to take a long, hard look in the mirror.

But his relative cluelessness and lack of self-awareness notwithstanding, there’s another quote in the piece that I find far more interesting. It’s from author Germaine Greer:

“Amazon wants to sell e-books at less, so they should. They should cost less because they don’t have to be put together, stitched, printed, designed, blah, blah, blah. If you skip all that and all you have got is a ribbon of text on a Kindle, then it should cost you pennies, frankly.”

Now this is obviously going to set some people on edge. I, for one, am not down with the pennies assessment, but I do agree that the pricing for ebooks should reflect the far lower production costs. As a side note, does anyone else find it kind of ridiculous that many publishers are now openly dismissing production costs as not that big of a deal yet at the same time arguing royalties need to stay low to cover those expensive costs? Which is it? I think it’s pretty obvious that they’d like it to be both, depending on the question they’re answering, and who they’re answering it to. Remember, just a couple of years ago, these same publishers were swearing up one side and down the other that ebooks weren’t cheaper to produce than print, and some even went so far as to suggest they might actually be more expensive. The massive profits publishers are pulling in from ebooks today shut that line of thought right up, exposing it as the lie it always was. Anyway, back to the quote…

Here’s a tweet I found in response to it:

“Ebooks should cost what readers are willing to pay for good writing, editing and design. Many readers value those far more than pennies” — Caleb Woodbridge @calebwoodbridge

Here’s where I have an issue. The word “should” in respect to what readers want to pay is out of place. There is no place for should there. Readers will pay what they want to pay, be it $20 or just the pennies that Greer suggests. There’s no should involved, only what the market will bear. But this got me thinking about the notion of value and how that relates to price. Sure, it would be nice if readers were interested in paying high dollar for concepts and ideas within a story but, and here’s the kicker, they never have. Nobody in the industry had a problem with that, either, up until they lost control of pricing and fell behind the curve on reader expectations.

I’ve found myself comparing newspapers and book publishers a lot lately, mostly because the Amazon/Hachette dispute has exposed more of the underlying strategy of the publishers. It’s a strategy that appears, on its surface, to mirror the strategy that newspapers used to decimate their own business. This is another example of that, I think.

Contrary to what you may have been told, newspaper readers never paid for the content in the paper, they paid for the bundle of services including coupons, circulars, classifieds, etc, etc. The bundle they bought wasn’t even priced to reflect the value of the content. It was done so to maximize the audience to better support the exorbitant ad rates because that, and not selling content to readers, was where most of their revenue came from. But as the value of their bundle declined, the industry decided people should pay for the content. Not only that they should, many believed almost religiously that they would. They were wrong. Some have but most won’t, principally because they were not paying for that content in the first place. Nobody in that industry segment had any problem with it, either, so long as the ad sales kept flowing. Once that dried up, though, their argument switched to one of value and what readers should do.

Books are having the same problem. It’s popular in some circles to claim books aren’t commodities but that’s disingenuous. People have always paid for the container not the content. Pricing for books of similar form have always been eerily consistent based on the form. There was never any kind of premium pricing going on between similar books that I’ve ever seen. In fact, the more popular books were usually subject to more discounting than others. Oddly, ebooks are exhibiting a far greater range of pricing relative to its form than almost any other type of book, yet that’s hardly ever mentioned when folks start discussing the issue of pricing. Funny, that.

Now that the value of those older containers have diminished somewhat, and ebooks have emerged as a potentially very cheap type of container, the discussion is starting to turn to one of the value of the content. Just like newspaper readers never paid for the content but the packaging, book readers have never paid for the content, just the packaging. And that’s leading to suggestions about what readers should do. According to some, they apparently should now pay for something they’ve never paid for in the past. That argument simply doesn’t fly and, unless you’re interested in watching book publishers piss away their business like newspaper publishers did, it’s not one anybody should be interested in pursuing.

The difference here is that should absolutely applies to people producing and selling books. People buying them, however, are under no such requirement, nor will they ever be. The pricing structure for newspapers was to sell to a mass audience to support ad rates. Pricing in books was to sell mass numbers of similarly commoditized books in total to stores and other retailers. There was never any point that the value of the content inside was the principle driver of the price, except to the people buying them. Even then, that value has been established by the practice of commoditizing book prices based on their form. As newspapers learned the hard way, you can’t just shift gears and expect people to pay for something they’ve never paid for when it’s convenient for you to do so. There is no such word as should when dealing with the choices readers will make for themselves.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

A Hazy Future Can Make For Strange Bedfellows

Let me start by saying I like Mike Shatzkin. I see his work as a view from the other side. He’s very much entrenched in the traditional worldview but, unlike some, that doesn’t mean his thoughts are ignorant and should be discounted. Certainly, he falls into some of the same traps of assumption and false narratives that others do, but who involved in following any of this and voicing opinions on it doesn’t occasionally, in some form or another, including myself. I find Shatzkin to be a fairly vocal critic of publishers. Certainly, his point of view can sometimes be very Inside Baseball, as it were, but there’s value in seeing and understanding that point of view. Everyone on all sides have reasons for what they believe, and I’ve always thought the underlying reasons for those beliefs are more important than the beliefs themselves. That’s why I tend to be far more harsh on people voicing opinions based on faith rather than fact, assumption over analytics. You can’t argue with someone who has no sound basis for what they believe. Logic doesn’t work on people whose beliefs are formed without it.

Anyway, here’s an article by Shatzkin from back in May where I think he asks four very pointed and cogent questions, not only about the future of publishing, but what the nature of that future will be. I’ll first state the question he presented, then a short quote from Shatzkin on each point before expounding in my own rambling way…

1. How persistent an activity is immersive long-form reading?

“As my generation is replaced with digital natives, a decline in the market for novels would seem to be a very likely consequence. Or, at least, novels as we know them now.”

I agree to a point. The novel, perhaps more than other types of writing, fit the form of the printed book extremely well. But if it was the pinnacle of the form for fiction, digital “books” open up new channels of possibility with the potential for new forms to emerge. I am confident the novel in its traditional form has legs, be it digital or print. But I’m not as convinced it will remain the dominant form for fiction in the long run. What it will be ursurped by, now that’s a question I’m not sure any of us can answer at this point.

2. How persistent is the demand for printed books for long-form reading?

“My hunch is that ebooks will continue to take share from print for long-form reading, in fits and starts, but inexorably.”

I’m not going to call it a hunch, I’m absolutely certain digital will take share from print over time. I think hardcovers will transition into a boutique market, likely a larger one than what has developed for vinyl albums, but a much smaller niche than it maintains today. I think trade paperbacks have a niche of their own, largely because of the efficiencies and portability of POD technology. This niche will be larger than the hardcover one, cheaper and less ornamental but, however limiting it may be, paper is a great form for static work. And I suspect the conceit of books used basically as furniture and/or expressions of your personality may hold on longer than widespread numbers of people actually reading on paper. At the end of the day, though, I think digital is going to account for 85-90% of the industry’s sales in the not too distant future.

I have one caveat to this, it’s dependent on attracting younger readers and that’s dependent on being available when, where and for how much they want. The only way I can see print maintaining anything close to even 50/50 market share is if we all fail to bring in younger readers, print sustains through the older audience and the industry as a whole contracts greatly as that audience dies off (see: newspapers). But for this to happen, it would constitute an epic failure of the big houses as well as the smaller ones, the indies and retailers both large and small. Possible buy not likely.

3. How well do informational illustrated books compete with alternatives?

“My candidate for a Black Swan here is some industrial-strength attempt to curate the vast amount of video and other Internet-based content into ‘packaged’ competition for books that teach skills.”

I can’t say as I disagree with this either. I think it’s only natural that the vast amount of information available at our fingertips will be packaged in such a way as to maximize it’s use and, ultimately, revolutionize the way we approach education. Anybody looking at the mind blowing costs of college these days can’t help but think of it as an area in dire need of revolution. This will not be good for publishers of textbooks, however, who control a vast, extremely lucrative, captive market of students. But as time goes on, it will become more and more apparent that they no longer control any kind of monopoly on information. What’s available to all of us instantly will end up as the death knell of their exploitative business model. Couldn’t happen to more deserving group, either, in my opinion.

Some forms of book haven’t yet translated in any kind of peak form to digital alternatives. But it’s only a matter of time before they all do. The technology isn’t just going to stop progressing at today’s level. It will keep getting better and better.

4. How much of the creation and selling of books spreads beyond the book business?

“I’m sure that in less than five years every multi-million dollar marketing plan will have an ebook component: sometimes free, sometimes freemium, sometimes paid. Over time the businesses that do this work will learn, probably faster than many book publishers, how to use the online discovery mechanisms to drive the attention of relevant consumers.”

Why this isn’t happening more already is a bit of a surprise to me. Despite what publishers may tell you, it’s not that expensive to bring a book to market. Much of their expense comes from the model they developed to do so in the conditions that it developed. Things have changed, barriers for entry are little piles of rubble in most places now. Individual people can and do access this market regularly and to good success. If you’re a company of any size or bankroll, the cost of diving into this type of product is miniscule.

But more than just using them as a marketing add on, I can see all sorts of businesses using digital writings to supplement their brands. You see a business like Chipotle already experimenting with things like short stories on cups and their own miniseries television show released directly to Hulu. Producing entertainment or informational media and distributing that to an audience is no longer the sole purview of media companies. Everyone can be a publisher now and over time, everyone will.

So there’s Shatzkin, a person whose opinions I often disagree with yet I find I’m in near total agreement (to some extent) on these four questions, all of which forward-looking beyond the present day conditions of the publishing industry and it’s nascent battles with Amazon and the digital revolution. Just because someone seems to be on the other side of the fence today doesn’t mean they’ll always be there. Look at the underlying reasoning for why people believe what they do and you may find more commonalities than you expect.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Published in: on August 28, 2014 at 2:51 pm  Leave a Comment  
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Revisiting Paywalls Revisited

(Note: this is an unfinished piece from April of 2012 that’s been sitting as a draft in my WordPress que of posts since then. I never did get around to answering the question I asked at the end, but it increasingly looks like there’s no real reason to. The answer seems even more clear now than it did then, so much so, that the question itself even seems rhetorical now…)

Earlier this week, I received a message from a friend of mine asking if I’d heard about the latest round of layoffs at our local newspaper.  Since I moved from Cecil County to Chestertown nearly two years ago now (wow, time flies) I’ve found that I’ve lost interest in the comings and goings in that particular neck of the woods.

The state of printed media in my hometown was a popular topic of discussion on this site for the first couple of years, primarily because it was close at hand, their struggles echoed the newspaper industry at large in a lot of ways, and I still had connections with many folks in and out of the company. As I mentioned in the past, I worked there myself on two separate occasions in various capacities.  Before I received that message the other day, however, I hadn’t experienced a stray thought in their direction for months. 

Professionally speaking, I’ve moved on from any hope of getting back into the newsprint business.  It’s not just the derth of jobs (layoffs, buyouts, downsizing still abounds industry-wide as the revenue sinkhole just keeps getting deeper year after year) it’s that I simply don’t see a future in that area as it presently exists and I have yet to find a digital alternative that looks truly sustainable. Better to look in other directions, I figured.

Ebooks have been my focus for the past year, and, to this point, I see all the possibilities for revenue generation and sustainability within that area that are lacking in the digital-alternative newspaper segment. I’ve been writing, publishing, experimenting, expanding my skills and, most encouraging of all, actually selling my work at a level I’m not scoffing at (nor are the folks whose bills I’m paying with that money)*.  The gist of it is that, to my way of thinking, the struggles of newspapers are yesterday’s problems, ones that I’ve left, rather properly, in the past.  They had ample opportunity to innovate and adapt but didn’t, and the slow crawl to oblivion may be irreversible at this point. 

(* Note: Since then, I’ve since rethought my approach to ebooks and digital publishing. I did bring in a decent chunk of change at the time but I grew dissatisfied with my own efforts, so I’ve been cranking out new material, reworking old material and developing a different, much more expansive approach to this that I’ll be kicking off likely early next year, if not sooner. Try doing that when you’re locked into a publishing contract.)

So, when I read this message about further layoffs, it was a bit like hearing that an old girlfriend you were serious about a decade ago just got married. You hadn’t thought about her in years, she played no part in your day to day life for as long as you could remember, and news that would have seemed enormously important not that long ago ends up met with a shrug. It’s not that it doesn’t sadden me a bit to see the continued decline of my hometown newspaper, it does. But at this point, there’s really nothing that can be done about it. The point of no return for many newspapers passed by a while ago.

In today’s atmosphere, resources have eroded to such a level that genuine full-scale innovation really isn’t possible any longer. If it had been undertaken 3 or 4 years ago, it might have made a difference. Even scrapping the enterprise and starting over isn’t really feasible at this point simply because so many skilled people have been let go, particularly on the content side. You can’t really launch a new direction in an increasingly content-driven market when saddled with a money losing print albatross and a sparse skelton crew of leftovers. It saddens me to see it but, again, all of this at least could have been avoided with a bit of vision and foresight a few years ago when it mattered. But you can’t cry over spilt milk now that the carton’s down to the last few dregs of backwash.

All of which got me thinking about the last stand of newspapers, the paywall. Much like those famed 300 Spartans fending off the Persians, paywalls may hold off the onslaught for a short time, but in the end, the Spartans all ended up dead. For the Greeks, however, that stand provided the necessary time to execute a larger strategy that ultimately stopped a Persian takeover. Do newspapers even have a larger strategy to survive beyond simply fending off immediate annihilation? Or are paywalls their final stand?

Update

So, here we are two and a half years later, and I think this question answers itself. There was obviously no deeper plan going on at most papers, and the renewed push for paywalls then did little if anything to stem the hemmoraging of revenue. Here’s a piece by Clay Shirky essentially penning the obituary on the print newspaper business. As you can see, not only did this strategy not work to stifle print declines, it may well have instigated digital ad declines for them as well. They killed their future trying to protect a past that, at best, was on life support.

As for the company I mentioned, there have been more layoffs since these and the company was eventually sold to a venture capitalist known for slice and dice acquisitions. Doomed isn’t a strong enough word for their prospects at this point. Book publishers and their writers should take note of this. Following a print protectionist strategy did great harm to their emerging digital business. Ask questions, loudly and in no uncertain terms, anytime someone from the industry tries to tell you that restricting digital to protect print is a sound idea and in your best interest. It didn’t work here and I don’t hesitate to say it won’t work there, either.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Breaking the Scale: Bigger is not always better

A couple weeks or so ago, I left a comment on The Passive Voice under an article about Hachette’s CEO and his response to Amazon’s late night call to give him hell…er, politely inform him of your desire that they think critically about their pricing decisions, and seriously consider dropping the push for higher prices. Anyway, I got into a little bit of my experiences in dealing with large consolidated corporate accounting departments and the thinking I’ve run into about higher prices in days gone by. It got me thinking about a couple things and how this might relate to further understanding Hachette’s position and what the possible consequences could be, even if they get what they want.

Here’s the first comment I left:

“It may even be simpler than that. It reminds me of something I called the bean counter effect at a couple of magazines I worked for. They just couldn’t conceive of the notion that a higher price didn’t automatically mean more money. They wouldn’t recognize any kind of multiplier effect of more for less, no matter how many times we showed it to them on paper. It was a risk, unquantifiable (at the time) and all they knew was the difference between what we were selling at and the increase they wanted. We were selling print ads but it’s the same principle.

“Amazon could have said each sale at $9.99 generates a thousand extra sales and they wouldn’t have recognized it. They simply can’t see past “If I sell this for $13, I make $3 more than if I sell it for $10.” What I could never get across is that it’s not the difference between $13 and $10 that’s at issue, it’s the difference between $10 and the $0 that a not-insignificant number of people will choose instead $13. In this case, it’s the difference between $17.50 and $0 with Amazon’s multiplier data, which makes it an even dumber choice, I think. You’re not gaining anything at $13, you’re losing all the people who would have bought at $10. Essentially what you’re doing is making your customer base smaller and milking your best customers for extra money.”

Later on in the thread, I related a second instance of what I considered overly simplistic thinking involving money we paid out in this case. Here’s that second comment:

“At the same time though, you can’t always trust what they’re telling you about marginal cost. I was the managing editor of a free distribution magazine several years ago for a publisher who’s name would be instantly recognizable (not any of these folks). We were strictly ad supported and we operated on a 60/40 ad to editorial ratio, meaning we basically added up paid ad space and that number would represent 60% of our page count.

“Now I was a huge proponent of trading out ad space for various kinds of work we needed whenever possible. These trades were not counted as paid space so that added no cost outside the simple real price of what we paid to produce that space. Say I needed a delivery route run, something that would take a couple hours. I might pay someone $100 to handle it. Or I would offer them an 1/8 page ad for their business or whatever that’s listed at $150. They always took the ad, every time. Our real-world cost for that space across the entire print run was something like $20. And coming from non paid space, that $20 was a total sunk cost. So I traded $20 worth of sunk cost in exchange for not laying out $100 in real cash, effectively adding $80 to our bottom line. (You could argue it was adding the full $100 to the bottom line considering that $20 was being paid no matter what.) I was saving us somewhere between $2,000-$3,000 an issue with this stuff, if not more.

“Well our accounting department threw a fit. They insisted that we were actually losing $50 on this transaction. (Actually, they started out saying we were losing the full $150 price of the ad but I did manage to convince them the $100 was going to be outlayed in any case.) No matter how many times or how simply I laid it out for them, they would not move off the position that we were losing $50. It turns out their accounting systems had no mechanism for quantifying this because there was no revenue coming in but when they audited the paper, they recorded these ads as paid space, so we showed a deficit between the revenue they said we should have and what we actually produced.

“Eventually, they forbid me from making any more trades rather than adjust their accounting systems to record these gains. To make matters worse, our bottom line actually looked better on paper after they banned trades despite the fact that we were now spending a few thousand more per issue than we had been. That’s when the light bulb went fully on for me. If their standard accounting practices can make a real world $80 gain look like a $50 loss, and do it in such a way that it’s actually defensible and looks like it makes sense, can any of the figures they produce be trusted? How many other gains are showing up on the budgets looking like losses?

“Now this is a little simplified. There are tax issues and time a designer spends getting the ad together and such. But generally, we would get about 4 times the value back on a trade than we would paying out for it, and they banned me from doing so.”

I’ve found myself recently re-asking the two part question I wondered about back then, why in the world would you throw away essentially free money (in the instance of trades) and how do they not see that a much broader customer base at lower prices makes a far more stable longer-term revenue stream than a smaller base with higher prices? I also spent a not-inconsiderable amount of time worrying about the fact that I knew absolutely that the budget sheets we were getting from them were showing an artificially better bottom line than what actually existed. The disconnect between reality on the ground and the faux reality of their accounting systems was an insoluble issue simply because they wouldn’t even admit there was a problem.

I’m watching book publishers and their supporters today making arguments that are just as inexplicable to me as those were then. Do they not understand what’s really going on out here? Can they really be deluded enough to believe that readers will be supportive, even in the short term, of a strategy that gives them less choice, more restrictions and a higher price? Were they being taken in by comments from some readers supporting such a position? What I knew, from lots of experience, is that there’s often a hell of a difference between people speaking in high minded pronouncements about paying a premium to support their “culture” or what have you, and the choices they actually make when it comes time to break out the wallet.

I’m starting to believe the problem here is scale. Larger and larger companies require higher and higher outlays of resources just to keep the lights on, meaning the proportion of price needed for simple infrastructure that has nothing to do with actual production expenses grows near exponentially with the size of the entity. We’ve had it drummed into our heads that scale is beneficial because it provides greater negotiating leverage and greater purchasing power at lower prices from larger levels of bulk buying. This may have made sense at some pre-internet point, but does it still make sense in the current atmosphere? Does it even apply to something like ebooks that requires no physical materials to produce or distribute, making the notion of bulk buying power completely irrelevant? Certainly, Amazon is a large and growing company, their scale does have decided advantages, but is there a similar advantage from scale for publishers in dealing with them? It certainly doesn’t appear that Hachette’s size is any kind of advantage. If it were, there’d be no dispute going on.

Penguin Random House is often pointed to as the direction of things to come, but should it be? Consolidation in the periodical sector, looking back now, clearly did considerable harm to those publications siphoned up in it. It looks like efficiency on the surface but in practice turned out to be just the opposite. The question I have now is does the counter effect of increased infrastructure costs of consolidation counteract any bulk savings? I say yes, and then some.

Hachette’s not arguing for profit so much as arguing for maintaining revenue to cover sizable infrastructure costs. The obvious counter of why aren’t you decreasing your infrastructure costs to support those margins doesn’t seem to be a very popular one. It is, however, a needed question to ask and answer. There’s a line of thought going around that the lower production costs for ebooks and POD should have no bearing on the end retail price. I find that as inexplicable as not understanding a multiplier effect from lower prices or the savings from trades based on actual out of pocket expenses. Of course those lower production costs are a factor in price. Not only that, they must be.

Smaller entities are currently taking full advantage of these lessened costs. The problem for large publishers is their sheer size changes the equation. For an independent, the lower costs are directly tied to both lower prices to readers and a higher margins to themselves. For the larger entities, the lower price is threatening because of the sizable portion of the cut must go to the infrastructure costs associated with such scale. They can’t risk the multiplier effect not taking place because they need the raw revenue stream to be somewhat constant to keep meeting payroll and keep the lights on. The conventional wisdom that bigger is better is increasingly looking to be just flat wrong in this atmosphere. And if you’re doing it as a publisher to “compete” with Amazon, you’re making an even bigger mistake, as well as displaying a fundamental misunderstanding of the word compete.

There are numerous reasons to believe that, in the current environment, it’s better to be a smaller entity. One is that your accounting doesn’t have to be so complex and standardized as to be inflexible. Really, the problem I had with trades was that what I was doing didn’t fit into the parameters of their accounting software, so instead of adapting the software they just stopped me from doing it. Admittedly, changing that software is a pain in the ass on a much smaller scale. On a giant corporate one, I can understand why it wouldn’t be your first choice. But that’s stupid! I was one magazine adding an extra $50 grand a year or so to our bottom line doing what I was doing. This company had dozens and dozens of publications. They chose to throw that away because of inertia. It was a big enough amount to be a pain but not a big enough amount to force any accomodations. And they somehow managed to make the budget sheets look better than they had when they were in reality, worse.

Another is that the costs of the bundle of services publishers offer are inflated well beyond what those same (or better) services cost in an open market. That’s why you see some trad writers, when discussing the costs of publishing on their own, will cite numbers anywhere from $15k to as high as $40k for those services. It’s what they’ve been told these things cost. The knowledge of the reality that this work actually can cost at least 10 times less outside the gated publisher world isn’t even available to them. My lower prices/higher margin sales can relatively quickly cover those costs where your lower royalties require many, many times the number of sales just to cover the overly-inflated expense figures. Publishers costs in this regard are inflated for the same reason they want to maintain higher prices on the books themselves, their huge infrastructure costs have to be paid from somewhere.

In the present environment, scale isn’t some kind of competitive panacea for suppliers to retailers. It’s an albatross of expense and inefficiency hanging about their necks that necessarily limit their ability to fully exploit emerging markets and bring costs down in flattening if not outright declining markets. Scale, which may have been useful in the past, is increasingly suffocating now.

It’s really a matter of intetests. Is it in a writer’s interest to sign on with one of these increasingly consolidating publishers? How much does their sheer size, and the need to pay for that, change the dynamic between their interests and yours? How much longer will it be before a critical mass of writers realize that they’re bearing much of the weight of paying for many of elements of the publisher that have nothing whatsoever to do with producing, marketing and selling their books? They’re paying their expenses using you for pennies on the dollar, while pocketing the gains from the diminished to near nonexistent ebook production costs. Just on a simple dollar for dollar examination, the publisher’s interests run almost completely counter to my own and that’s moving more into the publishers favor as each day passes.

When the print ad revenue collapse hit newspapers, the companies with the largest scale responded the only way they could, tens of thousands of people losing jobs in round after round of layoffs. This not only hurt their ability to handle the size they had become, it further handcuffed their digital growth, which is now evident in the fact that their digital revenues are also declining and managing little to no separation in the rate of loss as the decimated print sector. Their scale forced the cutbacks which in turn left them understaffed to handle the essential tasks and woefully short on money for experimentation and growth in digital or keeping forward-thinking folks in their employ. Their scale became a self-defeating necessity to maintain itself rather than the advantage it had initially appeared to be.

What happens if we have a bad holiday season in print books sales this year? Can Barnes & Noble even sustain through another massive hit? Publishers are already squeezing writers both with deep discount clauses on print books and low ebook royalties (not to mention shrinking advances). If a round of layoffs or two end up a reality, the value of their bundle of services declines even more than the over-inflated costs we’re already experiencing. In turn, these companies become even less efficient, and less productive as they become understaffed to handle their sheer size. And raising prices to recoup print declines simply is not going to possible.

In the future, bigger is better may no longer be true, even for Amazon. People seem to be under some impression that it takes a giant to slay a giant. But that’s not altogether accurate. As Amazon continues to grow and expand, it’s own scale is adding massive infrastructure costs by the day. It’s not going to be one big company that gets them (certainly not one big consolidated publisher). They’ll suffer the death of a thousand cuts as many small, nimble entities target various bits and pieces of what they do, undermining the whole by eroding key components of it wherever possible. And Amazon is in a position where it simply cannot raise prices to compensate. Trying to do so will drive customers away in droves which will, in turn, further exacerbate the infrastructure cost problem. It can try to further squeeze suppliers but there are limits to how far that kind of strategy can take you, too. If they get complacent and anything is going to get them, it will be their scale that’s they’re undoing.

Smaller Is Better appears to me to be the approaching mantra of the 21st century. As huge consolidated corporations fall by the wayside under the weight of their own infrastructure, the only question I have left is how long it will take for Wall Street and business schools to catch on. Consolidation and ever larger entities may seem like something beneficial to those businesses today but, ultimately, they might only be serving to break the scale.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

A Letter to the New York Times Public Editor

So I just sent off a letter to Margaret Sullivan, the public editor of the New York Times, asking some very pointed questions about their journalistic standards and the ethics involved in yesterday’s piece on Douglas Preston, especially with regard to its one-sided nature, the timing of its appearance and the sizable ad buy from Preston set to appear tomorrow. I did get an automated reply from them, so they have received it. Hopefully, some answers to my questions will be forthcoming. Here is the letter in its entirety:

Hello,

I’m writing in reference to the article that appeared in yesterday’s Tech section of your paper featuring author Douglas Preston and his Authors United effort by writer David Streitfeld. I have to say I’m extremely concerned and disappointed. The article itself was very one-sided and dismissive of a great number of authors who have differing opinions on the matter. When the subject in question is also reportedly paying your paper over $100,000 for an ad in tomorrow’s paper, this not only is unseemly but gives the appearance of a quid pro quo arrangement.

You are the New York Times, The Grey Lady, what should be a well-respected voice in journalism. I believe we deserve some answers to how this article came about. Here are several points I believe you have an obligation to explain:

1. Who initially pitched this article? Was it Preston himself?  Was it Streitfeld? Was it someone else within the Times staff assigning it? What was the thinking behind it?

2. Who was responsible for the timing in which it appeared? Was that timing in any way connected to the very expensive advertisement taken out by Preston in your pages? If so, what is your justification for that? And if not, how do you excuse the ignorance of how this would appear, especially considering the article itself specifically references the ad and when it would run?

3. At one point, Preston makes reference to asking Hachette for his recent sales numbers and apparently received accurate, up to date figures very promptly. Did this not raise any eyebrows with either the author of the piece or any editors at the times? Did anyone think to question the validity of those figures or why a company such as Hachette was so quick to respond in a manner totally inconsistent with their history?

4. What editor approved this article and what justification was used to allow the clear bias within to appear in your pages essentially unchecked? Was this editor aware of the large ad buy connected to the subject of this piece and did that play any role in its treatment?

5. What is your standard policy for editorial coverage of people or organizations who also happen to be advertisers?  Do you have one?  Are you or anyone at the Times concerned with the appearance that this was simply a value add in exchange for the ad buy?

6. Why was there no effort to present the opposing point of view, one which is clearly supported by a large number of people both inside and out of the publishing industry? Did the editor who green-lighted the piece show any concern that it was offering only one side of the debate, in a completely uncritical manner while being openly dismissive of the other? Did the ad buy play any part in the tone of the piece or its content?

7. Did the editor in question voice any concern about the reference to the whale meat petition to dismiss a petition opposing Authors United on this specific matter that has collected 9 or 10 times the number of signatories? Did no one see this as disingenuous?

I believe it is important that you explain to your readership exactly what thinking and actions went into the article in question. The Times should be above simple pandering for ad dollars, and given the fact that Preston and Authors United have already had significant coverage within your pages, an explanation should be required as to why this latest piece was needed at this specific time given the large ad buy connected to the subject. The position you hold within the journalistic world demands it. Many people look to the Times for important news and information every day and expect that you will apply a high standard of journalistic ethics to your coverage. This is crucial, I believe, not just to the state of journalism in this country but to your continued reputation as a trusted news source.

Thank you for your time and I look forward to your prompt response.

Dan Meadows

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Pissing Contests Can Be Fun, Just Not Into The Wind

Here’s something I’ve been wondering lately. Amazon’s a monopoly, right, so we’re told? They had a 90% market share in ebooks 5 years ago. Today, estimates of their market share in ebooks range from 55-65% or so. Do monopolies typically lose 25-35% of their market share over 5 year periods? Yet we talk about Amazon today as if they’re more dominant than ever. Maybe they are, but something about that doesn’t seem quite right. It looks to me like that 90% was, as the sports analytics guys like to say, the result of a small sample size (very young market and they were the only player going all out after it). But that would mean they’re not actually a monopoly but a highly competitive company who grabbed a commanding lead in the market. And a commanding lead is a far cry from a dominant monopoly. Just ask Barnes & Noble.

What I find interesting is this assumption that Amazon will become abhorrent, they’ll destroy publishing, tear the fabric of time and space, and we’ll all suffer with no recourse forever. Anybody actually watching the lifespans of these tech companies? The pace of everything has sped up. We’re in a world where an unknown startup can become a beast in a few short years. But it’s also one where the beasts can fall on their faces just as fast. Nobody is afraid of Microsoft’s market power anymore. I hear Yahoo is getting into TV shows these days. In fact, that’s the first thing I’ve heard about Yahoo in months. AOL still exists, apparently. At least they pop up now and then to piss away money on some new acquisition they’ll proceed to run into the ground. When was the last time Google did something truly innovative that didn’t turn out to be all hype? Even Apple just dropped billions on a questionably-profitable headphone maker to get their hands on a flailing music store and seems more interested in protecting what they have rather than continuing the innovation they earned it with in the first place.

I think this reflects a bit of the problematic thinking that’s infecting the industry. Self published writers aren’t real writers or they’re disgruntled trad rejects or they’re a substandard slush pile gumming things up with bargain basement prices. They don’t truly believe any sizable numbers of indies can produce work as professionally or more so than they can. It’s unthinkable to them. They have the same problem with Amazon. They don’t understand where Amazon came from and they have no idea how to deal with them. I feel extremely safe in saying that when real competition comes to Amazon, and it inevitably will, it’ll be another publishing outsider that brings it, someone who can and will find weaknesses in Amazon to exploit when they appear. I’m also certain that publishers won’t like them any more than Amazon, either. Publishers would clearly rather force all retailers into the party line that’s escorting B&N on a slow walk to the bankruptcy judge. They don’t really want genuine competition with Amazon to emerge because what that requires isn’t going to bring back the good old days for them, either.

I watched (most) of that Amazon hate panel at the New York Public Library the other day. The most telling comment of all, I think, was when one of the panelists said that tech companies needed to learn manners. By that, I took it to mean why aren’t they acting like everyone else? Don’t they know they’re supposed to be making as much as they can squeeze out of readers, not us? And it’s just rude of them to undermine our leverage with writers by giving them real options and a sizable cut. Where are your manners? Get with the program, already!

Which brings me to the dueling petitions circulating, one from traditionally published writers “not taking sides” by bashing the hell outta Amazon and a response to that by independent writers. The former was ridiculous and embarassing, I thought, and it showcases either the ignorance of these authors to actual business dealings above their station or is simply a disingenuous attack designed to protect their personal paychecks. Either way, I thought it was unseemly. How can you claim to not be involved in the dispute in a document specifically designed to inject yourself into the matter and pressure one side over the other? It’s dishonest.

The latter petition, while I agree with much of what it said, did come off a bit preachy to me. I totally understand the desire to counter what you (and I) see as the slanted misinformation and fear-mongering going on out there. It’s hard to understate the freedom writers have now. We can literally do anything we can think up, produce it and distribute it to a wider audience than ever before and not have to sell our souls, rights and most of the proceeds to a middleman. It’s so obviously beneficial that I often wonder how there are writers who don’t see this or worse yet, seem to actually be afraid of it. We now live in a world where it’s possible to make money directly on our copyrights without being forced to give them up in perpetuity. That’s a huge development, and something that was very nearly impossible to consider a decade ago.

It probably shouldn’t be surprising that some writers haven’t grasped the full implications of this yet. It’s a major change in conditions that had been static for decades, if not longer. How much longer they can continue to ignore it is the question. I suspect many of these writers have the unfaithful girlfriend or boyfriend problem, with their publisher playing the roll of significant other. They suspect he or she is cheating on them, have bits and pieces of circumstantial evidence that something isn’t right but they don’t want to admit it to themselves because admitting it means a necessary major upheaval in their lives. So they rationalize away the concerns staring them right in the face. Given the sometimes irrational and conflicting nature of that petition, and other similar sentiments I’ve seen recently, I suspect many are at the point where they’re going to come home from work early one day soon to find him/her in bed with someone else and not be able to avoid that particular elephant in the room any longer.

As far as the indie petition goes, while I like and appreciate the sentiment behind it, I just don’t think it needed to be done. I’m all for calling out bullshit, but to do it in a similar format with a bit of a rah rah attitude, even if it’s totally justified, gives the people who ought to be paying attention a ready excuse to dismiss it. To rationalize away finding a pair of panties that don’t belong to you under the passenger seat of your boyfriend’s car, as it were. “They must be his sister’s.” Uh huh. The original letter was a back patting exercise, preaching to a choir that’s not currently going to be convinced of anything other than what they already believe. Unfortunately, I think the indie petition is the same sort of thing. My opinion is who gives a damn what those other authors think? Let ‘em look foolish, let ‘em slap their names on something that’s fairly easily refuted and, frankly, not particularly well written. When the entity you’re yelling at is more responsible for making you money than the one you’re giving most of the proceeds, you’re in for a sizable wake up call in short order. I’m not convinced slapping them in the face with their own format will do anything but make them more entrenched in their beliefs, no matter how well intentioned or how clearly we see they’re setting themselves up to be burned.

You can’t stop people from making their own mistakes. Our copyrights have direct benefits to us now, something they essentially never had before, and that alone makes them more valuable than ever. Yet royalty rates are anywhere from “meh” to outright terrible. All reports also indicate advances are shrinking as well. At what point does it become obvious that what you’re giving up far exceeds what you’re getting in return? The man who hired me at my very first job in publishing used to talk about the law of diminishing returns all the time. He was usually talking about circulation, the point where the costs of increasing it would outweigh the return you got from it. That’s where we’re heading with publishers, I think. The cost of doing business with them is outweighing the return. A much larger cut of the proceeds should be the very least we should expect from publishers but we’re getting the opposite with threats of even harsher cuts in the future. And by much larger, I’m talking double or triple what they pay now, at least. And none of this lifetime copyright, or non compete, or discount clause nonsense anymore. It’s not my or any writers’ job to leave money and control of my career on the table to lifeline your business infrastructure because you can’t afford to pay the freight. Writers’ offer more value than ever, Amazon’s retail platform offers more value than ever. Publishers’ problem is that they’re one of the few in the loop who’s bringing less value today than a decade ago. Basic rules of business would dictate that when you become less valuable, you can no longer command as big a paycheck. What’s at issue here is that publishers and some of the writers still being paid by them as they always have, don’t truly understand their value has fallen off and continues to do so. Look no further than the fact that ebook profits (built on low standard royalties to authors, btw) are the only thing keeping many of these publishers out of the red. If the traditional business model is so valuable, then why are your profits basically gone without the contributions of the non-traditional?

Writers on the whole were never really compensated for giving up our rights anyway. For most, they had no value at all without a publisher, and you giving them up was a required condition. Writers were paid based on sales. The rights were a necessary toll basically sacrificed for access to the market. The value of those rights to us have increased while the rewards of signing them over have gotten smaller. Yelling at Amazon isn’t going to change that. Do you think if Hatchette gets higher prices, you’ll see any more of that money? Will they up standard royalties? Chances are you’re on a contract where the more successful your book is, the more money you’ve left on the table. Go back and do the math. If Hatchette gets what it wants and mitigates the competitive impact of Amazon, do you think that makes them more or less likely to improve writer compensation? And given the nature of these publishers, generally working in lockstep, what one settles into, they all likely will shortly thereafter.

The question in my mind isn’t why aren’t indies rooting for Hatchette, it’s why aren’t trad writers rooting for Amazon? (Well, the question after “why should we be rooting for either?” anyway. What we should be doing is advocating for the best possible treatment from all sides.) I’ll tell you why, because Hatchette owns your rights. If they run themselves into the ground, you’re contractually obligated to eat a face full of dirt with them. If Amazon (or any other retailer) destroys themselves, I just move on to another one. Amazon doesn’t own me. Hatchette (and other publishers) do own you. If you can’t see the inherent long-term danger in that, and you obviously can or else you wouldn’t be bitching at Amazon rather than your own publisher, then no petition, no logic, no facts, no amount of fisking is going to help you.

By the way, your letter basically demands Amazon cut a deal immediately and go back to discounting your books. Do you realize it’s highly likely Hatchette wants the ability to restrict Amazon’s discounting as part of any kind of agreement? How’s do you expect that’ll work out for you? “You should settle so you can go back to doing what a settlement with my own publisher will prevent you from doing.” Good luck with that.

One part of the indie petition I liked very much was the thank you to readers. We should all do that far more loudly and often than we do. But readers don’t care about this conflict. Most don’t know Hatchette from Heineken. They do know Amazon and seem to like them in overwhelming numbers. No petition from a handful of best selling and/or famous authors is going to change that, especially when the argument behind it is higher prices for them. Supporting culture and literature against cold corporate business sounds great until you say, “Oh, and all our ebooks are going to be $12.99 from now on.” Good luck with that, too.

I believe very much in the “look where your bread is buttered” school of thought. Amazon offers a fair retail platform at a fair rate. Publishers may offer you the butter but you have to lease the bread from them. And the knife you need to spread it, well, that’ll cost extra, too. Maybe Amazon ends up like them someday, but that day is not today. And it also discounts the idea that, hey, maybe they won’t because, as a tech company, they know better than most the second they do, someone else is going to pounce. “We want competition by preventing the circumstances where competition can actually develop” is not a viable plan.

Everyone is ultimately going to make the choices they’re going to make, and they’re going to face the consequences of those choices; good, bad or some of both. I’m not sure dragging readers into the middle of a pissing contest between two groups who really should be in agreement on most things furthers anyone’s ends, regardless of who started it. And that’s what I think about that.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Sunday Morning Analogy

Anyone who’s ever worked in an office will know the kind of people I’m about to describe.  When you start a job somewhere, naturally you work hard, try and do well, and integrate your way in as best as possible. But after a while, you realize there’s these other people, folks who’ve worked there for 15 or 20 years, who hardly ever seem to actually be doing anything. Except for the few times when they are. You’ll instantly know those times because they’ll be sure to tell you, loudly and repeatedly, about how much they have to do that day and how exhausting it all is. They routinely stroll in late, knock off early, and often take two hour lunches. You can count on them calling in sick at least twice a month. And if you engage in shop talk around the coffee maker (the one they always drink from but never brew or contribute to) they’ll toss out a “this place would fall apart without me” line at some point. You try to figure out what it is they do, exactly, and your best guess is as little as possible, while complaining to the boss often enough to somehow keep getting regular raises. When they go on vacation, the person who gets stuck covering for them quickly realizes it only takes about 6 hours to handle the entire weekly workload they constantly bitch about. They’re lazy, complacent, slow and entitled simply because they’ve been there for years. They never bring anything new to the table, they resist everything new that might upset their treasured routine. If another employee shows some drive or ambition, that’s when the resentment kicks in, followed by the vicious gossip, trying to undermine that person. It’s clear their interest is in maintaining their position rather the work they’re supposed to be doing. These people are the living embodiment of the inefficiencies the office environment creates over time. And they’re virtually indistinguishable in spirit and approach from big corporate publishers.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Hatchette accidentally reveals concern for authors is bulls*&t

Hatchette released a statement today in response to an Amazon statement about their protracted and increasingly ugly contract negotiation. Here it is, with inappropriate commentary added by yours truly. And, yes, I’ve been so inspired by all the anti-Amazon hit pieces lately that I chose an intentionally inflammatory headline. Hyperbole for fun and profit!

“It is good to see Amazon acknowledge that its business decisions significantly affect authors’ lives.”

Yes it is. Now let’s continue on to see how Hatchette acknowledges its business decisions significantly affect authors’ lives. (Hint: you’ll be disappointed.)

“For reasons of their own, Amazon has limited its customers’ ability to buy more than 5,000 Hachette titles.”

From Amazon’s own statement: “These changes are related to the contract and terms between Hachette and Amazon.” Reasons of their own in a contract you signed. Reasons that you know damn good and well. Is Hatchette in the habit of not enforcing provisions in its contracts when it’s in their interest to do so? I didn’t think so.

“Authors, with whom we at Hachette have been partners for nearly two centuries, engage in a complex and difficult mission to communicate with readers.”

A complex and difficult mission to communicate with readers made so by publishers because it served their interests at the time. Or do you have some other explanation for why you’d create a system that essentially locked writers out of distribution unless they paid a toll of lifetime copyrights to a publisher to even reach the marketplace? If there’s a barrier between readers and writers, it’s because publishers put it there to better collect their pound of flesh.

“In addition to royalties, they are concerned with audience, career, culture, education, art, entertainment, and connection. By preventing its customers from connecting with these authors’ books, Amazon indicates that it considers books to be like any other consumer good. They are not.”

Oh, Jesus, more special snowflake nonsense. Weren’t you listening when the judge who reamed your ass for price fixing told you, precisely and in no uncertain terms, that publishers are not special snowflakes? Of course books are commodities like any other. You know who made them commodities? You did, and publishers like you when you priced them according to the format instead of the content inside. You seemed perfectly cool with that for the past 200 years. What’s changed now? Oh, that’s right, you’ve lost control of this particular commodity market.

“We will spare no effort to resume normal business relations with Amazon—which has been a great partner for years”

Of course they have been, they’ve made you a metric ton of money. Particularly on those 25% of net ebook deals that make writers a little bit and you a shitload more that you all totally didn’t collude to make industry standard almost simultaneously.

“but under terms that value appropriately for the years ahead the author’s unique role in creating books, and the publisher’s role in editing, marketing, and distributing them, at the same time that it recognizes Amazon’s importance as a retailer and innovator.”

Herein lies the rub. What, exactly, is the appropriate value of the publisher’s role now? Even Hatchette’s own phrasing admits the writer’s role is unique. We’ve all got a pretty good idea how valuable Amazon’s role as an innovator is. Who’s the weak link here? Nothing unique or innovative about the editing, marketing and distribution most publishers provide. Anybody can do that or find someone who can to affordably contract out. I suspect the root problem here is they don’t yet realize that the appropriate value of the publisher’s role has declined, perhaps dramatically. You know what happens in a negotiation when you come to the table with declining leverage? You don’t get as good of terms. Ask your writers about that, I’m sure some would have a few pertinent things to say on the subject.

“Once we have reached such an agreement, we will be happy to discuss with Amazon its ideas about compensating authors for the damage its demand for improved terms may have done them, and to pass along any payments it considers appropriate.”

“It’s ideas” because we sure as hell know it wasn’t Hatchette’s idea to compensate authors during this fight. If you didn’t know, Amazon, in its statement, offered to form a fund to help authors hurt by this situation and volunteered to kick in 50% if Hatchette kicked in the other half. This was their response, a big ol’ “fuck you” to their own authors who they just claimed to care so much about. Not only did they refuse, they attached any assistance to Hatchette getting what it wants first, making author assistance a negotiating tactic, and guaranteeing they will continue to suffer for as long as this lasts with no help forthcoming. Also guaranteeing that they’ll readily trot out and use that suffering to engender support and more Amazon hatred. More than that, “we’ll discuss it later” and “we’ll pass on any payments it considers appropriate” is just, “you can pay them if you want, but only after we finish our business, and we won’t be kicking in” just with different words.

Being that this is a near-explicit refusal to establish such a fund or contribute anything to it, the line about “the damage Amazon’s demands may have done them” looks like a total false denial of responsibility as they’re doing them damage right now. Seems to me like the discussion that needs to happen is between Hatchette and it’s authors about what the appropriate value of the author’s unique role is. Here’s an instance where they could have backed up their earlier glowing praise and concern for authors by putting their money where their mouth is but instead they pissed all over them trying some half-assed attempt at a clever quip at Amazon’s expense. They should leave the half-assed quipping to bored writers looking for big corporate hypocrites to bitch about. Just sayin’…

“In the meantime, we are extremely grateful for the spontaneous outpouring of support we have received both privately and publicly from authors and agents.”

Spontaneous, sure. Nothing at all to do with the coordinated astroturfing effort you all were talking about not too long ago.

“We will continue to communicate with them promptly as this situation develops.”

Yup, just like you communicated promptly with them the seven months this bullshit’s already been going on, right?

So, Hatchette accepts no responsibility for this at all, refuses to lift a finger to help their own authors this is hurting, and seems to be under some impression that their negotiating power hasn’t atrophied some over the past few years. So, for emphasis:

“It is good to see Amazon acknowledge that its business decisions significantly affect authors’ lives.”

When can we expect to see the same acknowledgement from Hatchette, because this sure as hell ain’t it. This is you intentionally putting authors in the middle of your fight and purposely extending and exploiting their suffering to suit your ends first and foremost, right there in your own words. Strange that Amazon’s statement was far more subtle in its implications than Hatchette’s. Maybe you should of hired a better writer.

Look, nobody wants to see Amazon get to be a dominant beast that lords over everyone. But these folks are not the right horse to back. They’re deluded, have an over-developed notion of their own value and readily blow smoke up writers’ asses while profiting in different ways from both their success and struggles. Even some of their own writers fully expect they’ll use the decline in sales against them in their next book deal. Amazon may be big and powerful, but these folks are just opportunistic scumbags.

Amazon broke the hold these publishers had on the industry, and it’s created more opportunities for more writers to make more money than publishers like Hatchette have in, well, pretty much ever. We need to move forward on the gains writers have made of late, and publishers like Hatchette are firmly entrenched in the past. Yesterday’s exploiters aren’t going to be tomorrow’s liberators no matter how many New York Times anti-Amazon hit pieces they encite.

We do need to have a very serious conversation about competition and diversification and what direction things need to go in the future, but Hatchette and those like them have repeatedly shown that they have absolutely nothing to add to that conversation. Or are you one of the three people who don’t think every other major publisher is going to follow lock step down the path Hatchette’s setting right now? What I really want to know, though, is after they’re all done cutting their noses off to spite their faces, which body parts are next?

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Predictions

Prognosticating the future is always a tricky business. Easy to do, far less easy to actually be right. Fortunately, we don’t often call out folks for being horribly wrong in their Nostradamus impersonations after the fact. You can argue maybe we should but relatively few who make public predictions are going to jump all over someone else’s bad ones because they know only too well how many of their own are way off base. What goes around, comes around so don’t go around in the first place.

But predicting things is fun! Hell, I spent 40 or 50 tweets predicting the NBA season back in the fall, then used another 20 to predict the playoffs last month even though my regular season picks were so hit or miss as to be nearly random. The only pick I’ve got left is Indiana winning the title. I also may be the last person not named Larry Bird who’s riding that particular bandwagon, and I’m not too sure Larry didn’t tuck-and-roll his way outta there a while back, too. But if they win, you bet your ass I’ll be doing some gloating. Albeit without mentioning the other dozen predictions I made that didn’t come through, of course.

My point here is take any and all prognostications you see with the biggest grain of salt you can find. Not usually something you see a writer say in a piece about to make a prediction, I know. But I find the value in prognosticating doesn’t so much come from whether the final prediction is right or wrong, it comes from the process of evaluating circumstances and evidence and extrapolating that out to a conclusion. When I read predictive pieces, the reasoning why the writer is making the guess they’re making is more important to me than what that guess is. You could be completely correct with your prediction but the reasoning leading to it could be so flawed as to be useless, or you can be completely wrong in your prediction but dead on in the circumstances leading you there. You have to evaluate those circumstances and how they relate to your individual situation. It’s impossible to know for certain how things will turn out in a complex environment like the publishing industry, but it’s very possible to understand the conditions and act accordingly for your personal ends.

That being said, here’s my extrapolated prediction: book publishers, even huge conglomerate ones like Random Penguin, will be non-existent or so altered as to be unrecognizable as present-day publishers in less than 10 years time. Easy to say, no way to prove. In fact, you can’t even prove I’m wrong at the moment, only after the fact. You can try, and state evidence opposing my viewpoint all day long, if you like, but guess what? All you’re doing is making predictions to try and counter my prediction. The same flaw that makes my prognostication far less than a certainty is also making your counter-prognostication far less than a certainty. So my final word, as it were, isn’t really the point, only a guess as to where things are heading, exactly like your theoretical counter is really only a guess.

What matters is why I’ve extrapolated that publishers are screwed (or why you’ve extrapolated that they aren’t.) Here’s the basis for my reasoning, in five handy points: Hatchette is reportedly trying to reinstitute some flavor of Agency pricing in its deal with Amazon now that it’s prohibition against such is almost up. The other major publishers will likely take similar action as their DOJ-imposed limits expire. What does Agency pricing do? It limits discounting by retailers and raises the price of books. Point one.

One of the major arguments in favor of Agency pricing (and against, to be honest) is that it works to protect hardcover sales and sales in brick and mortar bookstores from ebooks that are “too cheap.” That’s great and all, but ebooks aren’t what’s hurting brick and mortar retailers, online commerce is. Doesn’t matter if someone’s buying a print book or an ebook, if they’re buying it online, that’s a sale a physical store didn’t make. Certainly, ebooks are native to online but trends show print sales are increasingly migrating there, too, for a number of reasons. Online commerce is exposing the inefficiencies of brick and mortar retail in virtually every business that doesn’t ask if you want fries with that. (I also predict it’ll be exposing their inefficiencies sooner than later, too, but that’s a different article.) Does Agency pricing affect that deeper societal trend in any way? No, not really. Point two.

The book publishing industry hasn’t had the classic disruption drop off in sales that all disrupted industries have suffered. Napster and it’s ilk exposed the holes in the music industry’s model and set off the demand for digital music that caused massive, rapid declines in cd sales. (Not that downloading killed cd sales, mind you, consumer demand for digital music did that.) Craigslist (and later, eBay) virtually wiped out newspaper classified advertising almost overnight. For those that don’t know, classifieds were the most profitable advertising per column inch in the newspaper business. The sudden loss of great chunks of it was catastrophic.

It’s tempting to say ebooks were that force and the industry avoided the huge losses. But think about it for a second. Ebooks have been a decided gain for publishers, the extra profits they reap from ebooks have made their bottom lines look better than they should. Ebooks didn’t work against publishers’ interests, they were extra money dropped into their laps. They were the best positioned of anyone to take advantage of this when a market was firmly established. And they did, albeit while bitching all the way to the bank. Ebooks themselves have never been a threat to publishers, so unless they were braindead stupid, they were bound to benefit from them like everybody else. The fact that they haven’t benefitted more from them is something they’ll soon come to regret, I believe. Point three.

Barnes and Noble is circling the drain. We all know it. It’s just a matter of when. I would argue that if not for the college bookstores (a different, less disrupted to-this-point market) they might already by a ghost. They just reported a 10% drop in sales the third quarter of 2013 over the year before. Immediately after, they suffered about a 10% drop in their stock value. This corresponds rather neatly with a recent U.S. Census report that shows bookstore sales in general have dropped by 10% from last year, illustrating that this isn’t a B&N-centric problem but an industry-wide issue. Their online commerce effort is an epic trainwreck. And, they’re a brick and mortar retail store at their core no different from Borders or Best Buy or Circuit City (remember them?) or Blockbuster or any number of other chains that used to be mainstays in strip malls everywhere. Those pressures aren’t going to go away and they really have nothing to do with ebooks or even the publishing industry itself. Higher education is in many people’s crosshairs as a ripe market to be disrupted. When someone finally breaks through, and they will, those college stores aren’t going to be life lining anything. Barnes and Noble is doomed. Point four.

Ebook sales are slowing down. The market is maturing, establishing a ground floor somewhere around 20% of the industry and is growing at a slower rate as its marketshare rises. Now you could argue if that’s even true, given the nature of the data available and the invisibility of many self published works in that data. But what’s not really disputable is that the data we have is unquestionably reflecting traditional publishers. So, while you can argue whether ebooks on the whole are slowing down, you can’t really dispute that they’re slowing down for traditional publishers. On top of that, inexplicably, many of those same publishers seem to be under some impression that this is a good thing. Point five.

So that’s the five elements I see as the present conditions I’ve made my prediction from: the biggest publishers are likely going to try to reinstitute Agency in some form; the results of that will handicap retailers and raise prices in a market struggling with online commerce already undermining brick and mortar retail; we’re still waiting for the classic steep decline in legacy product sales caused by disruption; Barnes and Noble is a dead man walking; and the growth rate of ebook sales for traditional publishers is slowing. Now that I’ve identified what I believe are the current applicable conditions publishers face, I’ve concluded that their long-term prospects aren’t particularly good.

Here’s how I think this goes: Say you’re a big pub CEO and you sit down at your desk one morning to headlines reading “Barnes and Noble files for bankruptcy. Remaining stores to be shuttered.” As you drop your head into your hands considering the 65 different ways this screws you, there’s a knock at your door. It’s Walmart, Target, Sam’s Club and the other warehouse stores.

“We’re so sorry to hear about Barnes and Noble. It’s a terrible tragedy. We’d like to offer our condolences. Here’s a cookie bouquet.” You nod solemnly and they turn to leave, but Walmart stops short, looks to you and says, “By the way, being that we now represent the last mass-market retail space you have, we’d like to have a discussion about the discounts you give us, when you feel better, of course.” He then leaves, closing the door behind him.

Your mind races. “Well, we can probably absorb a bit of an increase in discounting. Maybe we can hire more interns or move to more freelancers.” As you snatch up one of the cookies from the bouquet and start munching, feeling somewhat ok, your office door suddenly flies open and in storms Amazon. “Hey bozo, guess who’s responsible for 70% of your business now? I’d suggest you get ready to open that checkbook of yours or we might happen to have some technical difficulties with your buy buttons. See ya, loser!” Amazon storms back out, slamming the door so hard the picture of you and a smiling James Patterson falls off your office wall.

“Ok,” you think to yourself, “maybe if we cut advances by 30%, we can get through this. We’ll be alright.” Just then, there’s another soft knock at your door and a finely dressed, lawyerly gentleman strolls in. “Hi, I’m from the Independent Bookstore Alliance. We represent 1500 independent bookstores in the U.S. Given as we are now the last bookstore shelf space in the country, we’d like to discuss the types of discounts you can give to our members at your soonest possible convenience.” He softly lays his business card on your desk, next to the half-eaten cookie from the bouquet, and leaves.

You lean all the way back in your fine $10,000 Italian leather desk chair and mutter to yourself, “Oh fuck…”

Or something like that. B&N’s gone, brick and mortar bookstore sales start dropping 10-20% year-over-year, quarter after quarter for years until what was 50% of your business is now 15%. What’s worse is that the sales you’re still making, both online and physical, print and digital, are less profitable than they were before due to being squeezed by retailers of all stripes. Ebook sales growth, while inexorable, isn’t keeping pace with the losses that are mounting. It’s the book industry version of the print dollars to digital dimes problem. On top of that, you’re losing writers from two camps: the upper echelon superstars who you’re not producing results for like you were before, and the entry level writers who scoff at the increasingly miser-like contracts you’re foisting on them. Midlist writers would likely join them in the exodus, too, if they hadn’t already fled in large numbers by this point. Both groups of writers are moving on to either do it themselves, to better adapted publishers or to some new concoction of collaborative publishing or author collectives that cut you out altogether.

At that point, there’s two choices: change to become a different kind of company, one that can handle these new market realities where you and your ilk are no longer at the head of the food chain (a process you may already be too late for) or fade to obscurity in the corporate sell-off/bankruptcy/vanity buyer process that has chewed up most newspapers. Either way, what publishers are today, and especially what they were 10 years ago, will be largely no more.

So that’s my theoretical timeline. Am I right? I don’t know, ask me in 10 years. What I do know is that there are likely more protectionist actions coming from publishers that don’t actually protect anything. I do know that Barnes and Noble is struggling mightily from the same reasons in the same ways other similar businesses didn’t survive. I do know publishers have lost a great deal of their control of the distribution system, and with it, their principle means of discovery and a chunk of their leverage with retailers over discounts. I do know, for whatever reason, ebook sales growth is slowing for traditional players and maybe everybody. I do know that writers have more options to make it to market than ever before, many of them outright replacing the essential positions publishers were anchored in. Whether all this means what I think it means is open for debate. Whether you agree with all of my five points, a few of them, just one or even none at all, there’s elements within each that can have profound impacts on the choices we have to make as writers.

Maybe you don’t think publishers are in serious trouble but you agree B&N is, so you set up a short-sell deal on their stock. Maybe you agree publishers are heading for a period of great upheaval and don’t want to sign an open-ended contract with one, or go with a publisher willing to work with contracts with a 5 or 10 year expiration date. Maybe you’ve been considering striking out on your own and the struggles of publishers are the last push you need. Maybe you think reinstituting Agency will protect the print side of the industry and put your efforts there. Maybe you agree B&N is toast but you think it’ll lead to a resurgence of independent stores rather than the start of a deep brick and mortar downfall and seek out a publisher better integrated with that community. Interpretation is in the eye of the beholder and should always be based on achieving your own individual ends. Making my prediction led me through a long cycle of circumstances, patterns and considerations to reach what I think may happen. Reading this likely led you to consider the same things, even (maybe especially) if you were breathlessly hollering at your screen how full of shit you think I am as you read. Whether I’m right about the end result or not doesn’t really matter. There are several factors in play here that will impact what I ultimately choose to do, and that’s the real value in predictions. It’s not a right or wrong thing, but a process of understanding and examining smaller elements in order to extrapolate out to a conclusion. Progress doesn’t just happen in big, sweeping pronouncements. It occurs from within the smallest details. And nothing you choose to do will be very effective if you don’t have a better understanding of those diverse yet interconnected details. I predict that’s the case, anyway.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

Do Editors Have Copyright Interests in Books They Edit?

“Our job is to partner with you on a journey to reconcile your vision of your book with the way your prospective readers will see it.”

–From Writer’s Digest

The relationship between an editor and a writer should be collaborative, we’ve all been told time and time again. It seems to make sense on the surface, almost to the point of common sense. The problem, though, is that it’s dead wrong. Even more than that, as a writer, it’s a potentially dangerous and expensive mistake to make. Let me explain…

“A developmental editor will take your manuscript and work with the content itself. If needed, they might reshape your work and rearrange sentences to make the book flow together better. This type of editor helps an author find their voice and help refine their vision.”

– from PBS Mediashift

So an editor of this type, or one that engages in this type of action, precipitates significant changes to the finished product. Do you think it’s fair to say the end result of such a relationship is a collaborative work? That the editor’s contributions are an essential component in the finished creative work for sale? So would I.

“Do editors have a copyright interest in the edited version of the manuscript? Maybe, maybe not, but it is a weapon in the editor’s collection arsenal that should not be ignored.”

–From An American Editor

This is from a blog for editors openly discussing whether editors have a copyright interest in the finished edit of a work. It’s not a theoretical construct, it’s an actual thing being openly advocated for amongst some editors. Albeit, editors in this case who have been stiffed by their clients, but I don’t think they’d be wrong in doing so under any circumstance. Although, I find the author’s stance that as little as inserting one comma would give an editor a copyright interest is maybe a little bit of an overreach. Appropriate stress due to “maybe” there. It well could. What I have no personal doubt of is that, if you’re making substantive content changes at the behest or recommendation of an editor, you most certainly are giving them a copyright interest.

So why aren’t we seeing courtrooms filled with editors making copyright claims? Because it’s something that was largely irrelevant in the past, and people’s perceptions haven’t quite caught up with reality yet. When most books went through publishers and most editors were employed by those publishers, the copyright interest of the work product of the editor belonged to the publisher. There was little reason for anyone to enforce it. Even after publishers started relying more and more on freelance editors, you can be sure their agreements with those editors contained work-for-hire language, meaning their work product, and any subsequent copyright interest, still belonged to the publishers.

The rights were there but everyone’s interests, as they were aware of them, generally flowed in the same direction so they were rarely, if ever, expressed. That’s why we think of editors as collaborative but not to the extent of a copyright claim, even though, particularly with deep substantive editing, it’s difficult for me to find a rational reason why they wouldn’t that isn’t based on the assumption that they’ve never had one. It’s not that it didn’t exist, but that the nature of the industry itself repressed their claim, likely without most of them even realizing it.

So what’s changed? Everything. Now we have independent writers hiring freelance editors and designers for all manner of tasks. We have writers selling print only rights to publishers and retaining ebook rights to publish themselves. We have the 35 year rights termination procedure passed into law in the ’70s only now coming into use. Everyone’s interests are no longer flowing in the same direction. Little things that were insignificant in the past because the system inherently suppressed them, like any potential copyright claim for editors, can now bubble up through the cracks these changes have opened in the industry’s very foundations. Just because we haven’t seen it doesn’t mean we won’t.

Self Publishers and Independent Contractors

Let me just say this, if you’re doing any freelance work yourself or hiring independent contractors for things with any copyright implications at all, you had better know the law relating to work-for-hire and the IRS and Agency definitions of “employee” inside and out. I see a ton of articles about how to pick an editor or how to pick a designer directed at self publishers. What I don’t see is nearly enough articles explaining how not to screw yourself on the contractual relationships with those contractors.

“(1) a work prepared by an employee within the scope of his or her employment; or (2) a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire. (17 U.S.C. § 101)”

–From U.S. Copyright Act of 1976

Work-for-hire is a fairly simple concept on the surface. If you are an employee, any work product of doing your job, and any resulting copyright interests, belong to your employer. “Employee” is a little more complicated than just if you’re on the payroll and they’re paying payroll taxes on you, although those are considerations. Whether you are legally regarded as an employee depends on the nature of the relationship. The more the employer controls the terms of your work; the times you work, the equipment you use, where you work, etc; the more likely you are to be deemed an employee regardless of how they’re paying you.

The second part of work-for-hire, and the one you really need to pay attention to, is that the work must fit into one of those categories listed in the quote and be expressed in writing. The and is the crucial part there. If you are an independent contractor and there’s no written work-for-hire agreement, it doesn’t exist. This means whoever contracted you has limited use of the work per the terms of the contract and all copyright interests remain with you. The written agreement is not optional. No contract, no work-for-hire. And believe me, as someone who’s done my share of independent contractor work, it’s extremely useful to be aware of its absence in your agreements. Here’s a link to a pdf of the U.S. Copyright Office circular that explains work-for-hire, and the criteria for employee determination. If you don’t already know it forwards and backwards, read it now.

The point of this is, simply, don’t be stupid. Know the law and protect yourself. Understand that everything is different about the nature of your relationship to an editor you contract versus one you work with who was also contracted by the same third party publisher. And I mean everything, right down to the legal implications of the structure of your business arrangements.

Do editors have a copyright interest? I think they do but I don’t know absolutely. That’s for a judge to decide at some point. But do you want to be the one standing in court across from that judge when he tells you they do? I sure as hell don’t. Simple work-for-hire language in your agreements with any independent contractors who are contributing anything creative to your final work for sale will make it a moot point. Even if a clear ruling is made that they do, you, through the work-for-hire language, would own that copyright interest in the work they did for you.

If you go around leaving holes in your agreements with people, you’re going to fall into one. Know the law, use it, protect yourself and your interests. You can be damn sure others will.

The 35 Year Termination Rule

We’re just now entering an era where authors can have their rights reverted 35 years from publication just by filing some paperwork. This applies to any work after January 1, 1978, so we aren’t very far down the road on what this will mean. I expect we’ll see publishers inundated with these things in the coming years and, eventually, we’ll see some long-term lucrative works they really don’t want to give up in the firing line.

In the past, rights reversions were generally one of two things; done through an out of print clause for a book the publisher’s been getting nothing from, or a buy back where the author pays the publisher for the reversion. This new termination rule is different in that it clearly forces publishers to give up rights against their will with no recourse. If you don’t think they’ve got lawyers pouring all over their contracts and the various intricacies of copyright law to find a workaround, you’re kidding yourself.

Here’s another place where a copyright interest for editors might turn up in the future. Publishers never had any reason to acknowledge such an interest, particularly since they owned all those interests anyway through work-for-hire. But now, faced with losing money-making properties for nothing, they very suddenly find themselves with such an interest. But it shouldn’t matter because the rights are reverting at 35 years, anyway, right? Well, no, not really.

Where a typical copyright term is life of the author +70 years, work-for-hire is different; 95 years from publication or 120 years from creation. More than that, work-for-hire is not eligible for the 35 year termination. Yes, you may get your rights reverted but the publisher, through the work-for-hire work product of editors, may still retain a copyright interest in the final product you’ve been selling for over three decades. With that, they could potentially stop you from publishing that version, or licensing the rights to that version to another publisher. More likely, I’d expect they’ll use it as a nuclear option to negotiate a new deal with them at better terms.

Termination may not be what we think it is, all because folks weren’t paying enough attention to small little contract provisions like work-for-hire. You know who was paying attention? Publishers. Or do you think it’s just a coincidence they happen to own all the rights to any possible editor copyright interest for damn near every single significant book of the past 40 years? Harper Collins just won a lawsuit claiming to have bought ebook rights in 1971, for God’s sake! Their contracts may be onerous but they’re not a leaky ship full of loopholes by any means.

This may be something to keep in mind for future negotiations; provisions that keep any work-for-hire copyright interests created in producing the work attached to the rights for the purposes of any reversions. It’s something to consider.

Print Only Publishing Deals

When I first heard about Hugh Howey’s print-only deal a couple years ago, the first thing that popped into my head was, “how is that going to work?” I have questions and maybe Howey, who’s been very forthcoming in a lot of ways, or someone else out there who’s cut one of these deals can answer at some point at their leisure. Enquiring minds want to know…

What’s the deal with editing? Did the print publisher do an edit of their own? Did they just use your final edit you’ve used in your ebooks? If they did do an edit, did you use that in your ebooks, and if so, is there language in your contract that allows that? Or are there two separate edits out there, their’s for print and your’s for ebook? What happens when the rights revert at 10 years or whatever the time limit is? Does the final edit revert too or just the rights to the original before the edit? Does the contract address this at all? I could probably think of a few more but that about sums it up.

The print-only deal where you publish the same material in a different format simultaneously on your own didn’t exist even five years ago. It’s added a layer of complications to what was a fairly simple process. Who knows what kind of holes may open up? There’s no possible way we can foresee all the potential risks such arrangements may bring about. Unintended consequences are a bitch.

If we presume for a moment that editors, especially of the deep, substantive variety, have a copyright interest, then someone owns that. It’s either the editor themselves, the publisher or the author through work-for-hire. It might be a good idea to know who, and a better one to make sure, iron-clad in writing, that it’s you.

One of the great selling points of self publishing is that you keep control, you retain your rights. That’s true, so don’t encumber them unnecessarily through lax independent contractor agreements or because you don’t fully understand work-for-hire or copyright law. It may be that all of this, even the very concept of editors having a copyright interest, is speculative and will never come to pass as a significant issue. But as I look at what role editors are increasingly asked to play, and as I read the particulars of the law, I’m fairly convinced that they do, at least in some circumstances.

This could ultimately have implications reaching much farther than self publishing. We, as independents, can solve this problem by inserting clear work-for-hire provisions in our contractor agreements. But what about the matter of that copyright interest being owned by the publisher through their agreements independent of us? That’s a different kettle of fish, and much harder to protect from. Especially if most of us don’t even realize it’s a danger.

Intellectual property is the 21st Century gold rush. What they found back then was the rush very quickly was followed by claim jumping. Some of it was criminalized, but not all. I’m in favor of protecting myself at every possible angle. You just never can tell where those claim jumpers might look next.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

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