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

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

Print Protectionism Rules The Day…For Now

So Amazon came out with a statement a week ago detailing its position on ebook prices and, not insignificantly, it’s belief that authors are being short changed on royalties by publishers. Not surprisingly, it was met with a collective shrug by the mainstream industry, if not outright contempt. One thing this has done, however, is bring the belief that publishers’ actions on ebooks are all about protecting print out of the implied shadows. Here’s a variety of quotes from various sources critical of Amazon in response to their statement. Read on:

“Amazon doesn’t quantify what lower e-book prices would mean for sales of physical copies of the same books. Authors who work with traditional publishers like Hachette tend to make more, per copy, from hardcover sales than from e-books. If cheaper e-books draw people away from hardcovers, that could hurt these authors financially.”

“If lower e-book prices were to eventually destroy the market for physical books entirely—or even shrink it enough so that it wouldn’t make financial sense for traditional booksellers to publish them—that would help Amazon consolidate its power, which would ultimately be dangerous for authors.”

Literary agent Brian DeFiore in The New Yorker

“Lower e-book prices aren’t necessarily the best thing for writers. We get a percentage of the price as a royalty. You also have to take into consideration the price of the hardcover. Yes, it’s cheap to make a digital book but it’s expensive to present a book in hardcover.”

Roxana Robinson, Authors Guild President in Wall Street Journal

“Amazon’s assumptions don’t include, for example, that publishers and authors might have a legitimate reason for not wanting the gulf between eBook and physical hardcover pricing to be so large that brick and mortar retailers suffer, narrowing the number of venues into which books can sell.”

John Scalzi from his blog

“It is true that ebooks live in a world where they compete with other media. It is also true that the they live in a world which includes print, also an important component of a publisher’s and an author’s economic world. This analysis is very short on measurements of the impact on print sales of lower ebook prices.”

Michael Shatzkin from his blog

“Their figures consider a world of ebooks only. Their “total pie” is really just a piece of the pie. But publishers and authors are looking to maximize revenue across all formats. “Total revenue” on an ebook is only part of the “total revenue” for a new release book, and the hardcover edition still generates substantially more revenue per unit.”

Michael Cader from Publishers Lunch via Joe Konrath

“Even if ebook prices are the focal point of the dispute, that does not mean (Hachette) should not be looking at the effect across their total business, and their total account base.”

Michael Cader from Joe Konrath’s blog

What do all these have in common? The belief that the ebook is not only inextricably tied to print, but must, in some way, be handicapped to shield the older, more expensive and inefficient model. So what we’ve got here is the key issue in modern publishing, do you believe that digital must necessarily be hamstrung in some way to the benefit of print?

If you’re a Patterson or King or someone who gets the benefits of large numbers of hardcover sales in physical bookstores, that answer seems to be a resounding yes. But if you’re not one of those very select few, the question becomes much more difficult to answer. How does it benefit the midlist author or the debut author to have your ebook prices placed higher to support brick and mortar hardcover sales that benefit a much smaller number of superstar writers almost exclusively, and very likely, not you? As for the indie authors, it clearly doesn’t seem to benefit you to link print and digital in this way at all.

There appears to be two schools of thought on this. One is that print must be protected from lower priced ebooks because they will hurt physical stores, shelf space will decline and Amazon will reign hellfire over the industry forever and ever, which will result in damage to all authors in the long run. This is a call for all but the publishers and most fortunate authors to sacrifice in order to preserve an ecosystem that doesn’t really help them. You must sacrifice now in order to prop up a network where, unless you’re extremely fortunate, you must sacrifice in perpetuity, essentially.

The second school of thought is that ebook prices must necessarily be higher (and royalties lower) because the revenue generated pays for the totality of the book. This line of thought is that profits from ebooks aren’t really profits at all but a portion of the total revenue of a book that includes high print expenses that must be paid. This is a call for authors to sacrifice on ebooks to pay for the publishers’ print expenses even though they’re already being paid for that with a royalty structure on print that was designed and implemented to cover all the costs of bringing the book to market. You’re basically donating 75% or so of your digital proceeds after the retailer’s cut to your publisher for generating and uploading an epub file.

Either way, the presumption is that ebooks can’t be allowed to grow independently of print. They must either be restricted to prevent the erosion of print sales or a large portion of their revenue must be siphoned off to pay for the print infrastructure. There is also the assumption baked into this that the future of bookstores depends on the continued furtherance of $25 or $30 hardcovers. Also that any contraction in the print market (and conversely any unchecked growth in ebooks) will lead to Amazon consolidating even more power. Both assumptions rest on the belief that ebook and print revenue exist in the same continuum as hardcover and paperback revenue did in the past.

Here’s the thing about that, paperbacks didn’t undercut hardcovers because they were windowed. Windowing doesn’t work with digital. So the only means they see to prevent hardcover sales erosions is to actively lessen the sales of ebooks. Presumably, I would think, once the hardcover cycle runs it’s course, the high ebook price should come down to old mass market paperback levels, if not less, but that’s not really what we’re seeing.

All of this rests on the belief that digital sales can be essentially capped at 30-35% of the industry. And further, that print, particularly pricey hardcovers, won’t erode anyway due to other factors irrespective of ebooks or that the large and growing segment of the industry that simply doesn’t care about the hardcover/bookstore ecosystem they’re essentially locked out of won’t undermine the higher ebook prices to the point that publishers lose out on both print and digital sales.

Protecting physical bookstores is also a tenuous ideal from this two-pronged perspective. One, ecommerce is not going away. In fact, same day delivery is being rolled out by multiple players, not just Amazon. That has nothing to do with the price of ebooks but a more existential question on the nature of consumer shopping choices. Two, print on demand technology will become better, cheaper and more pervasive, possibly even resulting in kiosks that have the potential to do some of the same things Redbox did to video stores. When was the last time you visited one of those?

Are publishers going to withhold books from these kiosks? Will they demand near-hardcover prices for the trade paperback products they produce? Are they also going to demand higher prices for print books sold online? All of these elements will eventually erode bookstore sales and if publishers’ interests rely on protecting those stores, then these acts would be totally consistent with the higher ebook price strategy. It also means that publishers would be intentionally harming virtually every new publishing technology that increases efficiency, lowers prices to readers and increases sales in favor of their one preferred sales channel and format. One that, it can’t be understated, makes books more expensive, more inconvenient for readers to buy and less lucrative for writers overall.

If you’re James Patterson, Stephen King or Douglas Preston, these strategies may make some sort of sense in the immediate term. If you’re any of Hachette or any other large publisher’s thousands of non superstar authors, however, this doesn’t make a whole lot of long-term sense. Remember, you’re not just making less money on a contracting print market, you’re covering the publishers’ revenue declines in that respect through lower ebook royalties. The only way declining hardcover sales and rising ebook sales harms these authors is if the publishers are saddling you with a much-too-small cut of ebook proceeds. Amazon is right in this respect. If publishers were paying writers fairly on ebooks, then you stand to make more money on more sales at cheaper prices for readers. Their strategy is going to make you less money on fewer sales at higher prices to readers. The fact that there’s one single non-superstar writer who signed on to that Authors United letter is another illustration that, much like politics, dogma can and does lead some people to make choices that run counter to their own economic self interest.

Also consider, much like ebooks, independent authors will jump all over POD kiosks and the opportunities they bring. After all, when you’re looking at a physical store ecosystem that actively discriminates against you, protecting their margins or even their very existence is likely a non-factor in your choices if not a potential negative to you to do so. This is something bookstores would do well to keep in mind. Continuing to block, ignore or alienate indies is creating an entire giant class of increasingly successful writers who are ambivalent to your problems if not outright hostile to you. You might want to knock that off.

Basically, this strategy that the big publishing houses are engaging in is not in the best interests of readers or the vast majority of authors. The concern that Amazon will dominate everything is a very real one, but this isn’t a particularly practical way of dealing with that. I want a diverse ecosystem as well but asking me to sacrifice to the benefit of organizations that aren’t willing to do so in return isn’t going to work for me. Amazon’s market force is a different problem in need of a solution as innovative as the ones Amazon has used to gain that position. I think it’s fairly safe to say any such innovative competition is not going to be any more friendly to the publishers’ 20th century business strategy.

Let’s say I self publish a few books and my sales take off. A publisher comes to me with an offer. Ignore for a moment that the advances being offered barely cover a few weeks worth of sales in some cases, let alone life of the book. Let’s say I sign it anyway. That offer would require me to pull currently good selling material from the market for months in some cases. When they do return, my ebooks are now two or three times the price, the share of which I receive is less that what I was making per book on my own. I’m locked out of doing anything about it. I’m also hoping that bookstores stock my books in a way that generates sales rather than just another title on just another shelf and that declining physical sales doesn’t cost me even more money. I can’t get my books into libraries without the crazy high prices and restrictive terms publishers impose on them. I can’t take advantage of POD opportunities without my publisher’s approval and even then only on terms they set. On top of that, I have little means of having a viable route to rights reversions should everything go south. I have to hope I get lucky enough to generate hardcover sales (if I even get a hardcover print run) at a high enough volume that my next contract can get more favorable terms or a bigger advance, if there’s a next contract at all. The icing on this particular cake is that my material that was finding a foothold on my own may now be stagnant and trapped with that publisher for at least 35 years unless I can afford a good lawyer and a drawn out legal battle to get my rights back. And all because my publisher chose to emphasize its most difficult, expensive and inefficient product line for a litany of reasons that have little to nothing to do with benefitting me. Why would I sign that? Why would anyone?

I’m of the opinion that, if I were to sign on with a publisher to handle my print business, I absolutely do not want that same entity to also be in control of my digital business. They will almost inevitably do just as these publishers are, handicapping the digital to prop up the print. What should be happening here is another round of disintermediation, this time separating the print and digital products entirely. Focus on finding a way to maximize print that doesn’t involve sacrificing digital. That could mean exploiting POD technology and finding ways to actually cut the cost of physical books to readers (and bookstores), not raise the cost of ebooks. Can it be done? Maybe, maybe not. But what you won’t be doing is handicapping the emerging market that customers’ dollars are flowing toward. $30 hardcovers of mainstream genre fiction is not a long-term growth market, just as $20 compact discs weren’t for the music industry and multi-thousand dollar print ads weren’t for the newspaper industry. Their respective businesses may have been dependent on those things at one point, and they may have seemed reasonable at the time, but they weren’t a strength, instead a major weakness making them extremely vulnerable to technological change and shifting consumer habits.

The music business lost nearly half of its CD sales revenue in a just few years. Newspapers lost near half of their print ad revenue in just a few years. Sometime in 2025, will this paragraph be finished off by saying book publishers lost nearly half of their print revenue in just a few years? Those other two businesses refused to adapt, engaging in protectionist strategies under the mistaken belief that digital alternatives would top out at a lesser market share and the physical product would still retain primacy. Sound familiar?

Ask yourself this: if I sign on with a publisher whose entire strategy is to use digital to support the furtherance of print, what happens to me if print drops precipitously anyway, as there is clear precedent for? How you answer that question may well determine which writers still have a career a decade from now.

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

Was Chesapeake Publishing just bought by a private equity billionaire?

I just found out that my former employer twice over, Chesapeake Publishing, has had yet another sale to yet another new owner. This time, the buyer is an Adams Publishing Group from Minnesota. How do I know this? The press release thinly veiled as a news story says so. Good thing, too, because otherwise, there’s no record of an Adams Publishing Group of Minnesota even existing prior to this acquisition.

Here’s the rundown that appeared on the Cecil Whig website. According to the Whig, APG bought three newspaper divisions from American Consolidated Media, the Chesapeake papers as well as papers in Wisconsin, Minnesota and Ohio. Not knowing anything of them, I was naturally curious about Adams Publishing, and what else they might happen to own, so I read on. Unfortunately, there was no mention of anything Adams owns by name, and no comment from anyone at Adams, other than the heads of the divisions they just purchased. And, boy, are they happy!

After not finding anything to my liking, I did a little googling only to discover zilch anywhere on the internet for an Adams Publishing Group other than the various announcements of this string of buys. There’s not even one listed in any phone book or address database for the entire state of Minnesota. Odd, I thought. Here’s the description the Whig gave of Adams Publishing Group’s resume:

“Adams Publishing Group LLC…has holdings in radio broadcasting, magazines, outdoor advertising, consumer and trades shows, commercial printing and production, and other sectors…”

Holdings? An interesting way of putting that, no? So, a little more digging and I turn up this description from Wikipedia:

“current holdings include…a national publishing, retail stores and member-based direct marketing organization directed toward owners of recreational vehicles…an operator of outdoor advertising structures in the Midwest, Southeast, and Mid-Atlantic regions…previous holdings have included operators of television and radio stations, print publishers, cola bottlers and community banks.”

Pretty similar, huh? The second description belongs to billionaire private equity investor Stephen Adams who was born and raised in, you guessed it, Minnesota. This is the same Stephen Adams whose holding company, The Affinity Group, changed its name a couple years ago to Good Sam Enterprises after losing tens of millions of dollars with its investments and having Standard & Poore’s drop its credit rating to D for “the company’s highly leveraged financial profile, weak operating outlook, and limited liquidity.” One of the more interesting holdings of Adams was Affinity Bank, which Federal regulators shut down in 2009 because of depleted capital reserves. Are we still happy to be a part of this exciting new opportunity? More from the Whig:

““We are thrilled to be joining Adams Publishing Group and to be moving back to a family-owned company,” said David Fike, president and publisher of the Chesapeake group.”

Family owned, right. Just like the Koch Brothers companies are family owned. Just like the Mitt Romney’s very vulturey Bain Capital was family owned. But I guess when you’re in an industry where bad to worse has been the modus operandi for the better part of a decade now, you tell yourself whatever you have to to keep from crying to sleep at night.

Keep in mind, this is pure speculation on my part based on what little information was provided about the buyer, but it makes sense to me. How coincidental would it have to be to just happen to have a filthy-rich private equity investor from the same location with holdings in the identical areas, whose last name is the same as this seeming-previously nonexistent publishing company? I tend not to believe too much in coincidence.

My only question: if this is actually Stephen Adams behind this purchase, why not just say so? It’s not like old, billionaire white guys buying up newspapers is some kinda rarity these days. In fact, it’s increasingly looking like they may be the only people interested in buying newspapers, including the folks who used to read them.

UPDATE: After unsuccessfully looking high and low for any information on Adams Publishing Group and any connection to Stephen Adams, wouldn’t you know a kind soul took the time to email me a link to exactly that. Here’s a piece from Business North, a business news site for northern Minnesota and northwestern Wisconsin, that makes the explicit link between Adams Publishing Group and Stephen Adams.

UPDATE PART 2: Here’s a piece from Nancy Schwerzler at the Cecil Times that sheds a bit more light on the subject. She did some legwork through SEC filings to find that APG does, in fact, track back to Stephen Adams. Also, the four LLCs that will house these papers, Minnesota, Wisconsin, Ohio and Chesapeake, were incorporated in Delaware about two weeks ago.

Perhaps most interestingly, according to the Cecil Times, Stephen Adams’ son Mark is set to oversee the operation of these newspapers. Schwerzler also mentions Mark Adams as the head of an EPG Media, a company founded last year to, essentially, spin off the outdoor motorsports magazines then owned by Good Sam Enterprises.

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

Who’s Got The Ether? Publishing, Hugh Howey and the downfall of old assumptions

A little while ago, I ran across this Writing on the Ether article by Porter Anderson. Anderson does a fantastic job of culling together the various viewpoints of whatever outbreaks of argumentativeness spring up around the publishing industry every week. Check him out on Twitter and definitely look for his articles when they come around. Always well worth the read.

Anyway, this particular piece dealt with author Hugh Howey’s suggestions of what would constitute a fair and equitable industry for writers given the new realities of independent publishing. Here’s a brief rundown of his points, all good ones, in my opinion:

“1. No more digital rights until ebook royalties are 50 percent of net.
2. No more “Most Favored Nation” clauses.
3. No more DRM for Guild members.
4. Fair pricing for ebooks.
5. No more non-compete clauses.
6. Stop fighting “free”.
7. The Authors Guild should embrace Amazon as a friend to writers and readers.”

The only thing I would add to that is no more DRM for anybody, but he was specifically referring to a hypothetical writers’ strike led by the Authors Guild, so there’s that. Go read his full piece yourself. Howey is clearly positioning himself not as simply a successful author but a strong advocate for author’s rights and fair treatment, something we seem to be sorely lacking from the old guard (looking at you, Scott Turow). Not surprisingly, his suggestions weren’t very well received by the establishment players, and that was the gist of Anderson’s piece and what led to the comment that caught my eye that I’ll get to further down.

Here’s industry consultant and analyst Mike Shatzkin taking issue with Howey:

“Hugh, your post is so thoroughly from an indie author’s POV that it is really not relevant to anybody else and, frankly, not to all indie authors either…It is doubtful to me that indies have 25% of all ebook unit sales everywhere, but, even if they did, they’d have a much smaller fraction of the ecommerce…let’s just say that my respect for your expertise does not extend to your ideas about how publishers ought to operate.”

To be fair, Shatzkin was very complimentary to Howey for his writing ability and the successful path he’s forged for himself. I like Shatzkin, but I have to wonder about an industry analyst advocating outright ignoring the suggestions of possibly the most successful author to emerge from these technologically challenging times. (I also find myself saying, “I like Shatzkin but…” a lot the past few weeks. I really thought he was turning a corner on this stuff, too.) He has a point of sorts, in that large publishers as they exist today likely can’t continue to function in the environment Howey describes. They’d have to cut a whole lot of fat from the bone and do damn near a complete 180 degree shift on their attitudes toward writers. But, like Howey seems to believe, those kinds of changes may look optional to publishers today (admittedly, a bad option for them) but before much longer, they won’t be. Get ahead of the curve now before it’s too late. And, maybe, paying some attention to a guy who’s already well ahead of that curve might make some sense, but I digress.

This brings me to the comment from Anderson that drove me to save this article. Here goes:

“You know where I’ve heard Shatzkin’s comments before? From myself! From myself and from other news people when “citizen journalists” became a rude, unwanted, upstart presence in “our” network news. We said just these things. Citizen journalists were a minuscule part of the overall picture in media coverage, we said. Citizen journalists, with their silly cell-phone videos, couldn’t hold a camera to our superb camera crews, we said. Citizen journalists, many of them fine folks, of course, knew nothing about how genuine journalism worked, we said.

“What we couldn’t see as we said these things was that the digital disruption of journalism would neutralize most of our traditional models and modalities. The news audience would not rush to “genuine journalism’s” aid. And the ways and means of our industry would be profoundly shifted toward open access and non-expert participation.

“See, we were wrong: every cell phone really was our competition. But we couldn’t see that, not then, not for anything, not even when we tried.”

I have to give a huge thumbs up to Anderson for not only recognizing this but stating his, and others’, mistakenly dismissing major change for a brief inconvenience. I haven’t seen that nearly as much as I should have at this point. When I first shifted over from following the newspaper/periodical segment of publishing (I started out working for newspapers, after all) to the book publishing side, one of the first things I noticed was that many in the established guard were spouting the identical nonsense about the self publishing interlopers that I had seen newspaper execs espouse about independent journalists, bloggers and the like, leading directly to them getting beaten around left, right and sideways by the shifting sands of disruption.

Kudos to Anderson for seeing that and pointing it out. Even more so for recognizing the error in his own dismissals of the past. Book publishers are still following that path, one that will lead to ruin. I’ve said before that the only thing that saved newspapers from completely collapsing in on themselves was, due to the nature of that industry segment, there was no simple, inexpensive means for the talent (writers) to fire up their own directly competing products that could monetize as well as needed. Some did, but it could have been much worse given a little different dynamic.

Ebooks are that different dynamic. There is clearly a simple, inexpensive means for authors to compete directly with publishers, largely thanks to Amazon and others. Howey has shown that it’s the case, both in his own success and now the Author Earnings data collection effort that has, even at a formative stage, shown how the interlopers are increasingly snatching up a larger and larger share of the market and the money that goes with it.

Many traditional defenders have nitpicked Howey’s data and, in some respects, they have a point as Howey himself has said. You don’t release you’re raw data unless you’re trying to invite exactly such nitpicking. But, to me, many of those arguments reek of fear. And they should be very afraid. If publishers don’t wise up, the turmoil the newspaper segment suffered isn’t the worst case scenario here. Given the talent’s ability to reach the market on their own and, more crucially, monetize in more than adequate means to support the low infrastructure costs, it could get a whole lot worse for book publishers than even their newspaper brethren ever dreamed.

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

Dirty Tricks Are For Kids…and people who work in publishing

Lately, I’ve been reading a lot about the sock puppet, review buying scandal “gripping” the ebook world. I used quotes because, frankly, I’m fresh out of shits to give about whatever system-gaming tactics other people are engaging in. Don’t get me wrong, I believe the people using fake accounts to rip other writers and their work are cowardly bastards that deserve our scorn. I also believe faking an account or getting you friends and relatives to write glowing reviews of your stuff comes off as desperate and a little pathetic. As for buying reviews, I’m honestly a little indifferent to that. It’s not something I’d do, and it’s deceptive if you know the reviews are bogus. But marketing itself is far more frequently deceptive than not. We don’t bitch when our favorite athletes or movie stars take fat checks to hock cars, watches, fast food or what have you. That’s obviously fraudulent marketing, too. Why aren’t we railing against that? No, buying reviews doesn’t even register as something I care about in the least.

My primary issue is the self-righteous indignation that has exploded in some circles over this matter. Don’t you people have anything better to do, like writing a book or something? System gaming and pushing the boundaries to get ahead is the American way. Rules exist simply so we know where the lines are when we cross them for personal advantage. Sure, that’s a cynical attitude, but then I’m not the one sitting here spewing morality and lying to myself about human nature.

I am shocked by one thing, though, that there are so many people who seem to have no conception of what the publishing industry really is. It’s a shark tank filled to the brim with lies, deception, trickery and questionable ethics, same as it ever was. Stomping this set of tactics out will only serve to the advantage of whoever’s got the next system-rigging scam ready to put in play. Is it fair or ethical? Hell no! It’s publishing.

Anyway, the whole mess reminds me of a piece I wrote over 2-1/2 years ago when some well-meaning but naive folks tried to start a new daily newspaper in the Detroit area. When their effort failed in all of four days, they proceeded to launch a massive whine-fest about the dirty tricks their competitors played on them. I think many of my points about publishing then are still applicable today, and they’ll still be applicable a decade from now, too. So, here is that piece along with the new intro I wrote in italics for its inclusion in my book, The Decline and Fall of the Publishing Empire.

By the way, see what I did there? I plugged my book, complete with hyperlink. Is that ethical? In fact, is this entire post just an excuse to promote my book on the back of a high profile scandal? It’s not, I genuinely think this is a perfectly valid point that I’ve also made in the past. But can you be sure of that just because I say so? Do you want to spend all your time sussing out who’s being totally legit and who’s being manipulative? Is it even possible to tell with any degree of certainty? If so, good luck with that. I’ve got stories to write.

Dirty Tricks- December 1, 2009

I was part of a start up publication a little over a decade ago, taking on an established, much bigger entity.  They tried every trick in book to derail us.  They swiped our papers from store racks, they pressured printers to not do business with us, the threatened possible backers, even filed a totally and completely frivolous lawsuit that was designed to get us to spend on legal fees instead of actual competition.  That’s the nature of this business. 

Dirty, low down trickery is second nature in publishing.  Always has been, always will be.  We, however, were prepared for it, didn’t go under in four days like these guys I talk about here, successfully fended off the lawsuit and, in fact, quite completely kicked their ass head-to-head.  The lesson in all this is be prepared.  Just having some money and what you think is a good idea is never enough, especially in a fickle industry like publishing.

If you haven’t heard, today I’m going to address the brief life and quick death of the new daily paper in Detroit, which lasted all of four days.  Now, when I first read about this, my thoughts weren’t particularly optimistic.  This is simply the wrong time in the wrong industry to try something so brazenly risky, but, hey, give ’em points for effort.  Anyway, today, I read a lament about the paper’s demise, which largely blamed dirty tricks on the part of Detroit’s other two long-standing major newspapers.  You mean publishers actually engaged in dirty tricks against the competition?  Color me shocked.

How can anyone at this point possibly be naive enough to have not expected this?  Publishing is an industry built on dirty tricks.  If there has ever been a manipulative, back-stabbing, sneaky, dirty trick played in the business world anywhere, it likely had its start in publishing.  Just because you have a group of well-meaning people with good intentions and more money than sense doesn’t mean that everyone else will just step aside, congratulate you and say, “welcome to the game.”

Publishing is, and always has been, a screw or be screwed industry.  That doesn’t mean that you have to play dirty, but you do have to be prepared for it.  Expect otherwise and you’ll get eaten alive.  It’s part of what attracted me to publishing in the first place.  You have to constantly be on your toes because the minute you let your guard down, people will be lining up to burn you.  Everyone has an agenda, and part of the fun is in figuring out what that is, while keeping your own close to the vest.  Reading between the lines, figuring out the real motivations behind people’s actions and words; those are essential skills.  These dynamics exist everywhere in publishing; employee on employee within companies; company on company within markets, that’s simply how the game is played.  Whining about dirty tricks after the fact just makes you look even more unprepared than closing up shop in four days does.

When I first heard about the shut down, which has been called temporary (yeah, sorta like death is temporary) it suggested a few things to me.  The first is that they were either ill-prepared or seriously underfunded.  It’s probably both.  But to complain about printers charging you up front, and other competitors putting pressure on vendors to not do business with you?  Exactly what industry did you think you were getting into?  First off, I wouldn’t trust a printer that didn’t try to charge you in advance for a new start-up.  There’s a long-standing tradition in printing, passed down through the generations, of getting small publishers in hock up to their eyeballs in print bills just so they could take them to court and strip them clean of any and all assets.  Never, and I repeat, never allow your print bills to be secured debt and run up out of reach.  You’re much better off paying up front and shutting down before that happens.

Secondly, it seems that these folks were counting on a massive influx of revenue right out of the gate.  Apparently, they took the dissatisfaction of the community with the existing players to mean that just starting a new paper will bring them on board.  It simply doesn’t work that way.  It takes time to establish a solid revenue base, and if you don’t have the money to fund at least a year’s worth of production without earning back a dime, don’t even bother getting started.  It doesn’t matter how pissed people seem, they’re not going to throw money at you until you can prove that you’re a better alternative.  Four whole days isn’t even close to making that happen.  Four months isn’t long enough.

That being said, I appreciate their initiative, misplaced as it was.  The best we can do is learn from their mistakes.  Even a weakened print industry isn’t an easy target, and they will not go quietly into that good night.

The Fraudulent Society: A world of bogus book reviews, statistics & cyclists

We live in a fraudulent world. Everything around us every day is fake. The economy is in the dumps because of financial sector fraud on a scale so large that it can hardly seem possible. This November, we’ll be asked to select which major political party’s dishonest, pandering, self serving pack of lies gets to run the country for the next four years. Hell, even Lance Armstrong has stopped defending himself from doping charges. I know, it doesn’t make him guilty. But it doesn’t make him innocent, either. Given the track record for honesty and integrity I’ve seen around me in my lifetime, you’ll excuse me if I’m a wee bit cynical of the guy who used steroids to return from a virtual cancer death sentence, then goes on to pull off probably the most far fetched athletic feat in my lifetime, going from an also-ran to winning seven Tour de France titles in a row. Sure it’s possible his brush with death motivated him to develop the drive to push himself to never before seen athletic accomplishments. It’s just as likely he discovered the wonders of drugs, or most likely, some combination therein. Either way, the guy who should be the most inspiring athlete in the world doesn’t exactly scream legitimacy. But then, what does anymore?

Certainly not the validity of the customer review system that much of the retail web works under. Read this piece from the New York Times and try not to throw up in your mouth. Now I’m reasonably sure most of us know some kind of questionable practices have been going on in terms of reviews. But the scale this suggests is frightening. This is one guy, subcontracting out “reviewers.” If he made $28,000 a day, as he claimed, that’s a ton of bogus reviews scattered out there. In fact, at that rate, this guy would’ve disseminated a half a million fake, rose-colored reviews in a year’s time. One guy. How many more review services are there out there? How many private groups trading quid pro quo positive reviews amongst their memberships? And what’s the percentage of “sockpuppets” that sellers are using to contribute glowing reviews of their own stuff clandestinely?

The short answer: a royal shitload! Certainly enough that it calls into question the validity of any customer review system. How exactly are reviews weighted in Amazon’s discoverability algorithm? If they’re counted at all, doesn’t this disclosure seem to indicate their removal may be called for? I mean, the information is tainted. Worse yet, so long as reviews directly count toward helping products be seen and possibly drive sales, there’s virtually no reasonable means of stopping it from becoming that way.

So who availed themselves of this “service”? Well, John Locke, for one, reportedly bought 300 reviews from this guy. Somewhat less to Locke’s discredit, he didn’t seem to actually care if the reviews were good, bad or indifferent, just that they existed. Maybe he legitimately thought he was getting people who were going to actually read his book and give an honest critique. Of course, that would mean a man that’s been held up for his business acumen for rising from unknown to self publishing icon would be dangerously naive. What was I saying about cynicism earlier?

But at least Locke didn’t stoop to the level of UK best seller Stephen Leather. Leather, rather incredibly, openly admitted to having a network of fake online identities he used to promote his books, or sockpuppets, as it were. Further, he implied that he also has a group of friends and associates all engaging in the same sham marketing. Here’s a breakdown of his situation.

As appalling as these instances are, really they’re just ham handed attempts to replicate conduct the corporate world has already perfected. Does anyone really think the Big Six don’t have someone posting glowing five star reviews on their books everywhere they’re available? Realistically, they’ve been paying for reviews for a long time, either directly or through back scratching deals with review publishers along the lines of buying ads in said publication with the expectation that your offerings get reviews. At least this new payola actually goes to the people writing the fake reviews and not just the newspaper or magazine printing them. Making the world of review fraud more democratic! That’s something, I suppose. Nauseating, but something.

Then there’s the simple case of the Digital Book World ebook bestseller list. Purported to be an accurate depiction of ebook sales, closer inspection reveals something that smells worse than a suddenly-abandoned fish market three days after the ice has melted. Is it a fraud? I don’t know for sure but my internal bullshit detector goes haywire whenever something produces generally surprising results that would be exactly what you’d expect if the fix was in. First, the somewhat contemptuous tone toward the lower price points in the promotional material for the new list seemed prejudicial to indies and immediately set me to awares. Then, the initial list had publishers prominently displayed but no authors. Hmmm…who would put a greater priority on the publishers being referenced rather than the actual authors? I wonder…Third, the results came out not only unpredictably but almost irrationally anti-indie and pro Big Six. One of the big tells in statistical fraud is when they overreach and results come out far stronger on one side than is actually reasonable. Last, the guy who developed the secret algorithm we know nothing about turned out to be employed as a VP at a Big Six publisher. Not only that, it was kept hidden from all materials until he was outed by a blogger and had to fess up. Hiding possibly pertinent information is usually a big tell in fraud, too. So is it a fraud? If it walks like a duck and quacks like a duck, well, sometimes it turns out to be a goose, but mostly, it’ll be a duck. And I’m sure you’ll excuse me if I’m fresh outta benefit of the doubt these days.

So, with all this obvious review fraud going on everywhere, will Amazon or someone else yank review data from any meaningful purpose? Nope. One other thing about our fraudulent society is that, far more often than not, the perpetrators of the fraud suffer no consequences from it. No bankers have been called to task, lying politicians are such a cliche now that we don’t even bother to call them on their bullshit anymore, lest we get buried by an even bigger pile of bullshit defending the first load. This review-pimping guy will be back to slinging bogus five-stars before you know it, and in the meantime, the ones who haven’t been outed yet will keep plying along unfazed. John Locke and Stephen Leather will be momentary blips, and very likely won’t suffer a bit from their questionable ethics (or naivete, if you’re feeling the Locke apologist vibe).

Lance Armstrong is getting his Tour de France titles stripped, though. That’s something, right? It would be if it weren’t being done by an agency that 1) has pretty questionable authority to strip them in the first place and 2) has no real evidence of doping at all and the somewhat inconvenient fact that Lance never once failed a drug test. See, when someone does get even the slightest comuppance, it, too, ends up done fraudulently.

But, oh well. I hear Roger Clemens is making a comeback.

Moaning and Groaning: Publishers’ supporters get more hard line after being shot down by the DOJ

So I’m catching up on my reading of industry news and I noticed that, since the DOJ pretty much laughed off the anti-settlement brigade’s rhetoric, the tone in some circles has gotten even sharper, more filled with doomsaying than it was before, and it was already pretty severe. Personally, I found a lot to like about the DOJ’s response to comments, which is something I very rarely say about any government agency. I especially appreciate that they weren’t swayed by the 10 to 1 ratio against that the traditional publishing backers’ letter writing campaigns generated.

I still believe there was a fatal flaw in their logic. In encouraging people to parrot the anti-Amazon party line, it created a raft of letters that failed to address the principle matter of law in the case, worse yet, it may have vindicated it. Very few, if any, of the letters substantively refuted the claims of collusion, instead using unsubstantiated claims of Amazon’s predatory pricing as justification for the publishers’ actions. In this way, many of the comments, while attempting to defend the publishers, essentially admitted collusion took place. It’s like saying, “Yes, your honor, we did it, but we’ve got a really good excuse.”

It doesn’t surprise me in the least that this kind of approach carried no water with a group of prosecutors. If anything, the arrogance of it seems to have further emboldened and entrenched the DOJ in its beliefs. This could end up being extraordinarily bad news for Penguin, MacMillan and Apple if they actually force an annoyed DOJ into court.

But that’s an issue for a later date if the holdouts don’t come to their senses and settle before they end up spending absurd amounts of money defending a pricing scheme likely to be obsolete before the first witness is ever called.

I’ve got two articles I read this week that, I think, illustrates both the attitude of superiority and the over-the-top, end of days hyperbole that’s making the rounds now that the industry seems to be realizing Uncle Sam isn’t going to do their bidding, no matter how many campaign contributions they make to Chuck Schumer. It’s a sad commentary on the state of things these days when buying a congressman is an easier accomplishment than competing in the market.

I’ve taken five points from each of these two articles to discuss. The first is a particularly single-minded post by Dennis Johnson, co-founder of the publisher Melville House, a staunch traditionalist.

Before I begin, let me say that I find it odd that such a virulent supporter of publishers founded a company named after Herman Melville, a man who largely had a tenuous if not outright bad relationship with publishers. Most of his books had to be published in London initially because American publishers wouldn’t touch them, and even then, they were never able to generate significant sales despite the fact he wrote some of the greatest works in the English language.  Rather infamously, Melville was paid a grand total of less than $600 for his masterpiece Moby Dick. I’m sure if he were to rise from the grave today, Melville would have more than a few choice words for publishers, particularly considering his actually burnt the unsold copies of an epic poem he wrote after he couldn’t pay for them. Comforting to see some things never change, like publishers’ contempt for writers.

1. “At the start of agency, for example, Amazon controlled 90 percent of ebook sales. There’s nothing “highly speculative” about calling that a monopoly.”

Except for the fact that Amazon’s large share came about because they took a then-under utilized ebook market and drug it into the mainstream essentially by themselves. No major publishers paid much heed to it at the time, very few competitors showed any interest in jumping in before Amazon charted a course, and certainly none on their scale. Once Amazon started making real money, though, that 90% share dropped significantly, just as you’d expect a trendsetter would when a previously empty playing field started filling up. It wasn’t like Amazon entered a thriving ebook market and swiped that giant share of business from others. They essentially created the market when almost no one else had the interest, desire or the balls to do it. He’s right, though, partly. It’s not “highly speculative” to call Amazon a monopoly in that instance, it’s outright bullshit to do so.

2. “The Sherman Antitrust Act, and its descendent the Robinson-Patman Act, clearly define loss-leader under-pricing as a predatory tactic rather obviously intended to “drive out competition and obtain monopoly pricing power.”

So when does the DOJ actions start up against every retail business in this country? Loss Leader pricing is so commonplace we barely even notice it any more. Its use is far from being “rather obviously” about driving out competition, either, far more commonly used on a day to day basis virtually everywhere things are sold, as a means of bringing customers into your store.

On the other hand, what the publishers did with the agency scheme was retail price maintenance, which up until 2007, was illegal in essentially all its forms. A Supreme Court decision (which overturned damn near a century of precedent, by the way) granted a limited allowance for the behavior under the “rule of reason” which Apple and the publishers flaunted by colluding pretty much in public and gloating about how their plans were going to screw Amazon, inhibit the ebook market and raise prices on ebooks. The publishers are only in legal trouble today because of their egos, stupidity and total lack of discretion. That and, unlike Amazon, they actually broke the law.

3. “The DOJ cited arguments from David Gaughran, writing on behalf of 186 self-published authors who thanked Amazon for ‘creating, for the first time, real competition in publishing by charting a viable path for self-published books. But when was it, exactly, that publishers prevented authors from self-publishing?

Is he kidding? Certainly, anyone with the money could publish a book, but getting that in book stores or retail outlets dominated by traditional publishing was an entirely different story. Publishers’ entire business model was one of dominating the channels of distribution. What good was publishing a book if you were essentially locked out of the principle sales channels?

Preventing writers from having any access to the market was their stock in trade, creating a ready supply of material they could pay as little as possible for, which is why writers get such a low portion of revenues today when they are principally responsible for the product. And, really, anyone who thinks there was anything close to a viable path to self publish pre-Amazon is either dangerously ignorant of reality or purposely being disingenuous.

4. “The process of public involvement was, apparently, meaningless. But there are better things to remember right now. For one, take this for what it is: The DOJ has found its own case sound. The good guys, meanwhile, have yet to have their day in court.”

So the DOJ was supposed to take a vote and ignore the law because a large number of traditional publishing’s disciples said so? The truest thing in the DOJ’s response was that the overwhelming majority of anti-settlement comments came from people and businesses profiting directly from the price fixing scheme. Like I said, I’m actually impressed they saw through it.

In truth, I think the public involvement stage was very useful. It illustrated the biases of those supporting the publishers who, despite their numbers, produced no compelling arguments for a lessening of terms. It also showed that the truly independent voices who, not coincidentally, are finding success without the need to break the law, were heard even though they could have been swamped by traditional publishing’s comment generating machine. If anything, unlike many other areas of life these days, this looks like the powerful corporations flaunting the law will be held to task while consumers, innovators and legitimate competitors in the market will win the day.

5. “The ludicrous charges, the fact of such paltry and pitiful support for them, the wide variety of opponents — the entire industry and then some — roused to speak out — all provide reason for hope.”

Yeah, reason to hope you guys hurry up and go bankrupt. Seriously? Ludicrous charges? Pitiful and paltry support? No and no. The charges look pretty damn sound to me. And evidently, those of us who choose to disagree don’t matter. Hell, we’re not even in the industry, apparently, despite selling books professionally. For money. To actual readers. See, it’s not that public input didn’t matter, it’s that public input he disagreed with didn’t matter, and it certainly shouldn’t have mattered enough to beat back their superior numbers and unsubstantiated inflamatory rhetoric. How dare the DOJ side with the law and actually aggreived parties who have paid tens of millions more for ebooks than would have been possible without collusion! They sent 800 carbon copy, Amazon-is-evil letters, didn’t the DOJ get the memo? Won’t somebody please think about the culture?

Shortly after reading that piece, I read this one by John Barber of the Globe and Mail. The hits just keep on coming in this one, including cameos by everbody’s favorite bitchy traditional writers, Ewan Morrison and Scott Turow, proving that even the Atlantic Ocean can’t keep arrogance and stupidity apart.

1. “Authors are losing income as sales shift to heavily discounted, royalty-poor and easily pirated ebooks. Journalists are suffering pay cuts and job losses as advertising revenue withers. Floods of amateurs willing to work for nothing are chasing freelance writers out of the trade. And all are scrambling to salvage their livelihoods as the revolutionary doctrine of “free culture” obliterates old definitions of copyright.”

Being as he made several points here, I’ll address each in order. First, ebooks are only royalty-poor because publishers want them that way. And, to be fair, print books are pretty damn royalty poor in most instances, too. Next, do you know who’s not seeing pay cuts and job losses as advertising flees newspapers? The CEOs, who are “suffering” with giant bonuses and golden parachutes for all those job losses they’ve instituted while simultaneously playing the fiddle on any kind of digital transition as their industry segment burns to the ground.

Third, as conglomerates bought up any and every publication they could find during the acquisition rush years ago, many publishers began getting tight with freelance budgets. Even at the height of profitability before the bottom fell out, prices paid to freelancers were stagnant or negative. Once the advertising revenue started to fall, they used it as a convenient excuse to put the screws to writers even more than usual. The flood of free content he refers to was largely spurred on by publishers looking for ways to spend as little as humanly possible on content, quality be damned. The issue isn’t that there’s work out there available for free, it’s that publishers refuse to pay even modest wages for quality writing despite the fact that content is the only reason they have the ability to attract any advertising at all.

And, finally, who’s perverted the concept of copyright more, the “free culture” people, as he calls them, who advocate sharing and the rights of consumers or the media companies, who lobby for laws like DMCA and SOPA, and push through things like the Mickey Mouse rule that now has copyright extended to life of the creator plus 70 years?

The extensions and increasingly stringent punishments for even minor infringement has created an atmosphere where it makes a lot of sense to argue that copyright needs to be looked at anew. The parts of copyright law that support derivative works and allow creators to build off of the progress of those before, fair use and the first sale doctrine, and the public domain and furtherance of culture have all been imperiled by the steady rights grabs of media companies who have been engaging in a systematic effort at maintaining copyright in perpetuity for decades now. If you’re going to cry about copyright being broken, don’t do so while advocating for those who actually broke it.

2. “(According to best-selling UK author Ewan Morrison) The result will be the destruction of vital institutions that have supported “the highest achievements in culture in the past 60 years.” In short, he predicts, “There will be no more professional writers in the future.”

I’m sure when Morrison uses the term “professional writers”, he’s referring to people like himself. We can only hope for a future with as few of those kinds of “professionals” as possible. It’s not his writing talents I have issue with, I’ve never actually read any of his work, it’s that he has some ridiculously backwards, elitist ideas along with a generous helping of contempt for anyone who circumvents the traditional getekeepers.

Morrison has said some pretty crazy stuff, for instance, this piece in the Guardian where he argues against social media but makes some larger points about traditional and self publishing. Be sure to read the comments because he has numerous additional points there, including a rather entertaining discussion with Joe Konrath. My favorite part is when he excoriates Konrath for daring to encourage others to eschew traditional and embark in self publishing by saying, “It is unfair and cruel to propagate a model for others which can only ever work for the few.” After I stopped laughing and wiped the tears from my eyes, the full audaciousness of that comment really sunk in. After all, Konrath has a long, long way to go to rate with traditional publishers in propagating models that only work for the few. The sad part is that it seems Morrison doesn’t even get the rich, creamy irony.

These statements are what I’m talking about when I say the rhetoric has gotten more severe. The highest institutions of culture will crumble and working writers will totally vanish. Talk about self-important! Publishers largely gave up their mantle of cultural protectors, if they ever had one in the first place, when they became little more than profit engines for larger conglomerates. It’s pretty obvious, too, yet Morrison seems to believe that writers should willingly accept lousy royalties so these publishers can keep exploiting them to the benefit of their parent company’s bottom line. Being self published and actually keeping a fair share of what your work earns is selfish, according to Morrison. Of course, he just might see it that way because more and more writers earning outside of traditional may jeopardize his next advance. Besides, if publishers weren’t portrayed as purveyors of culture, then there’d be no moral argument for their survival, and that would make for even more specious rants, if that’s possible.

3. “(Author Scott Turow) has drawn heavy criticism from digital partisans for defending the diminishing rights of “legacy publishers” currently under U.S. Justice Department investigation for allegedly fixing ebook prices.”

Diminishing rights? I wasn’t aware publishers had the right to colluded and fix prices. Didn’t know they had the right to rip off authors through shady corporate finanglings like Harlequin just got sued for. Wasn’t aware they had the right to snatch digital rights from contracts signed 30 years before anyone had ever heard of an ebook. Most of all, I didn’t know they had the right to operate largely free of genuine competition.

If publishers are diminishing, it’s likely for two reasons; writers have other choices now and are sick of being treated like chattel and paid slightly worse; and they’re clinging to a business model that is servicing a shrinking percentage of their customer base. But that’s the common denominator in the anti-Amazon camp, the stark refusal to admit publisher’s culpability for their own problems because it’s so much easier to make excuses for your own failings when you can pretend to be a victim.

4. “Nor is self-publishing profitable for the majority of authors, according to a recent British survey. It found that half of the writers – many no doubt lured by well-publicized tales of spectacular success achieved by a handful of fellow novices – made less than $500 a year for their efforts.”

No one was ever lured into traditional publishing by the tales of success of other writers, right? I’m sure that’s never happened. And let me just reiterate an earlier point: Herman Melville made less than $600 in total on Moby Dick. Using dollar figures in this way, especially with no context in comparison with traditionally published writers, makes for compelling soundbites while providing very little actual insight. Besides, there are a whole lot of self published writers. That survey means half of them made more than $500 a year. I’d be willing to bet that percentage isn’t far removed from traditional but I’m sure we’ll never hear about it.

5. “The livelihoods of serious writers will continue to depend directly on the health of traditional publishers, “the venture capitalists of the intellectual world,” according to Turow.”

So only writers with traditional contracts are serious? The rest of us are just dicking around out here then, huh? Writers like Turow and Morrison may have their livelihoods depend on the health of traditional publishers, but there seems to be a large and growing infrastructure that’s circumventing their control. That means the health of said publishers isn’t really a major concern in that segment. In fact, it may be just the opposite.

With fewer market obstructions from the traditional end, and less product from that side, it could well increase opportunities for success amongst those who aren’t dependant on them. But that doesn’t matter because those people won’t be serious, of course. Everyone knows you can’t be a serious writer unless you give up most of the proceeds, all creative control and any conceivable rights to your work until your great, great grandchildren are old and gray. It’s just crazy talk to say otherwise.