The Tipping Point in Publishing

Lots of journalists like to pinpoint an individual event as the catalyst for the dawn of an epoch. I choose to believe that in most cases, we can’t single out one event without excluding another (or perhaps several others) that contributed to a snowball effect.

Let’s start with Amanda Hocking. She started self-publishing about a year ago. Now’s she’s a millionaire with a seven-figure deal with a major publisher, and she did it with nothing but her mind, a laptop, and a stack of rejection letters, and the determination to see her work ‘in print.’ Amanda Hocking proved that authors didn’t actually need either corporate publishing through conglomerates or agent representation to be successful. Mind you, she did choose representation and both methods of publication, but it was her success before either decision that made those choices possible.

A few days earlier, Barry Eisler, the bestselling thriller author, turned down a $500,000 deal from Macmillan to self-publish. He is not the first big author to abandon traditional/NY/legacy/whatever publishing, but he is the first continuously bestselling genre author to announce this kind of decision. He will not be the last.

February ebook sales surpassed all other forms of books (not combined), including mass market paperbacks. Part of this was the pre-spring break buying binge after a November-December 2010 surge in ereader purchases, but we’re talking about a positive feedback loop now. What’s more, HarperCollins CEO Brian Murray said that ebook sales were having a dire effect on bookstores because the most hardcore readers in the U.S/U.K. — those people who buy at least 12 books a year or more — have increasingly bought ereaders and switched to mostly or all digital purchasing.

Print became a subsidiary right with Houghton-Mifflin-Harcourt, according to Mike Shatzkin of Idealog. I previously thought that we might have a transitional period between print-as-primary-right and print-as-subsidiary-right, where the Big Six publishers might choose to be more flexible in buying print rights only as more and more independent authors became successful on their own, acquired agents, and asked for print distribution. Now it’s pretty clear (to me, anyway) that conglomerate publishers must heed the advice of conglomerate lawyers and refuse to negotiate; they’ll usually choose to offer higher and higher advances in hopes of luring authors in without improving the fine print on their contracts one bit.

The fact that Hocking has not announced any print-only contracts for her backlist is telling here. She needs better distribution of her print books than CreateSpace alone can provide for her, but the focus was on a rights-grab for her new, unpublished, upcoming work. I highly doubt she has saturated the print market for the My Blood Approves Series or the Trylle Trilogy, considering that people apparently have been unable to order her books outside of Amazon or in physical bookstores.

Amazon announced it will soon allow library lending through Kindle. This is HUGE. Not only will you be able to bookmark, highlight, and take notes on book you check out, all of those notes will remain stored in the cloud so that if or when you decide to buy or borrow that book again, all of the notes, highlights, and bookmarks will re-appear. Other borrowers will not be able to see these notes. As Mike Cane points out, this disincentivizes (is this a transitive or intransitive verb? Usage tips welcome!) the purchase of e-ink ereader alternatives such as Nook, Kobo, and Sony models.

Why would I buy another ereader with a smaller selection of ebooks (Nook), or one without 3G wireless (Kobo), or one I have to sideload via USB (Sony) when I can get all of these features on my Kindle? I was seriously considering buying a Nook for the library borrowing alone. Now that probably won’t be happening unless I have the spare cash to spring for a Color Nook, and if I’m going to do that, shouldn’t I just save up and buy an iPad 2? (Note: I dislike Apple’s business practices for its “closed network” and “family-friendly”/censorship first attitudes, so this is unlikely unless I make a ton of money this year.)

Kristine Kathryn Rusch exposed major accounting problems with both ebook AND print sales royalty reporting. Different authors at the same publisher as she reported they had identical sales numbers as she did for some of their books, as well as identical sales numbers for different titles within a book series. That’s statistically so improbable as to be impossible — I can tell you that with confidence despite not being a math major. What’s more, some unidentified authors reported to her that their royalties for print books reflected lower numbers of books sold per title than Bookscan did. Since Bookscan only accounts for between 50-70% of total sales, the number of books sold on their statements should have been HIGHER than Bookscan’s numbers, not lower. Again, fuzzy math.

[I am continually impressed with the amount of free information Kris Rusch and her husband, Dean Wesley Smith, give out weekly on their blogs. They provide two of the most invaluable resources out there for writers of all stripes, period. If you haven’t subscribed to their feeds and you are a writer, you should.]

Now, as for why I think this massively under-reported story is as important as the ones preceding it in the big picture — I think (hope) that the inevitable audits and litigation that will eventually follow all of the statement checking will be an eye-opener for a lot of midlist authors, perhaps all traditionally published authors. However, bad accounting hurts midlist and lower-rung authors the most. Most of these writers have second jobs; perhaps the writing IS the second job. For them, losing nine-tenths of their royalties to lousy algorithms isn’t just pennies, this is talking about their bread and butter.

I trust Rusch’s research. I believe Rusch’s conclusion that publishers have been trying to fit a square peg into a round hole; in other words, it is likely they’re using databases and algorithms designed for print distribution royalty calculations to determine ebook royalty calculations as well. But you know what I believe that Rusch said the most?

Most writers operate from the mistaken mindset that they can participate in business without being businesspeople. The industry has trained them to trust that their publishers — and by extension, their agents — will always have their best interests at heart, and this is why almost all of them end up screwed at one point or another.

Here’s the thing: writers cannot operate in the mindset of an employee. We must operate in the mindset of either an independent contractor or a small business owner, both of which are self-employed. We have to look out for our own interests. You can “trust but verify” if you want, but that is the very least you should do.

Me? I’ve seen enough crappy freelance contracts to last a lifetime. I’ve been pressured into taking on more work for less pay. Hell, when I worked for Blockbuster between semesters as one of the store managers, I had the same number of shifts as the two other co-managers, but our supervisor purposefully assigned me 38 hours a week so that I wasn’t a full-time employee and therefore deserving of a salary and benefits. Douchenozzles, the lot of them. I cheered when the local stores closed down and celebrated when the company went bankrupt. I’ve gone to the moon and back for clients only to have them drop me for no reason.

I don’t “do” trust. Not anymore. I just verify.

Frankly? This is what the music industry does to contracted musicians, albeit on a smaller scale and without deliberate malicious intent. For an industry readers and artists are supposed to identify with and want to defend from outside market forces because “they’re the good guys,” NY publishing sure does a lousy job at convincing us that it’s any different than the other sectors of the media that are (more or less deservedly) foundering.

Who wants to place bets on whether the printers would let the publishers pay them one-tenth of what they’re owed in costs for a book’s production? The distributors, undoubtedly, wouldn’t mind waiting over a year to find that their invoice is only half-paid. (If they do, they’re fools.) Bookstores, what with their intimate relationships with publishers, surely wouldn’t mind if books suddenly became non-returnable? After all, the publishers know what number of books to print best! There won’t be any leftover stock! What, you’ve never heard of the consignment model? Trust them!

Yeah, I didn’t think so.

People, this situation is why unions exist. They exist so that the less powerful aren’t robbed blind and exploited by entities who will, by design, serve themselves to the detriment of all others.

Outside of the greater entertainment/media industry, it doesn’t seem realistic that the likely extent of this lousy bookkeeping would have a) escaped notice for this long or b) been tolerated or ignored by the people it harmed for this long. Yes, I know lots of businesses have done lots of bad things throughout the course of human history. The point is that in the majority of cases of corporate malfeasance in the 19th, 20th, and 21st centuries, someone was protesting and wanted the government to do something about it.

I don’t care whether these companies are shortchanging authors by carelessness, apathy towards software upgrades or transitions, mountains of red tape, slow-moving bureaucracy during a fast-moving technological revolution, or the inability to hire enough staff to do proper accounting because of budget cuts. If you can’t manage your business properly, you need to fix the problem. Intentions don’t matter. The fact is that according to several authors and dozens more unnamed people inside the industry, publishers are stealing from authors. Period.

If the conglomerates are so focused on quarterly profits, then surely no matter how badly their subsidiary publishers are hurting, they should have enough liquidity to hire temps and programmers, fix the accounting, and pay authors back, even if the funds have to come from the parent company? Responsible companies don’t take centuries to act. They get $%#! done. Full stop.

IF these allegations are true, at least two of the Big Six publishers are under U.S. jurisdiction. They could be in violation of federal law according to Section 4 of the Sarbanes-Oxley Act if their accounts are determined in court to amount to a “material misstatement,” according to one commenter. The broad definition of a material misstatement is a misstatement, whether by accident or intent, that affects the value or price of the company’s stock. The losses in supposed revenue that was actually owed to authors might have to be significant to cause investors to lose confidence in the solvency of the company and trigger a criminal investigation. Still, this is a potentially HUGE problem, especially if external audits uncover inaccuracies in print royalties going back for more than ten years, and if the publishers have been using the same systems to calculate royalties for so long, as Rusch suggests might be true, this is possible.

I’m pissed off about this on behalf of the authors, in case you couldn’t tell already. I can’t tell you how enraged I would be if it were MY royalty statements they were screwing up.

This will only serve to accelerate the exodus of midlist writers from traditional/NY/legacy publishing. Smart people can see where the money is going — or in this case — where it isn’t coming from — and they will make better personal business decisions, organize, and start collective action. You can count on it.



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