Follow the Money

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Follow the MoneyWhen big change happens in an industry – sometimes referred to as disruptive change – significant innovation is always involved. Think of the disruption digital photography has had on chemical based photography, or steamships had on sailing ships, or smartphones have had on traditional and mobile phones. Such disruptions affect all players in an industry along with the flows of money and profit.

Clayton M. Christensen, author of The Innovator’s Dilemma, argues that established companies have great difficulty with disruption because their processes and values focus on evolutionary change and the very things that make them successful are at odds with disruptive innovation. Of course, publishing is no exception.

Industry statistics are confusing and often incomplete, but consider a few US stats included in a blog on The Future of Publishing, written by Thad McIlroy. (Some are a little dated, but I believe still relevant.)

  • Of more than 88,000 publishers in the US, nearly 68,000 had sales under $50,000 – a 2005 study. (Does this  mean there are a lot of publishers looking for good product? Or far too many publishers?)
  • The top 50 US publishing companies hold 80% of the market in terms of sales. (A huge portion of their revenue comes from established authors.)
  • And yet, more than 400,00 new titles were published in the US in 2007.  (Talk about competition! What other industry offers so many new products every year?)
  • Nearly half of all Americans aged 18 to 24 read no books for pleasure. (That’s zero, zip, nada, folks, and begs the question of what they are doing with their time. I suspect that one answer is social media.)
  • Between 1985 and 2005, average annual household spending on books declined 14%. (Averaging can be misleading. For example, this data said nothing about splits amongst hardcover, paperback or ebook spending.)

According to the authors of a JRC Technical Report on The Book Publishing Industry,

Digitization alters the legacy cost structure. Some costs disappear (printing, physical transportation, storage), some remain unaffected (creation, authors’ advances, editorial process, marketing and sales), some are shifted (e.g. promotion, with the coming of blogs and other tools) and some new ones also appear – mostly on the software side of the equation (computer programmes, file conversion, cataloguing and permitting search of text and metadata, storing, security, right management…).

This report went on to discuss the publishing industry value chain, noting:

One major feature on the creative side is that this creative workforce is usually not supported directly, at least on a regular basis by its main customer the publisher, a feature shared by other creative industries. The author appears to be more in the position of a supplier working under various contractual arrangements. They will receive in most cases royalties within the range of 7% to 15% of the list price set for the physical book.

An analysis of the French publishing industry workforce found that 12% are writers, while 69% are journalists and publishing executives. An interesting structural dynamic with significant impact on cost allocation.

Pubsoft, an organization with the mandate of ‘democratizing the ebook publishing world to the every day user’ suggests that “readers are the ones who determine what sells and what doesn’t. They want cheap, good stories. And they want them now. They don’t care how they get them.”

These are some of the many pressures facing the publishing industry, and it’s likely that someone has already articulated what I’m about to say, but I will say it anyway: Writers need to follow the money.

By following the money, both outflows and inflows, writers can adjust their approach to leverage today’s changed and changing environment.

  • Writing requires time. Time is ultimately money. The more you write (volume) and the better your writing becomes (quality), the more you can potentially earn. What are you doing to increase volume and quality?
  • Agents are paid by writers. Are agents gatekeepers to the publishing industry? Is your agent worth the money you spend? Can you get published, and protect your rights, without an agent?
  • Readers have lots of choice. Readers ultimately fund the industry. What are you doing to reach readers and build an audience? What about reaching younger consumers who don’t (currently) read books, although many read tweets and blogs and interact on Facebook?
  • Volume x Price = Sales Revenue. Publishers have traditionally paid around 10% royalty to authors for each book sold. What are you doing to increase the volume of sales for your books? What trade-off would make it worthwhile to take a different publishing path?

A few examples illustrate different approaches authors have and are taking (I originally pulled these examples together in 2012, and I am certain there are many more):

  • James Patterson adapted lessons from his career in advertising to create a mega-writing business that functions like a literary assembly line and generates revenues in excess of $100 million a year.
  • A. Konrath, author of popular detective stories, agreed a few years ago to publish his newest novel directly with Amazon. (He decided he could make more money that way.)
  • Less well established writers like Joanna Penn, who began her blog as part of a marketing strategy for her books, make money (in some cases more money) from their blogs as well as their novels.
  • James Redfield, author of the novel, The Celestine Prophecy, offers a chat forum for readers on his website and bi-weekly webcasts for his Global Prayer project. He began by self-publishing.
  • Terry Fallis published his first book, The Best Laid Plans, by podcasting it a chapter at a time. He built an audience and won Canada’s Stephen Leacock award for humour. His second novel, a sequel titled The High Road and published by McLelland & Stewart, has been released concurrently in podcast and book formats.

What are you doing to follow the money?

FOR MORE ON READING & WRITING HISTORICAL FICTION follow A WRITER OF HISTORY (using the widget on the left sidebar)

M.K. Tod writes historical fiction and blogs about all aspects of the genre at A Writer of History. Her latest novel, LIES TOLD IN SILENCE is set in WWI France and is available from Amazon, NookKoboGoogle Play and iTunes. Her debut novel, UNRAVELLED: Two wars. Two affairs. One marriage. is also available from these retailers.

Mary can be contacted on Facebook, Twitter and Goodreads.