Interview with me on the BookGoodies website

An interview that I did with Deborah Carney of BookGoodies about things that publishers and self-publishing authors need to keep in mind when getting into eBooks, especially those for children's books and other graphic- and design-heavy applications, has been posted on their website. It's about a 45-minute interview, and there's lots of useful information. You'll also find a permanent link to the interview in the left-hand column of this blog.

Vook launches HTML5 eReader and new pricing models

Vook just launched a new HTML5 eReader for its eBooks (to try it out, go to http://vook.com; http://www.vook.com will take you to their sign-up page for writers). The samples I've seen are similar to a conventional EPUB display with flowable, resizable text plus embedded rich media.  It can display one or two pages at a time. It also has three layout options with different typefaces. A nice feature is that Vook has anticipated that the eReader will be used on both PCs and tablets, so it supports a single-page vertical scrolling mode for smaller devices, as well as two-page mode for desktop and notebook PCs.

The company has dropped its monthly fees and now offers two options for self-publishers:

• Publish the eBook free of charge to Vook's own eBookstore; the author gets 85% of revenues.
• Create eBooks using Vook's tools and then pay the company $99 for the files, which can be uploaded and sold by the author through Amazon, Barnes & Noble and Apple. 

Pay for a chance to perhaps have your book sold in Barnes & Noble

According to paidContent, FastPencil, a self-publishing services company, has struck a deal with Barnes & Noble to carry some of its titles online and in stores. The deal covers two FastPencil "imprints," Premiere and Wavecrest. Participation in the Premiere program seems to be limited to experienced authors who've already published at least one title that sold more than 10,000 copies, while the Wavecrest program is open to anyone who's willing to spend enough money.

FastPencil offers a free self-publishing service, but it's little more than a mechanism for the company to sell the author more services. There are three bundles of editorial, design and distribution services available in FastPencil's basic program, priced from $999 to $1,999. Even the most expensive program only includes five printed copies of the book. Pricing for Premiere is by quotation only, and Wavecrest, which offers exactly the same services as FastPencil's basic bundles plus a package of promotional services, is priced from $4,499 to $7,499. (For $7,499, the author still gets a grand total of five printed copies.)

FastPencil isn't even guaranteeing that Barnes & Noble will carry Premiere and Wavecrest titles; all it will do is pitch all new Premiere and "most" Wavecrest titles to a B&N buyer at quarterly meetings. B&N has complete discretion as to which titles it carries, and FastPencil has complete discretion as to which Wavecrest titles it pitches. I'm certainly not saying that FastPencil is doing anything fradulent--but they're asking an awful lot of money for what they actually do.

Let me be clear: Publishing your own book is the same thing as starting your own business. It requires a lot of work--but frankly, most of that work is neither difficult nor expensive. If you want someone to do all the work for you, pitch your book to an established publisher. They have more and better resources to help you than just about any self-publishing company, and you can save your money for promotion--which is the one thing that most publishers can't, or won't, do for you.

What did Pearson really buy when it acquired Author Solutions?

On the IndieReader blog, David Gaughran writes about last week's acquisition of self-publishing company Author Solutions by Pearson. Author Solutions will become an independent business within Penguin. Gaughran writes that Bertram Capital, the private equity company that owned Author Solutions, has been looking for a buyer for the company since March. The company grossed $99.8 million in revenue in its most recent fiscal year, of which 63% came from the sale of services to authors, and only 37% came from the sale of books.

According to Gaughran, "Industry watchdogs such as Writer Beware have received a litany of complaints about Author Solutions and their subsidiaries over the last few years: misleading marketing, hard-selling of over-priced services, questionable value of products provided, awful customer service, and, after all that, problems with writers being paid." He points to Author Solutions' "web-optimized press release" priced at $1,199 as an example of wildly overpriced services, and writes "In case it isn’t obvious, you would likely receive greater promotional value from setting fire to that money on YouTube." Gaughran says that "...the average customer spends around $5,000 over their “lifetime” with the company, but only sells 150 books." Customer dissatisfaction could explain in part why the average author only publishes 1.3 books through Author Solutions (the company claims that it's published 190,000 titles by 150,000 authors.)

It's possible that Penguin could clean up Author Solutions' operations, but first, the publisher has to believe that there are problems. Penguin CEO John Makinson said the following in Pearson's press release announcing the deal:

“No-one has captured this [self-publishing] opportunity as successfully as Author Solutions, which has rapidly built a position of world leadership on a platform of outstanding customer support and tailor-made publishing services.”

Pearson acquires Author Solutions for $116 million

Pearson reports that it has acquired self-publishing company Author Solutions, based in Bloomington, IN, for $116 million in cash. Author Solutions was owned by California-based Bertram Capital. Its back office and technology operations will be taken over by Penguin, but the company will be run as an independent business within Penguin.

Author Solutions has published more than 190,000 print and eBooks for 150,000 authors. Its 2011 revenues were approximately $100 million, split across publishing, marketing and distribution services. The company has approximately 1,600 employees, located primarily in Bloomington and Cebu City, in the Philippines, with a small office in Indianapolis. Penguin will expense the costs of integrating Author Solutions in 2012 and expects the acquisition to be accretive to earnings in 2013.

This is obviously a way for Penguin to profit from the growth in self-publishing, as well as an opportunity to use Author Solutions as a "farm club" for identifying new authors for Penguin's imprints.

Who's winning and losing due to the shift to eBooks?

In my last post, I wrote that eBooks aren't expanding the market for books in general. However, even if eBooks are, overall, simply shifting money from one bucket to another, there are definite winners and losers:

Winners:

• Amazon: The company sells the most popular eReaders and more eBooks than anyone else in the U.S. (although a lot of those sales are unprofitable.) Amazon's dominance in the eBook market scared five of the six biggest publishers into (according to the U.S. Justice Department and more than 30 states) illegal price-fixing in order to take away Amazon's price advantage.
• Barnes & Noble: In the U.S., the bookseller is Amazon's only serious competitor for both eBooks and eReaders. Barnes and Noble has between 25% and 30% of the U.S. eBook market.
• Kobo: The company is Amazon's primary eBook and eReader competitor outside the U.S. It's recovered from the failure of Borders and Borders' licensees (at least, outside the U.S.) Now that it's owned by Rakuten, it has both the financial resources it needs and a natural advantage in Asia.
• Major publishers: Even though eBooks are shifting money around rather than increasing overall sales, publishers are earning more money on each sale, because eBooks have no printing, binding, shipping, warehousing or return processing costs.
• Self-publishers: eBooks have opened up the market to both writers who couldn't find publishers or agents, and writers who've been previously published but didn't earn much money. Royalty rates on self-published eBooks are much higher than those from major publishers, so writers can sell fewer copies at lower prices and still make more money.
• Consumers: Even though the Big 6 publishers have raised the prices of their eBooks under agency pricing, in most cases their eBooks are still less expensive than print. Self-published eBooks are dramatically less expensive than equivalent print titles. In addition, eReaders and tablets are far more convenient for consumers than carrying around multiple print books.

Losers:

• Independent booksellers: Few independent booksellers have successful online eBook businesses, and none of them have the same ease of ordering and delivery that Amazon and Barnes & Noble have. The American Booksellers Association inadvertently tied itself to the "albatross" of eRetailers, Google. which has since given notice that it plans to cancel its distribution agreements with independent booksellers. Whether independents will ever have a significant share of the U.S. eBook business depends almost entirely on who the ABA decides to partner with next.
• Small publishers: Small publishers that are still focused on print are tied very directly to the fate of retail booksellers. They need shelf space in order to build awareness and sales of their books.

Too early to tell:

• Apple: With no more than 10% of the U.S. eBook market and even less internationally, Apple's jump into the eBook business has largely been a bust, plus it's become entangled in Federal, state and private price-fixing lawsuits. Competitors such as Kobo are gaining share more quickly in international markets. Apple may ultimately decide that eBooks are more of a problem than they're worth, and settle for taking 30% of sales from other booksellers.
• Sony: At one time, Sony was the undisputed leader in the eReader market, but a series of missteps have left it an also-ran, even in its original strongholds of Japan and the U.S. Sony can turn things around by aggressively pursuing partnerships with booksellers outside the U.S. and Canada.

None of these judgments are set in stone: Barnes & Noble's partnership with Microsoft could help it build an international business, or its slowly-sinking retail bookstores could bring down the entire enterprise. Major publishers could fail to transition to digital-first strategies and end up with costs that are much too high for their revenues. Independent booksellers could find the right partner and become a viable competitor for eBook and eReader sales. Small publishers could start producing far more eBooks and become more visible in online eBookstores. Apple's rumored new "iPad mini" could be the perfect tablet for reading eBooks and could drive sales of many more titles.

The radically reshaped media landscape

Today's media landscape is very different than it was even a few years ago. You might casually, or even professionally, follow one media business or another, but it's only when you look at all major media segments together that you understand just how radical the changes have been:

• DVRs have fundamentally changed the way that people watch television. Viewers are saving up entire seasons of shows and watching them all at one time, finding something better to watch on the DVR at 10 p.m. instead of watching network television, and skipping enough commercials that it's having a serious impact on the bottom lines of networks.
• Movie studios' home video revenues are in serious decline. Consumers are renting from Redbox and Netflix instead of buying DVDs, Blu-Ray is growing much too slowly to make much of a difference, and streaming video revenues haven't replaced, and probably will never fully replace, DVD revenues.
• As of July 3rd, Netflix became more popular than any U.S. cable network, according to BTIG analyst Richard Greenfield. Greenfield estimates that Netflix now has around 24 million subscribers, and the company itself said that its users watched more than one billion hours of video in June. That works out to around 80 minutes of viewing per day. In Netflix households, the service even beats ABC and CBS. Every minute spent watching Netflix is a minute that a broadcast or cable network isn't showing that person a commercial.
• Internet videos are finally making serious inroads into broadcast and cable viewership. It used to be that television networks simply used the Internet as a "farm system" to identify rising talent, but there are now too many people producing interesting Internet shows and not enough network slots to put them into. The Internet, unlike broadcast and cable, has an unlimited number of time slots and no requirement to get carriage from cable or satellite companies.
• Newspapers have cut all the editorial and production staff they can while still staying in business. They're now cutting back on deliveries and days that they print their papers. The only remaining step for many of them is to drop their print versions altogether and try to survive in digital form.
• Self-publishing has moved from the last resort for desperate authors to the fastest-growing segment of the U.S. book industry. Authors who could have gotten publishing contracts are choosing instead to self-publish, and are making more money as a result. Authors who were widely rejected by agents and publishers are turning to self-publishing and, in some cases, finding big audiences. (As with Internet video, major publishers see self-publishing as a "farm system," but it's only a matter of time before the farm teams overwhelm the big leagues.)
• Internet music services such as Spotify and Pandora are having a major impact on both the recording and radio businesses. Record companies are becoming more dependent on subscription music services for revenues; radio stations are losing part of their audiences to paid, commercial-free services. Car companies are adding Internet music services to their infotainment systems, making them as easy to access and convenient as broadcast and satellite radio.

There isn't one major media business--television, cable, movies, newspapers, books, music or radio--that isn't undergoing a dramatic upheaval. All of the changes favor new entrants. Rather than fighting back with innovation, most major media companies have resorted to litigation, lobbying, restraint of trade and refusal to deal in order to try to hold back competitors, or to support their customers that are trying to hold back competitors. In the short run, these tactics often succeed, but in the long run, they'll undoubtedly fail. You can't hold back the ocean forever.

Amazon's CreateSpace is pushing its clients to do direct deposit

According to Galleycat, Amazon's CreateSpace self-publishing service is trying to push customers to accept direct deposit payments for their royalties instead of getting paid by check. The minimum amount of earnings for which CreateSpace will cut a check has been raised to $100 from $28. In addition, they now charge $8 to send each check (so, if you're only getting $100 in royalties, that's like paying 8% for your own money.) By comparison, CreateSpace will issue an electronic royalty payment for as little as $10, with no processing fee.

What's more important to authors: Royalties or advances?

One of the strongest arguments for writers to self-publish their works is the potential to earn much higher royalties: Major publishers typically pay 10% to 15% royalties on the suggested list price of hardcover books, and 20% to 25% of their net revenue (wholesale price, or agency price minus 30%) for other formats. Self-publishers, on the other hand, can get as much as 70% of the sale price from Amazon and Barnes & Noble if they comply with those companies' restrictions. However, these numbers don't take into consideration the advances paid by publishers.

At the Digital Book World Conference that ended this week, Publishers Lunch Deluxe reported on a session on "Changing Author-Publisher Relationships" that shed some light on the question of advances vs. royalties. Madeline McIntosh, Random House's President of Sales, Operations and Digital said that over the last five years, for fiction titles, the company has paid 45% to 65% of its sales revenue to authors. Little, Brown Publisher Michael Pietsch said that, across all of Hachette Book Group's titles over the past 15 years, the share of the company's revenues that has gone to authors has risen from 30% to 40%.

Both companies' payouts are substantially higher than any standard royalty rate, suggesting that many, if not most, books fail to earn back their advances. The result is the same as a higher royalty on the actual number of copies sold. On the other hand, self-published books don't get advances, and the authors have to pay editorial, design and conversion costs themselves. As a result, self-published books start out much further in the hole financially, at least so far as the author is concerned.

The question for authors then becomes: Is it better to work with a publisher or to self-publish? If you know with absolute certainty that your book will sell more than it needs to in order to earn back any potential advance, you might make more money by self-publishing. However, if a publisher could sell at least two to three times as many copies as you could sell yourself, you're better off working with a publisher, since the increased volume will compensate for the lower royalty.

But what if you have no idea how many copies your book will sell? In that case, you probably should work with a publisher, because you'll get your advance no matter how many copies of the book are sold. However, there are two risks:

1. If the book earns out its royalty but doesn't sell many copies beyond that point, you might have made more money if you'd self-published it.
2. If your book doesn't sell well at all, the publisher will be much less likely to offer to publish your next book, and if it does, the advance will be substantially lower.

As a practical matter, the "publisher vs. self-publishing" question is often a moot point: If a book is rejected by multiple publishers, self-publishing may be the only option available. But, for those authors who can get a publishing contract, the decision may well come down to your confidence in the publisher vs. yourself.

eBooks: Reality sets in for publishers

Forrester Research and Digital Book World released some details yesterday of a survey of book publishers representing 74% of U.S. revenues. According to the survey conducted late last year, publishers are actually getting more pessimistic about the future as eBooks become more important. In a similar survey in 2010, 66% of respondents said that they expected that more people would read eBooks than before; in 2011, only 47% gave the same answer. When asked whether eBooks would cause people to read more books than before, 66% of respondents answered "yes" in 2010, while 60% answered "yes" in 2011.

29% of 2011's respondents believe that eBooks will comprise 50% of all book sales in 2014; 22% of the respondents believe that eBooks won't reach the 50% mark until 2015 or later. 82% of respondents are "optimistic" about the digital transition, but while 51% of respondents in 2010 believed that their companies would be stronger as a result of eBooks, only 28% believed so in 2011.

These are only a handful of responses from what is undoubtedly a much more detailed survey, but they suggest that publishers' mindsets are changing. In 2010, many publishers believed that eBooks were only another "binding"--another way to consume books--and that they didn't represent a fundamental change. Since then, however, you'd have to be living under a rock not to recognize that eBooks are changing just about everything about the book industry:

• eBooks are continuing to cannibalize print sales. Last year, eBook sales more than doubled over 2010, but sales in every category of print books tracked by Nielsen Bookscan were lower in 2011, from a drop of 3% for hardcover adult nonfiction to a 24% decline for mass market paperbacks.
• According to USA Today, for the week including Christmas 2011, 42 of the top 50 titles sold more eBook than print copies (this compares with 19 of the top 50 titles for the same week in 2010).
• When customers walk into the biggest bookstore chain in the U.S., Barnes & Noble, the first thing they see is no longer a table stacked with new print arrivals. Instead, it's a display of Nook eBook readers and tablets, staffed full-time by a salesperson.
• Self-publishing, which was once the domain of vanity presses and the last refuge for writers who couldn't get a contract with a publisher, is now a viable option for writers--even those who could get a conventional publishing deal. It's now possible for authors to sell a million copies of their self-published eBooks.
• The tasks performed by publishers, including acquisition editing, copy editing, book cover design, book layout, typography, format conversion, distribution of eBook masters to resellers and printing, are now being done by contractors, service suppliers or the authors themselves.
• Amazon, which represents both the biggest customer and the biggest frustration for many publishers, got into publishing in a big way in 2011 with five imprints. Amazon is willing to pay top dollar to sign authors such as Tim Ferriss and Penny Marshall, and to acquire backlist titles. 

Publishers are beginning to understand that things aren't going to go back to the way they were before the Great Recession, and that eBooks are much more than simply another way to consume books. They may not represent as shocking a transition as the effect of television on the movie industry during the 1950s and 60s, but eBooks' impact on the book industry will be dramatic, especially given that we're still early in the transition from print to digital. What will things look like on the other side of the transition? That's the subject of a future post.

Curation: Publishers' most important role

Book publishers perform many functions (some better than others, but that's a topic for another post). Some people believe that the most important thing that publishers do is edit manuscripts--both giving direction to the author and copyediting once the manuscript is complete. Others focus on sales and distribution--getting bookstores to carry their titles, and making co-op payments to bookstores in order to get display space at the front of their stores, along with better facings on the shelves. However, my opinion is that the single most important thing that publishers do is curation--selection of which titles to publish.

Yes, publishers often select and underwrite titles for a variety of reasons that have little to do with quality. They buy up the rights to titles (that are usually ghostwritten by professional writers) from celebrities and jump into hot markets with "copycat" titles, such as the endless stream of vampire-related books that followed the success of the "Twilight" series. However, they also impose basic quality standards on their writers, and they (usually) have standards about what they will and will not publish. To a knowledgeable consumer, seeing the Random House or Farrar, Straus and Giroux name on the spine (to take two examples) says that they're likely to get a well-written, well-edited book that's not going to be a waste of their time or money.

In the new era of self-published books and eBooks, most of the functions of publishers can either be farmed out or are irrelevant. Editing, copyediting and cover/book design can be contracted out or done by an experienced writer. eBook conversion can also be done by the writer or by a contractor. Printing can be done by any of a variety of companies. Distribution can be done by the author for eBooks; distributing print titles is more difficult, but can still be done through companies such as Ingram's Lightning Source, which deals with most of the world's major booksellers.

However, the one thing that neither a self-publisher nor companies that assist self-publishers does is curation. The writer of a book is the last person who can make an objective judgement about its quality--for better or worse, most authors are either far too hard on themselves or are deeply emotionally invested in their work. Self-publishing services companies are concerned with generating as much revenue as possible from self-publishers. That means not turning away any manuscript, no matter how poorly written, so long as the author can pay for their services. About the only thing that will keep a title out of Amazon's and Barnes & Noble's self-published eBook collections is if it's proved to be largely or wholly plagiarized, and even that doesn't happen very often.

Amazon and Barnes & Noble (and other booksellers) claim that their customer reviews provide a curation service for customers, but the reviews can be gamed:

• Authors can encourage their friends and acquaintances to post positive reviews, or they can pay people to do so.
• Consumers sometimes give extremely low ratings to books because they believe that they're priced too high (often, the consumers giving the ratings have neither purchased nor read the books).

There are also book curation websites, but none of them are widely popular, and they can be gamed the same way as the eBook retailers' sites. That leaves the tasks of curation and quality control to the publishers. To the extent that publishers abandon those roles, or de-emphasize them in favor of chasing celebrity and copycat titles, they'll give away their biggest advantage over self-publishers.

PressBooks eBook publishing service opens its doors to the public

PressBooks, a Montreal-based startup, took its eponymous online eBook production service public today. There are lots of services and software for creating eBooks, but PressBooks has some interesting features for self-publishing authors (and even for established publishers--more on that in a minute.) PressBooks is an online service built on top of WordPress. If you're familiar with the WordPress dashboard, you can jump into PressBooks right away. The service creates fully-formatted EPUBs and PDF files, as well as HTML online eBooks and XML documents. It's primarily designed for text-intensive trade-style eBooks; if you're planning to create picture books or heavily-formatted multi-column text titles, there are better tools than PressBooks. However, you can import book covers and images into a built-in media library.

PressBooks uses a simple WYSIWYG editor for creating and editing text; text can also be edited offline and then uploaded. A small variety of templates are available for automatically formatting eBooks; PressBooks is working on more designs. Multiple authors and users can be defined, and the site can be public (anyone can read the eBook) or private (only specified users can access the site). Users can enter metadata in the Book Information section, including title and subtitle, descriptions, names of editors and translators, print and eBook ISBNs, and prices.

PressBooks has already been used for creating two commercially-published eBooks: "Book: A Futurist's Manifesto", which was edited and published by the PressBooks team for O'Reilly Media while the software was under development, and "Nine Things Successful People Do Differently" by Heidi Grant Halvorson, published by the Harvard Business Review Press.

At the present time, PressBooks is a free service, but that's likely to change once it exits beta. Here's a presentation that demonstrates most of the service's features:

Pressbooks Demo Deck

The publisher bypass operation

I just read an article in the latest issue of Wired about the new breed of subscription music services--companies like Spotify, MOG and turntable.fm. The problem with these services (and for that matter, conventional purchase services like iTunes) is that artists get a very small share of the revenue. Most artists are now getting the majority of their income from live performances, not music sales. Where concerts once served to promote album sales, now digital music promotes live performances.

Online video distribution has had a similar impact on movies, television and original video. Most of the revenues from movies and television shows sold or rented by Netflix, iTunes, Amazon, etc., goes to the studios and distributors, not to the original producers. Original video produced for YouTube and other services is incredibly hard to monetize; only a few series, like "The Guild" and "Easy to Assemble", have sponsorship or distribution deals that directly compensate the producers. Most original video has to make do with a trickle of advertising revenue, modest sales from iTunes, or nothing at all.

That brings us to books, where the situation for independent authors is very different. Amazon will pay as much as 70% of the revenue from sales of eBooks to self-publishing authors, and other resellers will typically pay 35%. Compare that with the typical 10% to 12% royalty on wholesale price paid by publishers, and self-publishing starts to look very appealing. Yes, the self-publisher has to pay upfront for editing and design, but many publishers recoup those costs before they start paying royalties. In addition, unless you're a top author, publishers will do little or nothing to promote your title, so you'll have to hire a publicist or do the work yourself.

It's true that print still represents the majority of book sales, but the market is quickly shifting to eBooks. Some of the most popular titles are already selling almost as many copies of eBooks as print, and heavy book readers are adopting eBooks faster than any other group. The majority of book sales are likely to come from eBooks by the middle of this decade.

So, where does that leave publishers? Penguin, for one, is getting into the self-publishing business through its Book Country online service. In addition to charging upfront fees for formatting and designing eBooks, Book Country demands a hefty fee for distributing self-published eBooks to online bookstores--which self-publishers can do themselves. Other publishers are experimenting with "augmented" eBooks--containing audio, video and animations--which they believe are beyond the ability of self-publishers to create. There are two problems with that approach:

1. Companies such as Vook are launching eBook creation tools that will allow self-publishers to make augmented eBooks, and
2. Sales figures to date suggest that there's not a big market for augmented eBooks. For example, Vook's original strategy was to publish augmented eBooks itself, but the company couldn't sell enough to sustain its business, so it's now focusing on licensing its platform to others.

To be sure, publishers still provide valuable services, especially for top-tier authors--but book publishing is the first industry where creators (writers) can compete effectively with distributors (publishers). In the near future, the big publishers will likely find themselves focusing on two categories:

1. New releases from "A-list" authors that can command high prices and sell tens of thousands of copies in print, and
2. Milking their existing backlist for eBook reissues, bundles, and other ways of delivering "old wine in new bottles".

Some mid-tier authors may find a home with smaller specialty publishers, but almost everyone below the "A-list" will have to self-publish. We're likely to see some self-publishing authors join together in "United Artists"-like organizations to create "quasi-publishers" that perform some of the functions of existing publishers, such as design, publicity and promotion. The participating authors could serve as editors for each other.

By mid-decade, we're going to have far fewer and smaller "old-style" publishers. On the other hand, we'll have far more self-publishers and quasi-publishers that are performing most of the tasks previously done by publishers themselves. The industry power will reside with resellers such as Amazon and Barnes & Noble in the U.S., and their equivalents in other countries around the world.

The self-publishing conundrum

In 2002, when I was running a home video distributor, the movie "My Big Fat Greek Wedding" was a huge success. The movie cost $5 million to produce and was distributed by IFC Films, an independent distributor owned by the AMC cable channel. It grossed almost $370 million (U.S. dollars) worldwide. That film, along with "The Blair Witch Project" in 1999 and "The Passion of the Christ" in 2004, led movie producers worldwide to conclude that inexpensive, independently-distributed films could make a lot of money. The problem was that all three films were outliers--totally unrepresentative of the fate of the vast majority of inexpensive, independently-produced files, most of which never even make it into movie theaters.

A lot of money was lost by independent producers and distributors in that period, as they tried to duplicate the success of those three films. The producers of "The Blair Witch Project" even made a sequel with a much bigger budget, but it grossed only a tiny fraction of what the original film took in. A second sequel was planned but never made.

History is repeating itself in the world of self-publishing. Amanda Hocking and John Locke are both said to have sold more than a million copies of their self-published works. As a result of their success, many other authors have decided to go the self-publishing route. Unfortunately, there aren't a lot of self-publishing success stories to point to beyond Hocking and Locke. There are some self-publishers who make a nice living from a series of titles, or who have one particular title that does well, but the vast majority of self-published titles sell few, or even no, copies.

Self publishers start with several strikes against them:

• They have to bear the expense of hiring an editor and designer or do the tasks themselves and risk releasing a book with typos, an amateurish cover and poor layout.
• They also have to pay for a book publicist or do the work themselves.
• Self-publishers also have to get (and pay for) ISBN numbers in order to sell their books through most retailers.
• If they're selling print books as well as eBooks, self-publishers have very limited ways of selling to retail bookstores, and they don't have salespeople who are regularly calling on bookstore buyers.

Self-publishers can almost always make much more money "off the top" for each copy of their books sold than if they work with a publisher, but they have a lot of costs to bear that they have to pay upfront. On the other hand, self-published authors and authors working with a publisher are fairly equal when it comes to promotion. Most publishers offer little or no promotional support for new authors beyond including them in their catalogs and listing them in Bowker's databases. If you want a book tour or want to get press interviews, you're either going to have to hire a publicist or do the work yourself.

I'm a fan of self-publishing, and I don't want to discourage you from considering it. However, keep in mind that you'll have to bear a lot of costs and do a lot of work that a publisher would do for you (albeit at a high cost, especially if your book is very successful). One final point: Both Amanda Hocking and John Locke are now working with publishers: Hocking with St. Martin's Press, and Locke with Simon & Schuster.

Amazon's confusing self-publishing options

Tim O'Reilly just tweeted about Amazon's new Kindle Direct Publishing (KDP) program. This program enables authors to self-publish and have their eBook titles sold by Amazon. Authors are likely to be confused by Amazon's self-publishing options, for these reasons:

First, there are two royalty rates in the KDP program: 35% and 70% of the list price. To get the 70% rate, you have to give Amazon an exclusive on the eBook versions of your titles (you're allowed to sell the eBooks on your own website, but priced no lower than Amazon's price.) You also have to price the eBooks at least 20% less than the least-expensive print version of the same titles. In addition, you must support all the features that Amazon enables with the Kindle (text-to-speech, book sharing, etc.). If you fail to do any of these things (or don't meet other qualifications), Amazon will pay you on the 35% royalty schedule. Even with the 35% royalty, you still have to give Amazon "most favored nation" status on pricing--you can't sell eBook or print versions of your titles anywhere at a price lower than Amazon's price.

In other words, unless you give Amazon an exclusive and monitor all of your resellers daily in order to keep Amazon's list price the lowest, you could find yourself getting a 35% royalty with no recourse. Not such a great deal if you had expected to get 70%.

Another area of confusion is that Amazon has operated a self-publishing business, CreateSpace, for years. What if you want to distribute your title both in print and as an eBook? You have to work with and enter into separate agreements with both Kindle Direct Publishing and CreateSpace. What if you'd like to take advantage of the promotional packages and design services available from CreateSpace for your eBook? Too bad--CreateSpace only works with print versions, and Kindle Direct Publishing doesn't offer those services. Why aren't both programs unified in a single self-publishing program for eBooks and print? Ask Amazon, because it certainly doesn't make any sense to an outside observer.

I suspect that as more word gets out about the "gotchas" and limitations of Kindle Direct Publishing, publishers like Tim will have less and less to worry about.

You go back, Jack, do it again

A few weeks ago, I had a conversation with a manager with one of the biggest eBook companies in the business. (I'm not using names to protect the innocent.) This manager asked me what I thought the company should offer in the way of self-publishing services for authors. I told the manager that one way to add value would be to offer promotional services to authors. When I was writing computer books, I got virtually no promotional support from my publishers, so I and a friend had to arrange media bookings, book signings and speaking opportunities ourselves.

The manager told me that the company's self-publishing division already provides promotional services. I checked their website while we spoke, and I found nothing about promotional services on their homepage. As I dug into the site, however, I did find some promotional services. So, I asked the obvious question: Since the company already has its own self-publishing division, surely the eBook operation would take advantage of its services, wouldn't it? The manager replied that yes, they own a very successful self-publishing operation for print books and other media, but they've decided to build their own self-publishing operation for eBooks.

I didn't pursue the point because I was so shocked by the manager's response. Why reinvent the wheel when you've already got a self-publishing operation in-house? If that division isn't doing something that you think you need, why not get them to do it rather than build your own self-publishing operation? It makes absolutely no sense for authors to work with one group if they want to self-publish books that get printed on paper and another group for eBooks.

There may be a good reason why this company has decided to "do it again," but overall, it smacks of both bureaucracy in action and a strong case of "Not Invented Here" syndrome. This is a company that's highly praised for the quality of its management. I have my doubts.

The 70% Solution

Yesterday, Amazon announced a new program offering publishers and self-publishing authors a 70% royalty on eBook sales as long as they agree to a number of rules, including:

• Pricing their eBooks between $2.99 and $9.99
• Setting the prices of their eBooks at least 20% below the price of their lowest-priced print versions of the same titles
• Giving Amazon "most favored nation" pricing status (the price that the author or publisher sells the titles for at Amazon has to be the same or lower than the price offered through any other reseller)
• Allowing Amazon to offer features such as text-to-speech on their eBooks

Apple is rumored to be offering publishers a 70% cut of revenues on eBook sales for its rumored tablet, and is said to be allowing publishers to set their own prices, so all that Amazon is really doing is matching Apple's terms. However, Amazon's moves are likely to spark a more seismic move in the publishing industry than simply paying more money to a few publishers. It may help spur a mass move to self-publishing, especially for authors who today typically sell 10,000 or fewer copies of their books.

Seventeen years ago, my first book (an introduction to Windows NT) was published by Sams, an imprint now owned by Pearson. The book sold a bit more than 10,000 copies, the minimum sales target for most computer book publishers back then. I earned out my advance ($8,000, as I recall), and made a few thousand more. However, given the amount of time I spent researching, writing and promoting the book, I could have worked at Burger King and made the same amount of money.

Also, I was responsible for promoting the book myself. When people say that one of the big reasons for publishing a book through a major publisher is their ability to promote books, don't believe them. Unless you're one of the publisher's top authors, you'll get little or no promotional support. I had to pay to fly myself around the country to promote the book, and a friend in Public Relations scored interviews for me with PBS' "Nightly Business Report" and other outlets.

So what does all this have to do with Amazon's announcement? I ran the numbers, and the economics are strongly in favor of an author self-publishing eBooks with Amazon or a similar service rather than going with a big publishing house. Here's an analysis that I did, comparing my book, originally priced at $19.95 and selling 10,000 copies in print, against the same title priced at $9.95 and selling 5,000 copies as an eBook:

	Print	eBook
List Price	$19.95	$9.95
Distributor Discount	50%	N/A
Royalty Base	$9.98	$9.95
Author Royalty	12%	70%
Royalty Revenues Per Copy	$1.20	$6.97
Unit Sales	10,000	5,000
Royalty Revenues ($)	$11,970	$34,825
Less: Editorial & Design Costs	$0.00	($5,000.00)
Net Author Revenues	$11,970	$29,825
Advantage ($)		$17,855
Advantage (%)		249%

Companies such as Lulu, iUniverse and Amazon's own CreateSpace offer editorial and design services for self-publishers. $5,000 is at the high side of what those companies charge for a complete editorial and design package. Even with the author paying for the editorial and design work that the publisher would ordinarily do, they'd still end up making 2.5 times as much money on an eBook priced half as much and selling half as many copies as the print version. That's amazingly compelling.

Amazon will try to steer as many of those self-publishing authors as it can to CreateSpace, where Amazon gets a cut of the editorial and graphics services as well. It means that the 30% that Amazon gets is just the start...and the fees paid to CreateSpace are paid upfront by the author, no matter how many copies the author sells. In essence, the authors are paying Amazon an advance for its services, and they're hoping to earn back the advance and make more through sales of the eBooks. It's a plan that could make your chin drop.

It's far too early to give the game to Amazon, but in many ways, they're moving beyond Apple in their integration of production services, distribution and delivery devices.