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Vanity Fair

With the rise of services like Smashwords, Lulu, Xlibris, Amazon’s Kindle Direct Publishing and countless others, the practice of digital self-publishing has received considerable attention in the mainstream media, buoyed by stories of writers such as Amanda Hocking (a self-described author of ‘young adult paranormal romance’) who made almost US$2 million selling 900,000 self-published ebooks.1 While there’s a long history of self-published print books that have become bestsellers – Australian action-thrillers by Matthew Reilly, for example – digital delivery of books lowers the barriers that have traditionally hampered self-publishing. Ebooks don’t require the printing of a material artefact, and so the upfront costs associated with turning a manuscript into a ‘book’ are relatively insignificant, giving would-be authors virtually instant access to global delivery services.

Most media articles about digital self-publishing are celebratory, presenting a modern-day Horatio Alger narrative in which authors triumph by determination, hard work and savvy. But the reality isn’t nearly as rosy. For one thing, the self-published bestsellers have all been mass-market or genre works.2 While there’s nothing wrong with genre fiction, other writers haven’t met with the same success: no starving poets or literary fiction authors have got rich publishing straight from garret to Kindle.

The truth is that most self-published books will sell poorly, if at all. Melbourne-based writer, blogger and ebook enthusiast Benjamin Solah admitted – in a particularly candid post – that, even though he made his book available through ‘Smashwords, Amazon, Kobo Books, Borders.com.au and the iBookStore (as well as others)’, he had sold only six copies.3

Sales (or the lack thereof) are, of course, no indication of quality – a point that Amanda Hocking has herself acknowledged on her blog:

In fact, more people will sell less than 100 copies of their books self-publishing than will sell 10,000 books. I don’t mean that to be mean, and just because a book doesn’t sell well doesn’t mean it’s a bad book. It’s just the nature of the business.4

Publishers are cultural gatekeepers – and as a rule no-one likes cultural gatekeepers – so thriving self-publishers appeal as cultural rebels who’ve attained success by thumbing their noses at the establishment. But those who succeed rely upon an expensive infrastructure created by large, multinational corporations whose practices are no purer than those of any other publisher.

Indeed, for most authors, self-publishing services are arguably more exploitative than traditional publishers.

In a traditional publishing contract, there is a division of labour: authors focus on what they are good at (writing), while publishers concentrate on their strengths (editing, printing, marketing, etc.) and (in theory) pay authors an advance on royalties. The model relies on a notion of shared risk. Authors take a risk by licensing their intellectual property (that is, their book) to a publisher; the publisher takes a risk by paying for the author’s advance and providing editorial support, printing costs, and publicity and marketing. Both equally hope to gain from the book’s publication and have an equal interest in promoting it to the best of their ability (again, in theory) to ensure it sells.

Self-publishing companies like Smashwords, on the other hand, operate a business model employing the ‘long-tail’ theory. The concept is easy enough to understand. The graph  represents on the X-axis the range of items for sale, and on the Y-axis the number of units of each item sold. Traditional retailers – like bricks-and-mortar bookstores – tend to stock those items that sell at a high volume: the ‘head’ (that is, the darker section at the left-hand side of the graph). The rationale is simple: stock that sits on the shelves and doesn’t sell actually constitutes a loss. If a retailer outlays on an item that never moves, it’s basically just money down the drain. Traditional retailers make the vast majority of their profits from the items that sell at high volume.

E-retailers, on the other hand, can maintain extensive digital stock at relatively low cost, since server space is much cheaper than real-world rent, shipping and printing (and the wages associated with those tasks). While the cost of an individual paper book becomes significantly cheaper only when high volumes are printed, the cost per unit of selling one copy of an ebook is close to the cost per unit when one million are sold. E-retailers are therefore able to monetise the long-tail in a way that traditional retailers can’t.

This matters because the total volume of the long tail is roughly equivalent to that of the ‘head’5 – which is to say that, once the cost differential between low-volume and high-volume items becomes minimal, ebook retailers can make a lot of money out of the long tail.

For example, if a company like Smashwords has a million books available and each book only sells one copy, Smashwords will still sell a million books and turn a profit. This is a great set-up for Smashwords – but not necessarily great for most authors. The model turns the traditional relationship between a publisher and an author on its head, for the simple reason that a ‘publisher’ like Smashwords doesn’t share any risk with the author and so, practically speaking, has no interest whatsoever in any individual author as long as the aggregated titles in general are selling well.

Smashwords, then, operates more like a distributor and a bookseller, with the author an autonomous agent responsible for ensuring that the book finds its niche through publicity, marketing and the like. For authors who know nothing about publicity and are writing in less obviously commercial genres, there’s little clear benefit from the arrangement (aside from becoming a ‘published’ author).

Yes, some self-published authors are producing bestselling ebooks. On 4 April 2011, for example, Amazon’s list of the top twenty paid ebooks6 contained six self-published works. But this success is largely attributable to one simple factor: price. All of these self-published books sold for a mere US$0.99. No major publisher can sell a profitable ebook at that price, because the costs they’ve invested in the author’s advance, editorial support, PR and printing (most major publishers still produce books in both digital and print formats) need to be recouped. As a point of comparison, the number-one bestseller on Amazon’s ebook list – Michael Connelly’s The Lincoln Lawyer, published by Hachette – retails for US$7.99.

Savvy authors who self-publish mass-market fiction can exploit the traditional publisher’s pricing limitations by, say, selling the first book in a series at a very low price to bring in new readers. This is what Amanda Hocking did, incrementally raising the price for each successive book on the basis that readers who were already following the storyline would be willing to pay more than those who hadn’t read the first book.

Publishers, however, are hesitant to employ this tactic, because selling ebooks at such a low price would cannibalise print sales. In this respect, the success of digital self-publishers like Hocking is, ironically, attributable to the pricing practices of traditional publishers. Or, to put it another way, the attempts by major publishers to sell ebooks at a profitable price have paradoxically enabled self-publishers to use low prices as a marketing strategy.

That being said, traditional publishers do have valid concerns.

Amazon, in particular, has sought to lower the price of ebooks. In 2009 and 2010, it began selling ebooks either at or below wholesale cost. The strategy aimed to attract more customers to Amazon’s service by making digital books more attractive to consumers, and resulted in a very public dispute with the publisher Macmillan.7 Publishers, naturally, objected because they did not want readers to become used to ebook prices that, under current business models, were too low to be commercially viable.

After a series of negotiations, Amazon arrived at a compromise, employing what is known as the ‘agency model’ of book selling. Under this arrangement, the publisher establishes the price of an ebook while the retailer acts simply as an agent, selling the book and taking a percentage as a commission. E-retailers such as Amazon are no longer able to set the price of their ebooks, and publishers can ensure that ebook prices don’t drop below the point of viability (that is, that the sale price of the book doesn’t dip below the cost of producing it).

In the short term, the agency model has proven successful for publishers, many of whom (especially in the US, where the digital market is more mature) have experienced significant profits and growth from producing digital books.8

But there are two significant challenges.

The first is legal: authorities in both the US and the European Union are currently investigating whether or not the agency model might constitute price-fixing and thus violate local law.9

The second and more significant challenge is that this short-term ‘solution’ creates a long-term problem: the higher prices resulting from the agency model ensure that self-publishers will continue to grab a surprisingly large share of the market by selling their books at low prices. In this sense, publishers’ attempts to control prices have actually started to undermine their market dominance.

Self-publishing has quickly become a big business, and Kobo’s vice-president Michael Tamblyn has announced that ‘Self-publishing is 7 per cent of book sales worldwide.’10 It remains unlikely that a swarm of autonomous self-publishers will bring down major publishers on their own. But the success of self-publishers does signal that a price-war is looming, regardless of the agency model – or, more accurately, because of it.

Eventually, some player will emerge with a way of producing profitable books at lower prices. And it’s altogether probable that this player will come from outside of the traditional publishing industry.

Consider Amazon itself. Although most publishers still scoff at it, Amazon has quietly built up services that constitute legitimate publishing ventures.11 One, called AmazonEncore, uses customer data and reviews to locate:

exceptional, overlooked books … Amazon will then partner with authors to re-introduce their books to readers through marketing support and distribution into multiple channels and formats.12

The word ‘partner’ here is instructive since it suggests a model that’s neither that of Smashwords nor that of traditional publishers. It’s precisely these nebulous ‘partner’ models that a new generation of long-tail publishers might employ to generate books at much lower prices. Equally important is that Amazon is attempting to leverage its enormous collection of data about readers’ habits for a competitive advantage: no publisher could dream of having access to this kind of information.

But while companies like Amazon may well find ways to capitalise on their structural advantages, traditional publishers still hold a pre-eminent position in the market – for now. Again, there’s no better example than Amanda Hocking who – for all of her self-publishing success – announced on 4 March 2011 that she had signed a two-million dollar deal for four books with St Martin’s Press.

Obviously, traditional publishers still possess an allure and offer a financial advantage to even the most successful of self-published authors.

Equally significant is that Hocking turned down the publisher who actually put in the highest bid for her books: Amazon.13 It’s likely that one of her concerns related to Amazon’s capacity to produce and distribute print books, an issue that Amazon resolved recently by inking a trade distribution deal with Houghton Harcourt.14

Indeed, Amazon’s other publishing imprint, AmazonCrossing, focuses on the oft-neglected area of literary translations and seems designed precisely to help Amazon accrue the cultural capital that goes along with ‘literary’ publishing, allowing them to establish a reputation for editorial assistance and curation comparable to more traditional publishers.

Simply, traditional publishers can’t trade on their reputations forever. Price matters to consumers, a point that the Australian Book Review’s fiction editor Chris Flynn15 made in a recent blog post arguing that bricks-and-mortar bookstores simply can’t compete with the prices offered online by overseas sellers. Similarly, Matthia Dempsey, while suggesting that it was more ethical to purchase from local booksellers, noted that:

Some will try to tell you that it’s impossible for Australia’s book industry to do better on prices. It’s not true.16

While notions of ethical book buying might appeal to the educated bourgeoisie of Melbourne’s inner suburbs (and I count myself among this group), most book buyers are going to side with Chris Flynn. The numbers bear this out: while it’s impossible to know the exact figures of print sales through Amazon, the Book Depository and similar services, they’ve been estimated at 10 per cent of all sales … and growing.17

Publishers’ failure to compete on price has more wide-reaching effects, too. The tide of public opinion is increasingly turning against them. Today’s consumers are savvy and know how to use sites like Booko.com.au to compare prices across a variety of online sellers. When they see the difference between overseas and Australian prices, they come to the conclusion that Australian publishers are skimming the fat off an unsuspecting and geographically isolated population.

This is unfair. Although there are many supply chain inefficiencies,18 the fact is that publishing is by and large a low margin business: there’s just not that much fat to skim. But the punters don’t understand this, and – as the disastrous Gerry Harvey campaign for GST to apply to overseas online purchases suggests – marketing aimed at consumer ‘education’ is unlikely to change public perception.

You don’t have to take my word for it: simply look at the comments thread of any newspaper article on the subject, and you’ll see plenty of readers commenting that ‘e-books are allowing the authors to make more money by bypassing the layer of fat known as “publishing, distribution and retail sales”, a previously cartel like system in Australia’19 or that publishers:

are the spiritual cousins of the music and movie industry fat cats who spent years railing against downloading instead of embracing the new technology. Dinosaurs, all of them.20

Such comments seem to significantly outnumber positive comments about publishers. Again, although I think these views don’t accurately describe the economic realities faced by publishers, they do seem to be broadly representative of public opinion. And they suggest that publishers’ reputations might not provide a competitive advantage after all.

Ultimately, what the current crop of successful self-publishers teaches us is this: if Australian publishers won’t capitalise on consumer demand for book prices that are globally competitive, then someone else will. I am no proselytiser for globalised capitalism (and remain deeply critical of the neoliberal notion of the market as salvation), but the new demands that the global market places on traditional forms of industry cannot be ignored. The reality is that naïve protectionism or attempts to control pricing through the agency model may ultimately make traditional publishers less competitive and less able to survive – and I can’t imagine either this government or the opposition supporting a fixed-book pricing initiative like the Swiss have.21

The problems with the agency model aren’t evident yet, because ebook sales are still a small part of the overall book trade in Australia. But they are growing rapidly,22 and digital publishing will eventually become an integral part of the overall industry. We are already seeing this in the US where ebooks comprise 15 per cent of the market – and may rise to 25 per cent by next year.23

The growth of ebooks raises particular concerns for publishing in Australia. The local book industry has enjoyed considerable success over the last two decades but this is threatened by the arrival of multinationals like Apple, Google and Amazon who are already equipped to deal with new business models and new kinds of consumer demand. Arguing for the old ways of doing business will not benefit the local production of books.

These developments will also have far-reaching implications for writers. For most authors, self-publishing – or becoming subject to new ‘partner’ models – will likely result in little increase in pay but an enormous increase in required immaterial labour.24 Authors will need to be not only writers but also editors, marketers, designers, print-coordinators, sales representatives, bloggers and social-media consultants. Those who aren’t capable of such tasks will likely find themselves unable to compete in the marketplace – or, worse, may simply be required to pay out of their own pocket (companies like Xlibris will handle your book’s PR … for a price25) in a practice that borders on the predatory. Under such a regime, it may well be that a fat (virtual) Rolodex of media contacts may be more important than a good book.

I’m not offering simple nostalgia for traditional publishing. As Cory Doctorow has pointed out, most authors have never been able to live off royalties alone.26 While books have always been commodities that cannot be extracted from the larger processes of capitalism, I still believe that most writers’ work benefits from some critical distance from the vicissitudes of the market. At the extreme horizon of the new forms of ‘publishing’ that may soon arise lies a zone of indistinction in which publicity and art become irreducibly blurred. This is precisely the situation Evan Dara envisions in his excellent, self-published novel The Easy Chain (2008): a publicist in the book argues:

Anyone can get his name in the paper once. The goal is to get back in, regularly, all the time. To be news that stays news … starting right now you should view your life as a work of art, with art’s sovereign goal: make it news!27

The joke lies in the publicist’s appropriation of two of Ezra Pound’s most famous statements about art: that ‘literature is news that stays news’ and that artists have an imperative to ‘make it new’. I suspect that Pound may have understood this contemporary confusion of categories all too well: his first book of poems, A Lume Spento, was self-published in 1908 in a run of a hundred copies.

  1. ‘How a failed author made $2 million from e-books,’ The Star, 3 March 2011, www.thestar.com/entertainment/books/article/948078–how-a-failed-author-made-2-million-from-e-books, accessed 16 May 2011.
  2. As Jenny Lee has pointed out, successful ‘self-published titles … are all in well-established popular genres’. See Jenny Lee, ‘Publishers at the floodgates,’ Overland, no. 200, 2010, pp. 97–101.
  3. Benjamin Solah, ‘How is my ebook going?’, 2 February 2011, www.benjaminsolah.com/blog/?p=3028, accessed 16 May 2011.
  4. Amanda Hocking, ‘Some things that need to be said’, 3 March 2011, amandahocking.blogspot.com/2011/03/some-things-that-need-to-be-said.html, accessed 16 May 2011.
  5. For more information, see Chris Anderson, The Long Tail: Why the Future of Business Is Selling Less of More, Hyperion, New York, 2006, pp. 19–26.
  6. ‘Top 20 paid eBooks’, Amazon, www.amazon.com/gp/bestsellers/digital-text/154606011/ref=zg_bs_nav, accessed 4 April 2011. This list excludes books available as free downloads. The six self-published novels on the list were Trojan Horse (#14) by David Lender, and five novels all by the same author, John Locke: Saving Rachel (#5), A Girl Like You (#9), Lethal People (#16), Wish List (#19), and Lethal Experiment (#20).
  7. For more on this dispute see, for example, Leena Rao, ‘Amazon caves to Macmillan’s ebook pricing demands’, 31 January 2010, techcrunch.com/2010/01/31/amazon-caves-to-macmillans-ebook-pricing-demands/, accessed 16 May 2011.
  8. Jim Milliot, ‘A profitable transition, so far: the largest houses stay in the black’, Publishers Weekly, 4 April 2011, www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/46719-a-profitable-transition-so-far.html, accessed 16 May 2011.
  9. The EU recently conducted raids on publishing houses in Brussels relating to the agency model and ebook pricing; see Benedict Page and Leigh Phillips, ‘EU raids ebook publishers in price fixing investigation’, Guardian, 4 March 2011, www.guardian.co.uk/books/2011/mar/04/ebooks-publishing, accessed 16 May 2011. Britain’s Office of Fair Trade has also opened an investigation into the agency model; see Emma Barnett, ‘The Office of Fair Trading launches ebook pricing investigation’, Telegraph, 3 February 2011, mhpbooks.com/mobylives/?p=15591, accessed 16 May 2011. The Attorney General of Texas has also looked into the matter ; see ‘Texas Attorney General investigates Apple over agency model’, Moby Lives, 2 June 2010, mhpbooks.com/mobylives/?p=15591, accessed 16 May 2011.
  10. Calvin Reid, ‘BEA 2011: New Kobo and Other Points Rise Up at IDPF’, Publishers Weekly, http://www.publishersweekly.com/pw/by-topic/digital/conferences/article/47404-bea-2011-new-kobo-and-other-points-rise-up-at-idpf.html, accessed 24 May 2011.
  11. This article was written prior to Amazon’s hiring of the prominent literary agent Larry Kirshbaum as publisher for its New York publishing offices, but this move emphasises that Amazon is seeking to become a legitimate publisher.
  12. ‘AmazonEncore’, Amazon website, www.amazon.com/gp/feature.html?ie=UTF8&docId=1000373401, accessed 16 May 2011. My emphasis.
  13. Matthew Flam, ‘Amazon pushes into book publishing, Crain’s New York, 1 April 2011, www.crainsnewyork.com/article/20110401/FREE/110409990, accessed 16 May 2011.
  14. Mike Shatzkin, ‘It’s official: putting books in stores is a subsidiary right’, 4 April 2011, www.idealog.com/blog/its-official-putting-books-in-stores-is-a-subsidiary-right, accessed 16 May 2011.
  15. Chris Flynn, ‘Book Depository vs book stores’, 20 December 2010, flythefalcon.blogspot.com/2010/12/book-depository-vs-book-stores.html, accessed 16 May 2011.
  16. Matthia Dempsey, ‘Meaning-of-life-type-stuff: the survival of Australian bookshops’, Kill Your Darlings, no. 5, 2008, p. 18. Full disclosure: I am the unnamed ‘writer/reviewer with a position on several book-related boards’ who argues that ‘books in Australia are too expensive’ in Dempsey’s article.
  17. Dempsey, p. 13.
  18. For examples of these inefficiencies, see Dempsey, p. 18.
  19. Comment posted by ‘Steve’, 28 March 2011, on the article Chris Zappone, ‘Borders collapse: readers turn to e-books’, Sydney Morning Herald, 28 March 2011 at www.smh.com.au/business/borders-collapse-readers-turn-to-ebooks-20110328-1cct1.html?comments=62#comments, accessed 16 May 2011.
  20. Comment posted by ‘Stu’, 28 March 2011 on the article Zappone, ‘Borders collapse’.
  21. Amanda DeMarco, ‘Swiss to reinstate fixed book prices,’ Publishing Perspectives, 31 March 2011, publishingperspectives.com/2011/03/swiss-to-reinstate-fixed-book-prices/, accessed 16 May 2011.
  22. Malcolm Neil of Kobo has noted that ebooks constituted only 1–2 per cent of the market in December 2010 but were already 3–4 per cent of the market by March 2011, meaning that the market had doubled in only three months: see Zappone, ‘Borders Collapse’.
  23. Both these statistics and this growth projection were noted by Michael Webster, the principal consultant for Nielsen BookScan in Australia, in the panel discussion ‘The Evolution of the Bookshop’ presented by Meanland on 30 March 2011. A recording is available here: http://wheelercentre.com/videos/video/meanland-the-evolution-of-the-bookshop/.
  24. For a good, brief introduction to this topic see Maurizio Lazzarato, ‘Immaterial Labour’, translated by Paul Colilli and Ed Emery, <www.generation-online.org/c/fcimmateriallabour3.htm>.
  25. The sheer range of marketing services offered by Xlibris is overwhelming, including everything from print, internet and press-kit packages to purchasing ad space in specific publications, such as The New York Review of Books and Kirkus Reviews. See Xlibris’ website, www2.xlibris.com/marketing_services.html, accessed 16 May 2011.
  26. See Cory Doctorow, Content, Tachyon Publications, San Francisco, 2008, p. 97: ‘The golden age of hundreds of writers who lived off of nothing but their royalties is bunkum. Throughout history, writers have relied on day jobs, teaching, grants, inheritances, translation, licensing and other varied sources to make ends meet.’
  27. Evan Dara, The Easy Chain,Aurora Publishers, New York, 2008, p. 63.

Emmett Stinson is a Lecturer in Publishing and Communications at the University of Melbourne and author of Known Unknowns.
© Emmett Stinson
Overland 204-spring 2011, pp. 63–70

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Emmett Stinson is a writer and academic who has taught at several Australian universities. His most recent book is Satirizing Modernism (Bloomsbury, 2017).

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