How Traditional Publishers Will Get Rich

I’ve been saying for some time now that very few, if any traditional publishers will go down in this transition.

I have been saying that the traditional publishers will get rich because the writers and their idiot agents caved in on changing electronic rights from 50% to 25% of net. Across the board. And no writer or group of writers seems to be willing to fight this.

This morning my wife, Kristine Kathryn Rusch, in her new blog, worked out the math and what is happening with traditional publishers and how they will be very, very rich on the backs of writers. She quotes corporate quarterly stock reports and everything. Read it carefully and if you don’t understand something, ask her or come back here and ask.

Bottom line: Indie writers can get very rich at 70% of gross on a novel.

Traditional publishers are going to be very, very rich only giving writers 25% of net of that same sale.

Don’t believe me, just read the quarterly reports on these large publishers. In this time of recession and transition, they are making money.

Go read Kris’s post: http://kriswrites.com/2011/11/16/the-business-rusch-how-traditional-publishers-are-making-money/

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30 Responses to How Traditional Publishers Will Get Rich

  1. Ty Johnston says:

    Dean, I have no quibbles with Kris’s numbers, nor yours, but … and I’m thinking you’ll disagree … I don’t think writers are that stupid.

    Hear me out for a moment, please. Okay, yes, a lot of beginners and wannabes are that stupid, for a variety of reasons of which you’re aware.

    But traditional publishing over the last few decades has made its big money off of the big-name authors, your Pattersons, Kings, Rices, etc. I’ll admit this might change in the coming decade, with more money to be made from lesser known writers.

    However, if traditional publishing continues to make the majority of its money from big-name authors, I’m thinking sooner or later there will be a backlash. The next generation of up-and-coming authors isn’t going to have a history with publishers, and I believe enough of them will not want to work with publishers, at least not for 25 percent.

    Let’s say the next Dean Koontz comes along, but this version of Koontz is 30 years old and has grown up in a world of do-it-yourself over the Internet. Why in the world would he sign away rights for a mere 25 percent? An older, more established author with a history with a publisher or agent might be willing to do so because they’re already rolling in the dough and might not want to make any waves, but a younger genre author? (Literary authors are a whole different ballgame, in my opinion).

    I’m not talking now, but I mean 10 years down the road. Someone who has the sheer talent and business sense to make waves in the big leagues is going to realize they can do this without a publisher, or at least without giving away 75 percent.

    I am in no way predicting the end of traditional publishing, because I don’t believe that will happen, but I do believe there is going to be a major split in the industry between traditional publishers and independent writers. Yes, it’s there now, but I don’t think either is going away and both sides will only become more entrenched.

    I also don’t think traditional publishers have the Vulcan mind lock (or whatever) on the upcoming generation of writers as they once did. Yes, there will likely always be those who will seek the validation or experience of the traditional publishers, but I think there’ll be more willing to go it on their own.

    I could be wrong, and am willing to admit I’m guessing at all of this. I could be looking at things through rose-colored glasses, but I just don’t think the majority of young writers with talent will be that naive or lazy, and I think a lot of them will not find much value in what the major publishers have to offer (Occupy Penguin, anyone?).

    • dwsmith says:

      Ty, my hope, and Kris’s hope, and the only reason we keep pounding on this topic and other topics (like agents) is our hope that writers as a group gain a brain and a backbone. As you can tell from responses on the last post I did, that’s not coming soon. But I do hope that the big names will make the move. J.K already has, and many larger names like Lawrence Block are doing both in a very smart fashion. But it will take some of the big guns to make the move. Most won’t. Not because they don’t see the advantages but because they just won’t for a thousand personal reasons.

      As Mike Stackpole quoted a major publisher as saying, he will be in business because 97% of writers will not be as forceful about electronic rights as Mike is.

      Will I sign another contract with 25% of net? Honestly, that will depend on a bunch of factors. Up front money not being the least of it. As I have always said, I am a professional writer. I can be bought. However, my price is going up and I am standing firm on such items as reversion of rights as I talked about before. I’ll give a publisher 25% of net with a really good advance if I get the book back and the contract ends firmly in four or five years. Zero issue.

      Money equals use of time of my copyright.

      See how it all has to be balanced? The problem is that most writers don’t understand this and agents don’t have the slightest clue and are afraid these days of losing what little business they are getting. And then, of course, there are the agents in direct competition with publishers (like Trident). Folks, if you are going into traditional publishing, get an IP ATTORNEY, not an agent. As every month goes by this is becoming more and more critical for writers.

  2. Lyn Perry says:

    Here’s another way Traditional Publishers will get rich: They’ll force Indie Publishing sites to go under. How? By backing the new “Protect IP Act” (Senate’s bill, the House version is called “Stop Online Piracy Act”) which sounds great but would put the burden on online companies to monitor users and censor any copyrighted material.

    Here’s a quote from the NY Times Opinion piece
    (http://www.nytimes.com/2011/11/16/opinion/firewall-law-could-infringe-on-free-speech.html)

    “Compliance with the Stop Online Piracy Act would require huge overhead spending by Internet companies for staff and technologies dedicated to monitoring users and censoring any infringing material from being posted or transmitted.”

    The financial burden alone on companies like Smashwords, etc, will be prohibitive. Here’s a good blog article by Rick Copple outlining the dangers of this well-intentioned, but poorly constructed piece of legislation: http://www.goodreads.com/author_blog_posts/1765157-stop-online-piracy-act-and-indie-publishing

  3. K. W. Jeter says:

    If some people want to run around like hysterical Chicken Littles about the proposed Protect IP Act and Stop Online Piracy Act, mere facts probably aren’t going to deter them. But for reasonable people who are interested in the subject, here’s a quick summary of the actual provisions of the proposed legislation: http://tinyurl.com/86tyfjz

  4. Chong Go says:

    I actually just got an addendum for a contract (signed in Janruary 2010) with a nice foreign publisher, asking for the ebook rights at a 75/25 rate. It got me wondering if we’d only sold them the print rights, but no, when I went back and looked at the original contract, all standard subsidiary rights were there at a 50/50 split! I couldn’t believe the balls they had to try and do something like that.

    What’s more, the addendum started with nearly a page of detailed descriptions of library rights, book chapter excerpts, etc, and eventually a line about ebook rights. Finally at the end, in a convoluted sentence, it said that essentially everything except ebooks would be at a 50/50 split (as it always had been), and ebooks would be at 75/25. So all that stuff at the beginning was just there to disguise the ebook section, I’m thinking. The thing is, I just met the publisher and the exec who sent me this, and I’d had a great impression of them as people. And yet to try to pull such a shitty thing….

  5. Teri K. says:

    Dean, I think you’re taking guys like that Remus fellow in your last post way too seriously. I don’t think he’s in the majority.

    I’ve done an about-face in the past 6 months. 6 months ago I thought I needed an agent, and I had disdain for self publishing.

    My first book came out in 2001 and went out of print, and rights reverted to me. My next book is coming out in 2012 (NYC publisher)

    I became a Dean fan when I went through my agent crises of the past few years and found on Dean’s website some rational explanation for the insantity I was experiencing and seeing (in the agent department.)

    6 months ago I fully intended to see if I could sell reprint rights to my now out of print book (which was only issued in hardcover)But now I understand the wisdom of self publishing my out-of-print book. I contacted my former publisher, and the artist who did the cover art for the hardcopy book, and got permission to use the same art work.

    I see the other writers I know going through a similiar shift in their thinking (about self publishing being appropriate in certain circumstances, but I don’t see much change in their attitude toward agents)

    My books are middle-grade. I read an article today about how children’s books are going digital. I thought we had another 2 years or so. The future is here.

    Dean, I can’t wait to see what you think of the Trident-Penguin thing. Because of my experiences, I really hope you’re right about the agent model being broken.

  6. Frank Dellen says:

    “And no writer or group of writers seems to be willing to fight this.”

    This is quite surprising, imo. You’d expect that Rowling’s pottermore would make other bestselling authors think. I can imagine some big names joining forces and starting their own publishing company – “Coontz & King’s Little ePress of Horrors” or whatever.
    But of course, I don’t know how relationships are (maybe they hate each others guts) or whether they are already tied down by existing contracts – “Your next ten books will be ours because we paid you a gazillion dollars already!”

    This is probably an explanation why we don’t see The Really Big Names self-publishing: Were I to receive millions of Euros in advance I wouldn’t care much for petty epub percentages either.

  7. Ty Johnston says:

    Dean, I agree about the possibility of signing a contract with a traditional publisher. After consulting with an IP attorney, if I felt the money was right and the deal didn’t screw me for the rest of my life, yes, I’d probably sign (depending upon the details, of course).

    I’m not the most positive person (just ask my other half!), but I do feel the coming generations of writers won’t accept “things are just done this way.” It’s going to take time, perhaps a decade or two, and I think it’ll happen far sooner in genre fiction than the more literary stuff (which is often connected with universities or small, regional presses).

    On a related topic, has anyone read “An Open Letter to Simon and Schuester CEO Carolyn Reidy?” Warning, there is quite a bit of cursing.

    http://www.sebastianmarshall.com/an-open-letter-to-simon-and-schuester-ceo-carolyn-reidy

  8. Kort says:

    Dean, I know why 95% of authors will refuse to self-publish, and a lot of it has to to with articles like this:

    http://pikespeakwriters.blogspot.com/2011/11/news-from-trenches-new-developments-in.html

    I know the author and I wouldn’t think she would be somebody who would be fighting change, seeing as she’s written about computing, the internet and how to make money with it since it’s inception (and she sent me all the kids games she got sent to review and asked me how I liked them, which I thought was pretty awesome when I was much, much younger). It seems like she may be just reporting on an event and offering an interpretation, but it was so hard to read and not comment. Even now my comment is awaiting moderation, we’ll see if it makes it up or not.

    • dwsmith says:

      Kort, what’s sad is that the comment you linked to is on a major writer’s conference web site. Sigh… Thanks for the link.

  9. Well Dean, if you guys think that’s bad, wait until you hear about Book Country! :)

    • dwsmith says:

      Stephen, been following the start of Book Country, Penguin Publishing’s new venture into luring indie writers to them.

      And of course, good old Gottlieb of Trident Agency who had a response saying his indie publishing business is better. Thus putting his agency in direct conflict with one of the largest publishers in the business.

      Honestly, I keep starting a blog about this and stopping because it just seems so unreal. How can an agent say something like that and yet all his clients are staying with them???? I just go back to bashing at stupid writers. You have to be dumber than a post to go with Book Country, yet thousands and thousands of writers, if not more, will toss money at them for nothing they couldn’t do themselves in return. And if you are a client of Trident, you have to be dumber than a post to stay with that agency after that comment by the owner of the agency, yet I hear of no writers leaving Trident.

      So with two such stupid developments, and writers just sort of nodding and going along, I feel almost dirty to call myself a writer. But at some point I will talk about this stuff, when I get a little more rested and can not be so negative toward writers as a class of sheep.

  10. @Chong Go,
    Wow, I think that confirms beyond a shadow of a doubt that the conversations being held amongst traditional publishers is that ebooks are the new base profit target and they need to adjust their rates accordingly.

    @Ty Johnston,
    I think if Hocking, already a huge success on her own, could be swayed with a seven-figure contract, it’s an easy bet to say that a newbie author would take a $100k contract and give away the kitchen sink in terms of ebook royalty split. The way this will all play out won’t be simple or quick, we’re in for a wild ride.

    I recently blogged about Penguins “vulgar” attempt to hoodwink newbies with their Book Country venture here: http://z3n.tv/2011/11/16/why-penguins-self-pub-ebook-play-is-vulgar/

  11. Ty Johnston says:

    @ Adario Strange, no disagreements from me. I think for some little while yet a lot of writers will continue to be gullible, but I also think that is changing. Which is why in my original post I mentioned “10 years down the road.” Look at the number of writers, even beginners, who are already wising up? I would guess Dean and Kris often feel like they’re railing against the wind, but I hope from time to time they can sit back and realize how much they’ve already helped many beginners and probably even some pros; yes, writers do a lot of stupid things, but I don’t think as much as a few years ago (though admittedly there are probably a lot more people attempting to become an author).

    As for Hocking, my personal feelings are irrelevant. She did what she thought was best at the time, and while I don’t know the details of her contract, I would hope she wouldn’t sign away everything until the end of time. I freely admit, I would likely snap up a $100,000 contract, or even less, but it’s the details that are important. If a publisher didn’t want to meet my demands, then I can walk. But that’s the great thing about today compared to five years ago, I feel I can make demands because I have other options.

    • dwsmith says:

      Ty, you are right, the key is to not give away anything for longer than five years. Max. No opened-ended contracts any more. And as for taking money, the key always comes back to how fast you can produce a good book. If your speed is one book per year, then the decision to sell to a traditional publisher vs. indie publishing has vastly different ramifications than if you can produce four books per year. (You know, write 1,000 words per day.) Then selling one of those books to a traditional publisher will have little impact on anything.

      Folks, I keep harping and harping on this. This new world is not black and white. You don’t have to only indie publish or only traditional publish. The best way is both. Thus indie writers need to still be submitting some books to traditional publishers and traditional writers need to be learning how to also indie publish. That’s the new normal.

      What I find stunning is that so many people out there who consider Konrath or Eisler or Rusch or Stackpole or even me as some sort of leader of indie writers and yet we all traditionally publish as well as indie publish. Go both ways and it adds in fantastic dimensions of control and power for a writer that we never had just two years ago.

  12. Teri K. says:

    I, for one, am looking forward to the blog you can’t bring yourself to write.

    I felt the same way when I saw Gottleib’s comment on Pubilsher’s Marketplace. Sheesh. I’m trained as a lawyer and it’s staggering. It will take a few major lawsuits to set things right — or to create some very bad law.

    Although when I first saw that Book Country announcement, I thought Penguin would be offering Indie publishers the benefit of their distribution, which would be sort of awesome, wouldn’t it? Indie publish with the power of Penguin behind you? I guess what they’re doing is formatting your book for you and telling you to upload it to createspace? (I could have this wrong, haven’t looked too deeply) but it’s sort of weird.

  13. K. W. Jeter says:

    “so many people out there who consider Konrath or Eisler or Rusch or Stackpole or even me as some sort of leader of indie writers”

    It’s the beard, Dean. People think it makes you look like Moses, as played by Charlton Heston, leading the Israelites to the promised land. :)

  14. K. W. Jeter says:

    You should get her one, Dean. Then you, her, Stackpole, Konrath and Eisler could go on the road as the Soggy Bottom Boys of indie e-publishing, a la O BROTHER, WHERE ART THOU? :)

  15. Camille says:

    “What I find stunning is that so many people out there who consider Konrath or Eisler or Rusch or Stackpole or even me as some sort of leader of indie writers and yet we all traditionally publish as well as indie publish.”

    You’re telling people to think and take responsibility for themselves. What kind of pinko radical cult-leading nutcase are you?

    Getting back to topic at hand: the thing that indies are not getting is that the publishers will change, and are already changing (many faster than some of the indies who rant about them). This is an evolving situation.

    Sure, what the publishers are offering right now is terrible, but they don’t do it just because they’re jerks. They do it because most writers will take it.

    As the situation evolved — as more writers jump ship — the bid for their loyalty will get better. Not out of desperation, but as a good business practice. And even though the writers would still be better off as indies, if the deal is good enough, and the terms cozy enough, there will be plenty of writers who will stay.

    The thing to remember here is that even though neglecting the midlist USED to be a good business practice for publishers, doesn’t mean it will continue to be. eBooks make backlists and midlists profitable again.

    Me, I don’t expect to ever go for a publishing contract again. But I can see for certain that it will certainly get more attractive in the future.

  16. Bartholomew Thockmorton says:

    Hey now! No waffling! You’re our leader whether you like it or not! Together all us Dean-zombies will dominate both markets! Yeah!

    • dwsmith says:

      K.W. and Alastair, I had to remove your discussion on copyright. Very sorry about that because I was finding it interesting, even though both of you seemed to be saying the same thing, just differently. (grin) Why I had to remove the posts was because in the area you two were getting into, there are a vast number of people outside of the writing world who have extreme viewpoints on this, and your comments were drawing them here like flies to honey. Just this morning I had to deny seven comments because of their extreme nature and name-calling.

      Very sorry about that, K.W. and Alastair. Your support and comments mean a lot to me. Just trying to keep this place sort of focused on fiction writing and the extreme views of so many in the area you two were going into have caused me problems here before. And I forgot. (grin) I hope you understand.

  17. K. W. Jeter says:

    That’s cool, Dean. We were basically highjacking your thread, anyway. Back to regular programming… :)

  18. If I was a top name and I was e-pubbing, I would use a pen name (or different one). I would probably have one or two short stories or an old unsellable novel up. You’d never know I was even there until one day I admitted, “That was me.” (Lots of people write like ‘X’ author, right? “He’s so like X.” No, no…you’re not quite right… he is X!)

    Right now, people don’t want to mess with the good thing (top bestsellers, sometimes, have it good – advances, higher royalty rates, etc). They won’t be taking any chances until they have the freedom to do so (perhaps, legally as well: contracts)

    Hence, there is either nothing going on, or everything is going on, but under the surface (i.e., not publicly).

  19. Alain Gomez says:

    Backtracking back to Ty’s first comment…

    I have to say that I tend to agree with him. I am in my mid-twenties and I had to start my own business when I graduated from college because the economy had tanked and no one was hiring.

    I know that I am not the only one in this situation. Pretty much my whole generation and the graduating classes after us are having to rethink “getting a job.”

    Also consider that now you have a whole generation of writers coming up that were born with a mouse in their hand. Even more significant will be the kids that have grown up with ipads and icloud.

    When I was in high school I still had to go to the library to do most of my research for papers. By my 3rd year in college, the teacher could have assigned the class any topic and we all could have become experts on it by the next class thanks to Wikipedia.

    I’m not saying this in an attempt to be a some sort of youth rebel taking down the regime. I just think it’s important to consider the mentality of the up-and-coming working class. They are not going to be thinking, “Well, I couldn’t find a company to sell my product to, so I guess it won’t work.” They are going to be thinking, “No company will buy this product. I’ll just make a website and then link it through Ebay/Amazon and sell it that way.”

  20. Dean, looking forward to the blog post that has yet to be written. Was surprised at the Gottlieb/Trident response–and have to wonder as well why writers would stay with Trident. It just doesn’t make sense, but if lemmings run off a cliff, I guess writers will, too.

  21. Teri K. says:

    All right, Stephen. Now it’s our turn to hijack Dean’s discussion. I wonder if we’ll draw flame-throwing agented writers.

    I wonder if the distinction in Gottleib’s mind is he’s taking on the assisted-self publishing arm of the publishing company instead of the publishing company itself. Maybe feels that the editors feel enough distance from the self-publishing arm that they won’t mind somehow.

    The conflict of interest, though, is so shocking. At first when I saw his comment, I thought I was seeing things.

  22. Dean, no apologies from you necessary as far as I’m concerned, you did what you had to. Sorry about causing trouble. Like KW said above, we were hijacking the thread anyway.

    Enough said. ;)

  23. Wayne Borean says:

    Dean,

    As to how many writers are going to switch, that’s a hard one to call. I’ve talked to a lot of writers. Some of the are scared witless. Some of the are clueless.

    But with every writer who makes the move, well, more and more writers know the option exists.

    This isn’t a simple straight line graph, rather it’s a exponential curve. We should see an acceleration in the next six months. At least that is my guess based on the numbers I am seeing. And when that happens, all hell is going to break loose.

    Wayne

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