Tuesday, February 18, 2014

Indies Eat Publishers Lunch – A Semi-Fisking of Michael Cader

Michael Cader has a two part report on Publishers Lunch, opining on Hugh Howey's and Anonymous Data Guy's Authors Earnings website.

The second part of his post is behind a paywall.

Now, I dislike paywalls, in much the same way I despise DRM. But Cader is entitled to try to earn a living, and if he wants people to pay for his silly opinions (unlike me, who offers silly opinions for free), that's his prerogative. So rather than fisk him word-for-word as I'd normally do, I'm going to respond to specific excerpts according to the doctrine of Fair Use. If Cader, or anyone else who has read his complete piece, feels I'm missing his point or taking things out of context, feel free to chime in and correct me.

Michael: It's a quiet "news" day, so we're going to start looking at what a lot of people have been talking about this week: bestselling self-published author Hugh Howey's "Author Earnings" website and "report."

Joe: Congrats, Michael! In the first five words of your post, you managed to marginalize and denigrate Hugh Howey and his report not only once, but twice.

First, by claiming that the only reason you're deigning this topic worthy of your time is because it is a quiet news day. Perhaps because there was no collusion to report on, or because Turow has been blessedly quiet lately. But we know the truth: Howey's report was so popular his server crashed (over 50,000 unique hits in four days) and I haven't seen Twitter and Facebook activity like this since the DOJ ruling.

Second, by putting "news" in quotes, you're slyly stating that Howey's report isn't news at all.

Which amuses me, because that's my feeling about "Publishers Lunch." And for the record I only read your article because I was looking for a decent critique of Howey's new venture, but I found you instead.

Michael: That information is being presented as revealing "data" about how the ebook world really works.

Joe: Actually, Hugh's info is being presented as revealing how big a portion of Amazon's sales are self-published vs. legacy published, while estimating how much authors make off of each type of publishing. Because Amazon is very often the largest generator of author income, authors are very interested in this information. Which is why Hugh and Data Guy named the site "Author Earnings" and not "How The Ebook World Really Works."

I'm "also" going to sponsor an "intervention" to get you to stop abusing "quotation marks".

You're "welcome."

(And don't take this "personally." I'm only "kidding.")

Michael: At the end of the day, asking questions and challenging assumptions ought to be valuable for us all. Sometimes being provocatively wrong is a very effective way of getting people to re-examine their assumptions.

Joe: Agreed. But not always. For example, right now you're being provocatively wrong, but your two part article didn't effectively get me to re-examine my assumptions. What it did was help me cement the opinions I already had about how the legacy industry tries to explain away its mounting fear of the future by using incomplete data (the same thing you accuse Howey of) to further your own agenda.

Can we agree that Howey's agenda differs from yours? For example, www.authorearnings.com requires no subscription, nor a paywall.

Michael: The primary reason we do not have deep data and transparency about ebook sales, in both units and dollars, is because of Amazon. They keep their data private for competitive advantage in the marketplace, plain and simple. (BTW, if Amazon were to disclose their data in a Bookscan-style system, the other major players would happily participate.) 

Joe: I'm transparent with my numbers. So are many self-published authors (search Kindleboards.com for "sales thread"). We get clear, detailed reports from Amazon, and we share them publicly.

Do you know who doesn't share them?

Publishers.

Publishers, who are getting the same reports from Amazon as we authors get.

I post my numbers, down to the annual unit sales per title. The Big 5 don't post theirs.

And I bet any of the Big 5 would throw a huge hissy fit if Amazon suddenly put out a press release saying "Simon & Schuster Sold X Number of Ebooks This Quarter."

Publishers have a hundred year history of keeping their data private. And not only private, but cryptic and often indecipherable, as any author reading his bi-annual royalty statement can attest to.

Publishers didn't invent Bookscan. They've never been forthcoming with their sales figures. Hell, you can't even get a straight answer out of them as to exact print runs. There is NO WAY they'd ever start sharing information as you suggest. If they did, Amazon wouldn't have to share numbers, because we'd all have the same information Amazon has. We'd have even more information, because publishers could also reveal their B&N, Kobo, and iTunes sales.

And when they do, I'll ride a flying pig through a snowstorm in hell while wearing a T-Shirt that says "I Was Wrong".

Michael: In this digital age, we don't see why authors should have to be in the dark about real sales on the site that works so hard to secure their trust as the *exclusive* venue where their product is sold. Those half-a-million exclusive authors should not stand for fake data and merchandising lists.

Joe: First, do you have proof that Amazon releases fake data? Are you insinuating (or accusing) that they manipulate their lists? Earlier you said:

"But Amazon's hourly bestseller lists are a merchandising tool, controlled by the site according to their own black box methods and designed to drive their company agenda -- which includes selling more ebooks, and whenever possible increasing the share of KDP and Amazon Publishing titles on their own site."

Can you back that strawman up with facts? You're implying Amazon uses bestseller lists as a tool to their advantage, ergo Amazon is falsifying these lists. You understand how that is disingenuous, and a logical fallacy, right? You created your own reality and then refuted it, with no proof to back it up.

I mean, do you have reason to believe that Amazon's bestseller lists are based on write-in estimates by a few key retail outlets, like the NYT Bestseller List does? I could see how that would make a person mistrust a bestseller list. But where is your evidence Amazon does something like this?

It also seems like you're saying Amazon is the secrecy culprit while giving legacy publishers a free pass, Amazon keeps data private for a competitive advantage (without mentioning publishers do the same), and Amazon is the reason for all the secrecy in the industry (it isn't). 

Second, Amazon isn't keeping authors in the dark. All authors, like all publishers, know exactly how much they sell on Amazon. Amazon simply isn't sharing its view of the complete picture with anyone, and doesn't tell Peter what Paul made. Pretty much like most companies in the world.

And now you switched from "quotes" to *asterisks*. But is that really *better*? Doesn't Publishers Lunch have italics?

Also, be careful what you wish for. Amazon could someday release numbers, and their data could make Hugh Howey's data look understated.

Do you really want to know how big the self-publishing shadow industry is? If Amazon did release that data, how would you and your legacy pundit peers explain it away if it showed how much self-pub authors are earning compared to legacy authors? Would you dismiss it by saying it is fake? By saying it is only a small percentage of the whole industry? By saying ebooks only account for a fraction of all sales? By citing alternate sources of data?

In other words, many of the things the legacy industry is doing right now to discredit Hugh's findings.

Michael: the US market data clearly indicates that dollar growth has declined significantly and the ebook market has been roughly flat for a while. That leads people to speculate that self-publishing and/or small unreported publishers must be growing at a far faster rate and taking share from the publishers who do report their sales -- even though there is no hard data to support this, and as I'll show later on, the indicators we have, which are pretty good, specifically refute it.

Joe: I was under the impression that ebook growth is slowing, not flat.

And which publishers report their sales? Can you point to a publisher that admitted how many ebooks they sold in 2013? I don't mean percentage or growth. I mean unit sales. I can point to many authors, me included, who share that info. Why not legacy publishers?

Michael: The best data we have for US ebook sales comes from the monthly AAP reports. It comes directly from the largest publishers and distributors, and covers roughly 1,200 publishers in all. The AAP has good, consistent data from that set of companies going back three years, starting in 2011.

Joe: Hmm, the AAP never asked me for my data. And I bet Amazon didn't give them any data either.

But even if the AAP is beneficial to large publishers and distributors, it can't accurately guess at the size of the shadow industry of self-publishing, or estimate how much self-published authors are earning. So their data is largely useless to authors, whereas www.authorearnings.com is not.

Michael: For 10 months of 2013, AAP data shows that publisher dollar revenues from ebooks were down almost four percent

Joe: What makes you believe that the AAP data being down four percent for publishers means that all ebook sales are down four percent? Why do you think that represents the market for Amazon, or for self-pubbed authors? 

Michael: Here is where many people get tripped up. For publishers who report their results publicly in some fashion, almost everyone said ebook sales still rose in 2013, anywhere from 8 percent up to 24 percent (Simon & Schuster) or even 39 percent (HarperCollins). This is no way refutes or disproves the AAP data.

Joe: And now you're underlining.

So are ebook sales flat? Are they falling? Are they rising? And most of all, why do I, as a self-pubbed author, care, except in relation to how much money I'd be missing if I were locked into a legacy 12.5% ebook royalty rate instead of earning 70% self-publishing?

You quote a lot of data in this post, Michael. Where is your data that convinces authors to take legacy deals? (Hint: that's what the www.authorearnings.com data is doing.)

Michael: People read that the ebook market is flat (or declining), decide that does not correspond to their personal habits or beliefs, and then turn to conjecture rather than data for a reason. One reason they come up with is that it must be that self-publishing has become so huge it has overtaken the market and that's where all the growth is. This is fed by Amazon PR stories that are entirely in the etailer's self-interest.

Joe: You posted a lot of data on your site that I omitted because:

1) I respect your paywall and copyright and the work you put in and
2) It bored the shit out of me

Using that data, you made a rational argument that there could be other reasons for ebook sales being flat/rising/falling other than self-publishing sales affecting them.

But why do I care?

I care about how many self-pubbed ebooks are making money, not about if the legacy industry is experiencing growth or not.

I know you write for "Publishers Lunch" not "Authors Lunch" so it makes sense that you'll try to quell some of the obvious panic happening in the legacy world as a result of Hugh's report. But if you truly want to reassure the legacy industry that "*all is well*", gather some data as to why authors should continue to submit to them. Because Hugh's data, my data, and recently Edward W. Robinson's data all show that self-pubbed authors are faring very well.

All you have to do is look at some Amazon bestseller lists and count how many indie publishers are on them. It'll take you ten minutes. I've been doing it for years.

Michael: One reason they come up with is that it must be that self-publishing has become so huge it has overtaken the market and that's where all the growth is. This is fed by Amazon PR stories that are entirely in the etailer's self-interest.

Joe: As opposed to stories that are entirely in the legacy publisher's self-interest? Like your post here. Or the DBW survey, which is called What Advantages do Traditional Publishers Offer Authors.

Michael: The more logical conclusion, as I have set up and will now demonstrate, is that self-publishing is probably just like those other segments of publishing: It grew some, and outperformed the total market, thanks to the reallocation of dollars, but is in no way disproportionate to what other actors saw. And every indication we have shows us that either a) self-publishing is not big enough that significant growth here would change our profile of the total market, or b) self-publishing sales were just like AAP sales in 2013.

Joe: Self-publishing most certainly has changed the legacy profile in the total market, and has done so in a significant way. I made a million bucks in 2013. That means I grossed about $1.4M. If I'd been legacy published, some lucky legacy publisher could have added $525k to their profits.

Instead, they derived $0 from me.

Is that significant? To the Big 5, probably not.

As for demonstrating that self-pubbing is like other segments of publishing, let's look at the "data" you have to support this claim.

(See what I did with the quotes there?)

Michael: (Smashwords) total sales were $20 million.

Joe: So that's over $10M legacy publishing missed out on, just through Smashwords.

Significant yet? Probably not. But let's keep going.

Michael: If you posit that Smashwords is only reaching a third of the market for their authors (so triple their gross, to $60 million), and then you postulate the total self-publishing market is three times bigger still (500,000 KDP exclusive authors, plus 275,000 Smashwords authors), you've talked your way to a market of $180 million or so.

Joe: And if I posit that Smashwords is only reaching 1/100 of the market (so multiply their gross by 100, to $2B) we can both prove that we're pulling random numbers out of our asses.

But for a moment, let's look at your $180M self-pub market.

That's over $90M missed by publishing. Is that becoming significant yet?

Here's the thing, though. I can probably calculate $180,000,000 in self-pub revenue just totaling up people I know. Hell, I'm just 1/180 of that all by myself. And there are 2.4 million ebooks on Amazon, and more elsewhere.

Amazon, in a rare case of revealing data, mentioned there were over 150 authors who each sold over 100,000 ebooks in 2013. That's 15 million ebooks that legacy publishers didn't sell. And those are only 150 authors.

But earlier you discounted PR stories released by Amazon as "entirely in the etailer's self-interest."

Well, c'mon, Michael. Make up your mind. Do you want Amazon to disclose data, or not?

Now let's take a closer look at Hugh Howey's data. According to Data Guy:

"Our sample of the top 7,000 Amazon genre e-book bestsellers alone--just the small sample we took--adds up to $185M/year when the daily SP revenue is multiplied by 365. It's right there in the spreadsheet we shared: the indie part of our sample adds up to $500,000 /day in gross dollar sales."

So just the top 7000 authors in a few genres on a single retailer are doing better than your predicted $180M a year for the whole shadow industry of self-publishing.

How about the other 2.4 million ebooks for sale on Amazon that weren't counted in Hugh's spider crawl? And all the other etailers? Could the true annual ebook author revenue be triple what those top 7000 Amazon authors are making? What if the actual figure is $540M annually?

Is legacy publishing missing out on $270,000,000 in profits per year? Is that significant?

Next you talk about Nook, and flattening ebook sales, which may matter to publishers but is hardly representative of authors who are paying bills selling on the Nook.

You also talk about the USA Today bestseller list. I don't know how the list is compiled or weighted. I don't care. I made a million bucks last year and didn't appear on the USA Today list, even though I was an Amazon Top 100 Author dozens of times, often selling thousands of ebooks per day.

You also talk about Bowker and Codex and yes, I get it. Publishers Lunch is for publishers, and you can cite sources that show publishers they need not be concerned about the self-publishing revolution by going into explanations about how growth is flat or rising or falling.

Authors. Don't. Care.

Studies and surveys and polls about ebook sales only matter to authors in terms of how much the author pockets.

And since publishers make their living off the backs of authors, perhaps they (and you) should be less concerned with what Peter Hildick-Smith is tracking, and more about what Hugh's and Edward's data shows: lots of self-pubbed ebooks being sold. Self-pubbed ebooks that earn 70% of list price for authors, not 12.5% of list. Self-pubbed ebooks that are taking up a good deal of real estate on Amazon's bestseller lists—real estate once entirely occupied by legacy publishers.

We don't care if Amazon only tells part of the story. We just care about the part of the story that concerns us. The majority of authors I know make the majority of their income on Amazon. www.authorearnings.com is compelling authors to choose self-publishing as not just a viable alternative to signing with the Big 5, but as a far superior alternative.

How many millions of dollars does the legacy industry have to miss out on before it recognizes the threat of self-publishing?

How many authors, like me, does it have to lose before it starts offering authors better contract terms?

I don't have answers to those questions, but I do have an answer to this one:

How many apologists citing surveys are going to eat crow when the legacy publishing industry collapses?

Answer: All of them. And you'll have no one to blame but yourselves, because I've been telling you this since 2009.

Whose position is gaining favor with authors, mine or yours?

Addendum

I sent this post to Anonymous Data Guy to make sure I wasn't off base with anything I said, and he allowed me to share another two data points:

"The gross self-published sales in the soon-to-be-released 50,000-book spider run from February 7 add up to $615,000 / day.

That's a $225M/year run rate, and it's just a partial look at the top (all-genres) indie bestsellers on Amazon. The $225M ignores many hundreds of thousands of indie books that weren't on the Amazon bestseller lists, because they were only selling only a few copies per day, per week, or per month. I'd conservatively put Amazon self-published gross sales at a minimum $400M-$600M/year run rate right now.

Depending on how many low-volume sales are happening of the 2,350,000 other books deeper in the long tail and thus invisible when spidering the Amazon bestseller lists, the true indie total may be 25%-50% higher than that – I wouldn’t be surprised if it was $750M a year already."

Is this significant yet? Should legacy publishers care?

How about this:

"Here are the numbers from the first 878 respondents to the voluntary survey on authorearnings.com:

In total, the 767 survey respondents so far who had self-publishing revenue last year earned $49.7M. 

At 70% Amazon royalty, that’s at least $71M in gross self-published sales – or more, if a substantial portion were low-priced books at 35%.

That $49.7M self-published author revenue averages to $64,880 per self-published author responding.

The 223 survey respondents so far who had trad-publishing revenue last year earned $10.3M.

That's an average of $46,330 per trad-published author responding.

In total, the 876 respondents that had self-publishing revenue earned $4.7M in January. At 70% royalty, that projects to $80M.

And it projects to $64,390 per self-published author responding, which is very consistent with their figures for last year."

What if those legacy published authors had made 70% royalties instead of 12.5%? I bet they're thinking that very thing. They're looking at their print sales (if their bi-annual royalty statements are clear enough to define them) and that big minus column of paper returns, and then staring at their ebook royalties and wondering "why the hell do I keep taking legacy contracts?"

I understand this isn't a random sampling (which was one of the flaws with the DBW survey) but this data is telling authors (for free) some very provocative things. 

Michael, I really, really do understand why you went to great lengths to cite numbers and assure the legacy publishing industry whatever it was you were trying to assure them. They're the ones who subscribe to Publishers Lunch for $25 a month.

Now I must ask you, since self-pubbed authors make 5.6x as much as legacy pubbed authors on equally priced ebooks, how would you like to make $140 a month for a PL subscription instead of $25? Would you want to know more? Would you want to know if others were doing just that? Would you like data that shows how others are actually doing it? How would you feel if you made $25 from your work, and your domain provider made $115 for hosting it? Would you feel ripped off? Would you be looking for a new domain host?

That's the real danger of www.authorearnings.com. There is money being earned by legacy publishers that could be earned by authors. Food actually being taken from authors' mouths.

I can reach more ebook readers than a legacy publisher can, and I can make more money per sale. I don't need them anymore.

Publishers Lunch needs them, to stay in business.

Mike Shatzkin needs them, to pay his consulting fees.

Gottlieb, Zacharius, Curtis, Lipskar, Gernert, Maass, Turow, Russo, Patterson, Raab, many of the AAR, and many of the Authors Guild need them, because they pay the bills.

But authors don't need the legacy publishers. We haven’t for years.

Know who else doesn't need legacy publishers? Amazon.

Because if the Big 5 fail, Amazon will still be able to publish authors and their books, either through KDP, A-Pub, or via buying the entire backlist.

The legacy industry was once essential to publishing. Gatekeeping middlemen that controlled a quasi-monopoly on the distribution of paper books. And writers were exploited.

But legacy publishers aren't essential anymore. They're an option. And not a very attractive option at that. We can actually be fully independent of legacy publishers.

So you can keep reassuring your clientele that all is A-OK. Or you can give them some advice worth their $25 a month. Namely; if they don't start treating their authors better, they aren't going to have many authors left. They aren't going to stay in business banking on authors taking unconscionable deals because the authors are too dense to know any better. That isn't a smart long-term plan.

Then again, it makes no difference to me whether you warn them or if they stay in business. I'm just here to freely share my information with my peers. Because pain shared is pain divided, and joy shared is joy multiplied.

Don't worry about sending me $25 for my advice. I'm already making 8x what I once did within the legacy system.

And thanks for your "thoughts" on this matter. :)