Friday, February 21, 2014

Eisler - Publishing is a Lottery & Konrath - Publishing is a Carny Game

Barry Eisler: Over the weekend, I gave one of the keynotes at the terrific San Francisco Writers Conference.  The framework of the talk (Surfing the Waves of Change) was broadly similar to a keynote I gave last year at the Pikes Peak Writers Conference; for the main ideas, here’s a guest post Joe kindly let me post here, and an article I wrote for the Guardian.

One of the key updates in the talk I gave at SFWC had to do with bullshit—specifically, the prevalence of bullshit being peddled by various fixtures in establishment publishing.  This was natural enough, because in just the last month or so quite a few publishing insiders have grown sufficiently concerned about restlessness among the peasants that they’ve ventured into the provinces to try to head it off.  I don’t think it’s a coincidence that industry analyst Michael Cader, literary agent David Gernert, literary agent Robert Gottlieb, literary agent Donald Maass, industry analyst Mike Shatzkin, and Kensington Publishing CEO Steve Zacharius have all seen fit to engage some of the arguments that are both cause and consequence of the revolution in publishing (“Authors Guild” president Scott Turow, unsurprisingly, remains in hiding, perhaps because he senses how he would come off if he tried to respond to his critics).  Along these lines, I was encouraged that one of the SFWC founders, literary agent Michael Larson, felt compelled to take the stage immediately following my talk to try to rebut some of its substance.  I think this level of dialogue is unprecedented in publishing and will be enormously healthy for the industry, and I salute all the insiders who’ve elected to engage even though I disagree with much of what they’re saying.

In addition to bullshit in publishing, another theme of my talk was that publishing is a lottery, but it was only after Michael’s rebuttal that I realized I could have been doing a better job of integrating that notion with my points on bullshit.  Here I’d like to talk about why, and to make that connection more explicit.

One of the things Michael pointed out was that my thoughts on the benefits of self-publishing don’t apply to everyone (I certainly agree with that, and hope I made clear that I don’t believe there’s any one-size-fits-all publishing solution).  After all, he said, ask Stephen King if he wants to self-publish, and King would almost certainly say he would not.

I thought about that point afterward.  And then I realized—respectfully, because I really like and respect Michael—that it was bullshit.

Now, by “bullshit,” I don’t mean untrue.  In fact, I think Michael’s point very likely is true: while Stephen King has in fact dabbled in self-publishing (he even said, “My friends, we have the chance to become big publishing’s worst nightmare”), this was a while ago, and today, given the treatment he gets and the money he makes within the legacy system, I don’t think it’s terribly likely King would be attracted to self-publishing (though potential fame and fortune aren’t the only considerations an author might have in mind when trying to decide which publishing route makes the most sense).  Regardless, note the following:

First, the “but don’t you want to be Stephen King/James Patterson/Nora Roberts/J.K. Rowling” meme is widespread and frequently deployed by the publishing establishment.  For some examples, just click on any of the links in the second paragraph of this post.  More often than not, it strikes me as much more of an article of faith than a deliberate dodge, and knowing Michael, I believe he was referring to it sincerely as the former, not the latter.  But it certainly is widespread, and for this alone it’s worth addressing.

Second, the meme implicitly acknowledges that publishing is indeed a lottery (unless anyone advancing this meme would also argue that Stephen King-levels of publishing mega-stardom are in some way guaranteed or foreordained, neither of which would be a logically or empirically easy proposition).  This implicit acknowledgment is of course, in my opinion, not at all bullshit, because as you know I do believe it’s extremely useful to conceive of publishing as a kind of lottery.

But despite the kernel of truth, and despite the useful implicit acknowledgement, the meme is still bullshit (and all the more insidious as a result).  I would even argue that “Stephen King!” has become one of the two primary dodges of the legacy industry (we’ll get to the second in just a bit).  Here’s why.

First, let me briefly explain why publishing is, in fact, a lottery.  It’s simple.  Hundreds of thousands of authors play it, and only a very few of them win.

Some people object to the analogy because they say it ignores the hard work of authors and publishers.  But hard work demonstrably does not guarantee success.  If it did, then those hard-working publishers would produce nothing but massive bestsellers.  After all, don’t they work hard on all their books?

Of course, hard work (and a variety of other factors) can influence your odds of success in publishing, which is why it pays to work hard.  But the ability to influence odds doesn’t makes something not a lottery.  In fact, I can tell you how to instantly double your odds—double them!—in a regular lottery.  Just buy a second ticket.  Congratulations, you just influenced the odds dramatically.  Is it not still a lottery?

No matter how talented you are, no matter how hard working, no matter how awesome and committed your publisher might be, statistically you are far more likely to lose the game of publishing than you are to win it.  This isn’t a bad thing.  Nor is it good.  It’s just the nature of the beast.  You could argue it’s the nature of life itself.  Our job is to do what we can to influence the odds, but it’s foolish at best to argue the odds don’t matter, or don’t even exist.

Okay, now you’re trying to decide whether a certain lottery is right for you.  Whether it’s worth playing.  If someone was encouraging you to buy a ticket, and that person wouldn’t talk about anything other than the potential monster payout, would you feel you were receiving accurate, complete, and useful information?

Or might you sense something was missing in the presentation?

Look, there’s nothing inherently wrong with a lottery.  Whether to participate in one is a personal decision.  But to make a good decision, an informed decision, you need three data points, not just one.  These are:

1.      What is the potential payoff?
2.      What are the odds of achieving that payoff?
3.      How much will a ticket cost me?

Two quick hypotheticals to illustrate the point.

Lottery #1:  This lottery offers a million dollar payout, a one-in-two chance of winning, and a ticket that would cost you only a buck.  A one-dollar risk in exchange for a 50% chance at winning a million dollars.  Who wouldn’t buy a ticket to a lottery like that?

Lottery #2:  This lottery offers a million dollar payout, a one-in-ten-million chance of winning, and a ticket that would cost you ten thousand dollars.  You’d have to have a hell of a lot of money, and a hell of an appetite for gambling, to want to play in a lottery like that.

The same big prize, but two very different lotteries—one sensible for almost everyone, the other insane for almost everyone.  And if the people promoting them gave you only that one piece of information—a One-Million-Dollar Prize!—while concealing the odds and the cost, how could you know what you were getting yourself into?  How could you make an informed decision?

Well, you couldn’t, of course.  It’s enough to make you wonder why the people peddling the legacy-publishing lottery only want to talk about Stephen King.

So here I’d like to talk about the aspects of the lottery that establishment types tend to omit (for what it’s worth, again, I don’t think these omissions are for the most part deliberately intended to mislead.  I think they’re more commonly caused by well-intentioned people having been so long and so deeply embedded in a system that they’re unable to grasp its actual contours.  A classic case of missing the forest for the trees).

First, let’s stipulate that the legacy publishing purse is not a myth.  It’s real.  J.K. Rowling became a cash billionaire in the legacy lottery.  I remember reading somewhere that James Patterson makes over $90 million a year.  The richest purses in the legacy lottery are almost obscene.

But now it’s time to talk about the odds of you being the next J.K. Rowling.  How many authors are there who achieved anything like a comparable level of fame and fortune in publishing?  We can quibble over the details, but in general I’d say there have been maybe a dozen in the history of publishing.  Though I’m happy to broaden the definition of mega-success and up the number of mega-winners to, say one hundred.

Now we have to measure those one hundred winners against the hundreds of thousands of authors who have tried to get into the legacy system and been unable to do so, or who have secured a legacy contract only to see their book underperform and their contract canceled, or their publisher otherwise decide not to do another book with them and cut them loose.

Okay, a hundred big winners; hundreds of thousands of losers (and some hundreds winning lesser prizes, which we’ll talk about in a moment).  Now we’re getting some sense of the odds.

Please note that I’m not saying these odds should make anyone either embrace legacy publishing, or flee from it.  Different people have different objectives, different appetites for risk, different inclinations.  There really is no one-size-fits all.  But regardless of differences, no one can make a sound decision about a lottery without information about the odds of success, and developing that information is all I’m trying to do here.

Finally, let’s talk about what that legacy ticket will cost you.

First, it’ll cost you your rights, which someone else will own control for at least a very long time and in all probability forever (have a look at a typical legacy-publishing page-and-a-half, nine-point font, opaque-as-the-Dead-Sea-Scrolls reversion provision, and you’ll eventually conclude that the gist of it is “You will never get your rights back, ever”).

Second, it’ll cost you time-to-market.  Most legacy books don’t see daylight until a year after manuscript delivery and acceptance.  Many take much longer.

Third, it’ll cost you a huge margin in digital.  Legacy publishing typically pays authors 12.5% of the list price of a digital book.  Self-publishing pays 70%.

Fourth, it’ll cost you control over pricing, packaging, marketing, branding, and all other business decisions.

Fifth, it could cost you a good deal in conference and associated travel fees, as you fly from one writing convention to another trying to meet editors and agents and get them interested in your manuscript.

And those are the unavoidable costs, the innate costs.  You pay these costs even if you win.  That’s the way a lottery works.  There are also the risks:  risks of crappy covers, risks of embarrassingly bad titles, risks of cargo-cult bios, risks that overall your publisher, upon whom you will be relying almost completely, will fail to do its job and will destroy your books chances as a result, and maybe destroy your career in the process.

But it’s also absolutely true that in exchange for those costs, the risks might be avoided and you will become the next Stephen King.

It’s also true that becoming the next Stephen King isn’t the only payout promoted by the legacy industry.  There’s also the possibility of good conceptual editing, line editing, copyediting, proofreading, cover design, packaging, promotion, marketing, and paper distribution.  Note that I say “possibility” of these things.  They are not guaranteed, neither contractually nor empirically.  The notion that “You write, we’ll expertly take care of everything else” is the theory of publishing, the publishing ideal.  It is not usually the reality.  The promise of receiving expert editing, awesome cover design, crack marketing, wide paper distribution, etc., is itself one of the things that makes legacy publishing a lottery.  Some people get it.  Most do not.  Conflating the theory of legacy publishing with the reality of legacy publishing is another central deceit of the industry.

Now, to be as fair as possible, let’s expand the idea of what constitutes a winner in the legacy system still further.  In general, I’d define it as the ability to make a living writing full time.  But even that might be an unreasonably narrow definition.  We could broaden it still further:  the ability to make enough money from your writing to pay some bills and to occasionally take a nice vacation somewhere.  It wouldn’t be J.K. Rowling nice, but it would still be nice.

Well, wouldn’t it be useful if the legacy industry could share some of that information, too?  You’d think they’d want to.  “Hey kids, not everyone gets to be the next Nora Roberts (but you might!), but lots of people get to quit their day jobs and write full time, or at least get to use their winnings to make car payments and periodically buy a vacation in Hawaii.”

But they never talk about any of that.  What you hear instead is only, “Stephen King!” and “We’ll take care of everything but the writing so you won’t have to worry!”

Look, if I’m full of shit on all this, then why don’t legacy publishers share the data?  If the story of their lottery really is so enticing, why not let us see how it really works?  Why not talk about the odds, the risks, the costs?  What’s keeping them from anonymizing the last decade’s worth of data:  the range of advances; the number of books published per author; the number that have broken even for the publisher and the number that have earned out (these are not the same thing, and the suggestion that they are is another legacy publishing dodge.  Publishers typically start to make money long before the author earns out her advance—precisely because author royalties are so low).  For every entrant into the legacy lottery, what has been the purse?  The number of manuscripts legacy publishers reject at the door would also be useful to know, because if you realize you only have a one-in-ten-thousand chance of even being able to play in the legacy lottery, you might rationally decide not to waste years trying (part of the cost of a ticket), and to start playing the self-publishing lottery immediately instead.

An intern with decent spreadsheet skills could do all this as a summer project.  Why hasn’t it happened?  If everyone really is a winner in the legacy lottery, why doesn’t New York get this story out?  Wouldn’t authors just swoon for it?

(Steve Zacharius did say in his exchange with Joe that he would “try to find answers to some of these questions,” but I don’t think he’s gotten back to anyone since then…)

Yes, that was a rhetorical question.  Because if authors were presented with the actual data—not just the purse, but also the odds and the cost and the risk—many of them might rationally decide they liked the self-publishing lottery better.  New York understands this.  So instead what we get is “Stephen King!” pixie dust tossed in our eyes, and all the rest omitted.

As long as establishment publishing is only willing to talk about the biggest winners in publishing, and as long as they deliberately continue to suggest that the ideal of legacy publishing is in fact the widespread reality, without also being willing to talk about the odds, the costs, and the risks of legacy publishing, you are being bullshitted.

Now, am I suggesting that legacy publishing is a lottery but that self-publishing and Amazon publishing are not?  Of course not, and in fact I’ve repeatedly referred to the self-publishing lottery throughout this post.  Let’s go into a little more detail now, first for self-publishing, then for Amazon.

What is the high-end payout of the self-publishing lottery?  So far, it seems to be in the low seven figures annually.  What are the mid-range payouts?  Hard to say, though over 150 KDP authors sold over 100,000 books in 2013 and certainly many more than that are for the first time making car payment and periodic vacation money.  Other benefits include a dramatically higher per-unit digital royalty; significantly faster time-to market; and control over all aspects of your books and business.

What are the odds?  Long.  Again, I’m not aware of any solid data on this, but my impression is that even getting the lower-end “car payment and vacation” money payout has statistically speaking got to be a thousand-to-one shot.

What are the costs?  A few thousand dollars in upfront fees for editorial, copyediting, proofreading, cover design, and formatting.  There are few material opportunity costs, unless you had a legacy offer you decided to eschew in favor of playing the self-publishing game instead (and in fact, if your self-published book does well, that itself might lead to legacy offers.  You’ll also be acting as the CEO of your own business, with all the time commitment and aggravation such a role can entail (but note again that the notion that you’ll be free of such commitments and aggravation in the legacy system is a promise customarily unfulfilled—legacy ideal vs legacy reality—and that therefore having to manage your own business is generally not a material difference between the two systems.  For the most part, you can expect to be quite busy with the non-writing aspects of the writing business in both).  Because you keep all your rights and maintain full control over all aspects of your books and business, your risks are limited only to your upfront costs.

What about Amazon Publishing, which I think can best be understood at a high level as a hybrid—higher digital royalties, faster time to market, and more control over business decisions, like self-publishing; the promise of outsourced business tasks, corporate-level marketing, and higher ultimate payoffs, like legacy publishing, plus, possibly a decent-sized advance.  The odds of hitting at least the medium-level jackpot within the Amazon lottery (assuming you can get in—as in legacy publishing, a ticket in the Amazon system is not guaranteed) strike me as higher than those of the other systems, but as for my impressions of the other systems’ odds, this is largely anecdotal.

The costs include:  as in the legacy system, long-term and possibly permanent loss of your rights (in my experience, Amazon’s reversion provisions are far more sane and certainly less opaque than those of legacy publishing, but the thresholds for reversion are still hard to hit); opportunity costs, in the form of the even higher digital per-unit royalties you would make in self-publishing and the even greater business control you would have there, and in the form of whatever you walked away from if you were presented with a legacy offer, as well.  As in legacy publishing, there are no upfront costs with Amazon.  As with legacy, there is the risk your book will be poorly published and die (though from everything I know firsthand and by knowing and talking with dozens of other Amazon-published authors, my sense is that this risk is statistically far lower with Amazon than it is in the legacy system).  On the upside, in my experience publishing with Amazon means the opportunity to work with a group of exceptionally smart, interesting, fun, innovative, risk-taking people, which I count as a benefit and one I haven’t heard of any Amazon author failing to receive.  On the downside, I would note that in my opinion and in the opinion of more than a few of my peers, Amazon legal is becoming increasingly corporate and legacy-like in its outlook and its practices.  It’s still not remotely as bad as what I’ve experienced in the legacy system, but the trends concern me and I hope Amazon will reverse them.

I also think it’s entirely fair to criticize Amazon for its own unwillingness to share more data about winners and losers within the Amazon system.  I would only note this possible difference:  in my experience, Amazon is so obsessed with secrecy that the company won’t disclose even data that I know is tremendously supportive of the value they offer authors, including the terms of their publishing agreements (though again, in some respects these have been getting more legacy-like; Amazon, why not keep playing to your strengths?), and including the details of some of their biggest publishing successes.  Knowing this, and being familiar with the impressions and stories of quite a few other Amazon-published authors, my sense is that Amazon’s reluctance to share aggregate, anonymized data about the details of its lottery are driven more by an innate (and, in my opinion, unfortunate) impulse for secrecy than by a desire to obfuscate, but you could reasonably draw somewhat different conclusions, too.

That said, note that when an author self-publishes, the legacy industry is cut out entirely.  Legacy publishers make no money on a self-published author’s books.  But Amazon does make money, by charging 30% for access to the KDP distribution platform.  In other words, legacy publishing is institutionally, unavoidably, financially invested in spreading FUD (fear, uncertainty, and doubt) about self-publishing.  But Amazon makes money either way.  Draw your own conclusions.  You can draw similar conclusions about whatever biases I and other authors who are vocal about the revolution in publishing might bring to the conversation.  Say what you will, but I don’t think you can argue that my bottom line is dependent or even in any way affected by how other authors choose to publish their own books.  The truth is, I don’t care.  What I care about is that authors have good information upon which they can make the decisions that are best for themselves.  Can an establishment publishing insider who is steering you in a particular direction make the same claim of disinterest?

Overall, the biggest difference between the Amazon lottery, on the one hand, and the legacy- and self-publishing lotteries, on the other hand, is this:  Amazon’s unmatched direct-to-consumer marketing power.  Legacy publishing has virtually no such power at all, though to some extent it can buy such marketing by paying Amazon to do it for them (in self-publishing, your direct-to-consumer marketing reach will be even smaller).  If your sales are primarily digital, the paper distribution legacy publishing will offer you is relatively unimportant (it may even be less important than that), and legacy will be able to offer you almost nothing to market your digital books that you couldn’t have done yourself.  Whereas Amazon will be able to use its unmatched data on its own end-user customers, including direct email and on-site merchandizing, to market your book to an audience that is both huge (tens of millions of people) and targeted (people who demonstrably want to buy books).  In my experience, that kind of direct-to-consumer marketing power is worth a lot.  But will you get it?  Not everybody does, at least not in the same caliber, and the question of, “Yes, Amazon can promote the hell out of my book, but how much will they?” is part of what an author needs to grapple with when trying to decide whether the Amazon lottery makes sense for her.

I believe the biggest shift we’re seeing in publishing is precisely this:  the foundation of the industry used to be distribution.  Now that digital has broken legacy publishing’s lock on distribution, new publishing will be built on direct-to-consumer marketing, which is replacing distribution as the item new authors most need and will have the hardest time outsourcing for a flat fee.  Companies that can offer real direct-to-consumer marketing reach will be well positioned in the new world of publishing.  Companies that can’t will be in trouble.

Way back at the beginning of this post, I mentioned a second major dodge of legacy publishing.  Sorry it took a while to get to it.  It’s actually a more general category, of which “Stephen King!” is in part a specific subset.  What I’m talking about is the tendency of the publishing establishment to suggest, whether implicitly or explicitly, that all the benefits of publishing are in legacy and all the risks are in digital.  This dodge is ubiquitous—have a look at the links at the beginning of this post and you’ll see what I mean.  And now that you know about the dodge, I promise you’ll see it wherever an establishment publishing personage makes a pronouncement.  And you’ll be aware also that if someone is trying to have an honest conversation with you, that person will start by acknowledging that there are risks and potential rewards, costs and benefits, disadvantages and advantages in both systems.  Anyone who suggests or even implies otherwise is bullshitting you, whether deliberately or otherwise.

To sum up:  if we’re going to have a useful conversation, it helps to start by acknowledging that all publishing systems are lotteries.  After that, we have to acknowledge not only the systems’ different payouts, but also their different odds, different costs, and different risks.  Only now we can start to grapple with matching that framework with our own objectives, talents, skills, preferences, and personalities—overall, with our own unique circumstances—to make decisions that are likely best for us.

So what are some of the questions a writer trying to decide between the various systems might want to ask?  I would include these:

How much is the advance?  How much do I need the advance?  Do I think that with higher self-publishing royalties, I can beat the contract (to see what I mean with that concept, follow the last paragraph in this Daily Beast interview)?  If so, how long do I expect beating the contract will take?  How important is paper distribution to me, and how important is digital?  Am I in a genre like romance or science fiction, which are doing exceptionally well in digital, or am I writing something like a children’s book, in which for now I could expect relatively few digital sales?  How important to me is control over things like pricing and packaging?  How important is time-to-market?  How much do I like, and how good am I at, running my own business vs. outsourcing business management to someone else?  How much do I trust my potential business partner to manage things well?  How much do I hate what legacy publishers are doing today vs how much do I fear what Amazon might do tomorrow?  Which system gives me more personal power to influence my odds of success, and how important is that power to me?  Etc.  If you make a decision without asking such questions, you're making a mistake, at least in your process (though you can still get lucky in your result).  If you are asking these questions, then regardless of the path you choose, you're making an informed decision, and for you, the right one.

It really is interesting to consider the way New York tries to obscure the nature of the legacy lottery.  The prize is never other than Stephen King.  The odds are never other than that the reality you receive will always match the ideal you were promised.  The cost of a ticket is never mentioned at all.

A Martian might find an honest and transparent conversation about the nature of the various publishing lotteries so entirely obvious and commonsensical that s/he would find it hard to understand why the publishing establishment is so intent on avoiding it.  Of course, the Martian might not know about how long New York protested that their costs of digital book production were similar to their costs of paper production, when logic and just baseline common sense made such a proposition nonsensical (every single paper book a publisher prints and ships costs additional money, whereas the marginal costs of distributing digital books are zero).  The Martian might not know that HarperCollins recently confirmed what any honest observer already knew (and what Joe knew at least as far back as 2010), which is that indeed New York has been making far more money from digital books than from paper, and sharing far less with authors.  The Martian, in other words, might not know of New York’s demonstrated habit of, shall we say, dissembling (in fairness, if the Martian had ever seen a New York publishing contract or a New York royalty statement, the Martian would understand that obfuscation is one of the traditions Traditional Publishing most assiduously honors).

So come on, publishing establishment.  I know Scott Turow is too afraid to come out from under his rock and have an honest conversation, but I know not all of you are that cowardly.  Some of you have been engaging already, as I’ve noted, and, as also noted, I salute you for it.  Please, the comment section is yours.  Prove that I’m full of shit.  Share your data on payouts, odds, costs, and risks.  I can’t think of a better way, or a better opportunity, for you to prove once and for all that the legacy lottery is the best damn game in town.

P.S.  I know this is a long post, and certainly not my first.  I’d have liked to make it shorter because shorter would save everybody time (me most of all, because it takes longer to write these posts than it does to read them).  But I find it’s difficult to be brief when it comes to exposing bullshit.  Bullshit tends to come with a ready-made and already generally accepted superstructure that allows the bullshit to act as its own automatic abbreviation.  “Stephen King!”  “It’s so hard to get discovered in self-publishing!” (as though it’s easy and guaranteed in legacy, or in any other business, for that matter).  “When everyone can publish, there will be so much crap no one will be able to find good books!” (AKA, The Tsunami of Crap).  “Self-publishing is so much work, you’ll barely have time to write!” etc. are easy sound bites designed to play to people’s fears.  At a high level, they’re a lot like “Death Panels!” “Socialism!” “National Security!” and other such political propaganda that’s used to cow and manipulate the populace.  Using logic, evidence, and argument to assuage the fears ginned up by propaganda requires a bit more effort.  For more, I recommend Noam Chomsky on “concision.”

Joe sez: I was talking about publishing being a lottery eight years ago, before the Kindle existed. It's an apt analogy.

And while I agree with Barry that luck indeed plays a part, and it is important to know payoffs, odds, and costs, more and more I'm looking at the bullshit many legacy pundits are spouting, and their unconscionable contract terms, and I think of it as less of a lottery and more like a carnival game. You know, the ones where you pay for three chances to toss a hoop around a stuffed animal, or to knock down a pyramid of blocks with a baseball.

See, those games seem like they're easy. But they are heavily favored toward the carnival. That hoop barely fits over the stuffed animal. Those blocks weigh a lot more than they look. And don't get me started on how impossible it is to lob a quarter onto a small glass tray or get a ping pong ball into a cup only a millimeter wider than its circumference.

Legacy publishing trumpets its bestseller successes, tempting authors to be the next John Grisham or Lee Child, without explaining how goddamn hard it is to sell in those numbers (unless you're John Grisham or Lee Child). They talk about big names and big advances like anyone off the street could get them. They talk about how essential they are. They say that if you're good enough, you'll be rewarded.

I find this pervasive attitude analogous to a giant stuffed Snoopy doll that you have three chances to win for just $1. The Snoopy doll is no doubt worth a lot more than $1. It's hanging right there in front of you, practically begging for you to win it.

But the carnies can offer that doll for $1 because few ever win. The number of losers more than pay for the occasional winner.

And I believe, like the carnies, legacy pundits know this. But they never come out and admit it.

For example:

Kensington CEO Steve Zacharius: If you look at the printed NYT list, how many of the mega authors are self-published?  ….if indie publishing is as good as you’re all making it sound…..why do you think that the biggest and most successful authors in publishing don’t go this route? Why isn’t Nora Roberts, Patterson, Lee Child, etc….going this route?

Carny: Look at this gigantic Snoopy doll! You're a Snoopy fan, I can tell. Well, the only way to get this doll is to throw a ring around it, and you get three rings for just a dollar. Don't you want to take home that doll?

Legacy Apologist Mike Shatzkin: Unearned advances are a substantial part of author compensation. I know of one Big Five house that calculates that they pay more than 40% of their revenue to authors

Carny: People win all the time, and look what they win! Look how big that Snoopy is! I tell you, the odds are so good you'll win one that we're going broke here. This is our last Snoopy.

Agent Donald Maass: Authorship is a true meritocracy. (Sorry, it is.)

Carny: You're good at this game. I can tell. You're the best. And the best always wins. Give it a try, only three rings for a dollar. I'm sure you'll win that doll.

Agent Robert Gottlieb: Sometimes sharing opportunity with a publisher, wherever possible, creates greater opportunity for an author’s career.

Carny: You can't find a Snoopy doll like this anywhere else. We're the only ones that have it. If you want it, now is your chance to get it. Three tries for a buck.

Agent David Gernert: I am not a fan of self-publishing in general. It removes the gatekeepers from the process, and if we come to a point where every person in America who is writing a book can “publish” it, it becomes much more difficult for readers to find the good ones.

Carny: Knocking down blocks with a baseball? That game is rigged. And they don't have a giant Snoopy doll. Trust me, this is the game you want to play. The one you're good at, with the big reward. Just three rings for a dollar.

So you buy the three rings and fail to win the Snoopy, because the game is rigged, The odds were much harder than the carnies made them seem. But every so often--it is rare but it happens--someone wins a giant Snoopy worth a lot of money, and they only paid $1 for it.

But who really paid for that Snoopy? The one who won it? Or all the losers who didn't win it?

Who pays for the mega-bestsellers? Do they pay for themselves, and make so much extra that they also cover all the midlist books that lose money?

Or could the opposite be happening?

Let's do some quick and dirty math.

Phil the Writer gets a $5,000 advance. He sells 5,000 ebooks his first year at a Digital List Price of $6.99—a reasonable number for a midlist author. The publisher earns $2.62 per sale (selling to the etailer at 50% of the DLP and keeping 75% of net) or $13,100.  The author earns $0.88 per copy sold.  He's earned $4400—still $600 short of earning out his advance. So the publisher made $13,100, minus the $5,000 advance, so it actually earned $1.62 per copy sold.

Jack the Writer gets a $2,000,000 advance. He sells 1,000,000 ebooks his first year at a Digital List Price of $6.99—a reasonable number for a bestseller. The publisher earns $2.62 per sale or $2,620,000, and the author earns $0.88 per copy sold (assuming a 25% royalty—more on this in a minute) or $880,000—still $1,120,000 short of earning out his advance. So the publisher made $2,620,000, minus the $2,000,000 advance, so it actually earned $0.62 per copy sold.

In other words, in this scenario, it is arguably better for the publisher to publish a lot of midlist books that don't earn out instead of a huge blockbuster that doesn't earn out.

And how about those huge bestselling authors who make higher than 25% ebook royalties? That means an even smaller per unit profit for the publisher.

Of course, as the sales for both ebooks continue, the profit per unit increases. But some publishers offer advances so high they will likely never earn out, and they also offer some bestsellers higher ebook royalties.

So who is really paying for whom? If you were a publisher, would you rather have Jack the bestseller, or 400 writers like Phil?

Pundits like to say that legacy publishers—by offering advances and paying all the costs of publication—take all the risk. They're essentially giving authors an interest-free loan that never has to be returned even if the book fails to earn out.

But is this really the case?

I submit that the loan isn't interest free. In fact, the interest on it is huge; paying it back at 12.5% royalties takes a lot longer than the 70% royalties an author would make by self-publishing.

As I explained in a recent post fisking Mike Shatzkin:

If you were a genre author offered a $100k advance earning 12.5% royalties off of the digital list price (25% of net, and publishers sell to Amazon at roughly 50% off their digital list price), and your ebook is priced at $4.99, you earn $0.63 per ebook sold. You need to sell 159,000 ebooks to earn out your advance. And when you do, you're stuck with 63 cents per sale, FOREVER.

The same ebook, self-published, earns the author $3.49 per copy sold. If they sell 28,653 copies, they made the $100,000. Every copy they sell after that, they make 5.6x more money than they do on a legacy ebook.

Which seems like a better deal for authors?

And remember—even if the advance never earns out, the legacy publisher can still make money. The example of Phil the writer shows how.

And if Jack the writer had sold 1,000,000 ebooks via self-pubbing, he would have made $3,490,000, or $1,490,000 more than his advance (which he still hasn't earned out yet according to the figures I posted).

Isn't this looking more and more like a carny game where the publisher always wins? Especially when you include all the one-sided contract terms—non-compete clauses, next work option, term of copyright, etc.

Like carnies, publishers aren't in the business of losing money. They also aren't in the business of showing odds.

That's the distinction between a carny game and a lottery. Lotteries require the odds to be posted. Anyone who goes gambling has easy access to the odds in blackjack, roulette, and craps. It's simple math, and the gambler is aware of those odds.

With a carny game, the big fluffy Snoopy doll is hanging right in front of your eyes, promising itself as a huge reward for a simple ring toss. But the ring toss isn't simple, and the odds of winning aren't apparent. All you see is a big Snoopy—or a guest spot on Oprah and a #1 bestseller—without the carny or the legacy publisher actually telling you what your chances are.

As PT Barnum said, there's a writer born every minute.

Wait… I meant a sucker born every minute.

But as suckers, er… writers, we can arm ourselves with knowledge. We can share stories and read blogs and participate in forums and ask questions.

A few months ago, Brenda Hyatt updated her Show Me The Money! blog post, revealing average and median advances, royalties, and earn-outs for many legacy publishers. It's a must-read for any author considering a legacy deal.

It isn't up to me, or Barry, or anyone, to tell you what path to follow.

So why do Barry and I and many other authors blog about stuff like this?

Simple. Pain shared is pain divided. Joy shared is joy multiplied.

Share the pain. Spread the joy. Tell others what you've learned, good and bad.

And next time you go to a carnival, spend that five bucks on cotton candy, not on the ring toss. At least you'll get what you paid for.

P.S. A question that occurred to me after writing my bit was: If publishers are making so much less on bestselling titles, why do they keep offering huge advances?

I could think of a big reason: the long game.

The more copies a book sells, the less important an advance becomes because the publisher eventually absorbs it into total production costs. When enough copies sell, publishers are making almost the same amount on Jack's book as they are on Phil's book.

Carrie and Killing Floor and One For The Money and Along Came A Spider are first books (or first books in a series) by some mega-bestselling authors. These books continue to generate a lot of revenue, year in and year out, even though they no longer require marketing or advertising dollars. Backlist pays for the front list, in a sort of weird reverse-pyramid scheme. The old books front the costs for the new books until the new books become old enough to be money makers, which in turn pay for new books.

What a publisher makes next quarter is largely based on what they did years ago.

So a legacy publisher can afford to offer a 10 million dollar advance, because previous books by an author have shown, over time, to generate (or have the potential to generate) that kind of income.

There are also the instant hits, like Twilight and 50 Shades and Dragon Tattoo and DaVinci Code that also help to pay the bills.

A solid backlist and a few runaway hits, coupled with underpaying most authors with low advances and poor royalties, allow publishers to offer giant advances—even if those advances take years to pay for themselves.

As long as there is a steady supply of authors willing to accept what publishers are offering, the legacy industry will endure.

But 99.9999% of authors don't get the huge advance, just like 99.9999% of ring tossers don't win the giant Snoopy.

So what happens when authors wise up and realize they don't have to deal with publishers anymore?

Data Guy's nine-year-old daughter instantly understood what happens. She was reading The Passive Voice over her father's shoulder and said, "It's just like A Bug's Life. The ants are finally realizing they don't have to give the food they collect to the bullying grasshoppers anymore, while they starve."

Can't be more on the nose than that…