Guest Post by Michael J. Sullivan

Joe sez: Does my blog only focus on the bad things about legacy publishing? Here's Michael J. Sullivan, who took a legacy deal with Hachette after successfully self-publishing, to talk about his experience...

Michael: A great deal of ink is being expended on the current dispute between Amazon and Hachette. I have also weighed in with my own posts. The most interesting thing to me is the "camps" that various authors have fallen into. You have people like James Patterson, Charles Stross, and Lilith Saintcrow who are quick to defend traditional publishing and paint Amazon as some evil entity out to destroy literature while crushing authors under their boots. Then there are people like J.A. Konrath, David Gaughran, and Hugh Howey who point out the many positive things Amazon has done for authors (and readers), and any negative actions Amazon is taking against Hachette is merely (a) within their purgative and (b) "standard business" when two giants negotiate. Each perspective is completely understandable considering the source. (Here's a hint, each align with the party that provides them the greatest income.)

What I hope to do here, is present a bit of a balance. Which probably means I'm going to piss off both camps...but here goes. For the record. I'm a HUGE supporter of both models. I had the pleasure of dining with Joe Konrath and Blake Crouch during BEA a few years back, just as I was deciding whether to sign my contract with Orbit (Hachette's fantasy imprint). Joe warned me I would be sorry for the decision...my response was, "Time will tell." Well time has gone by, and I can say that in my particular case, signing with Hachette was the right decision, as doing so greatly improved my career, and in general I've been treated extremely well by my publisher. I would have been worse off if I hadn't traditionally published. What makes me say this? Well first off I've earned significantly more money. Even though there were months when my self-publishing income exceeded $45,000 those were not sustainable numbers...sales go up and sales go down but by going traditional I opened up alternative income paths including foreign translations and subsidiary rights (such as audio). Yes, I had some of this when self-published, but not nearly to the same degree as when traditionally published.

In addition, my audience has grown considerably. This benefits my future work, which can be self or traditionally published. Let's look at my Goodread's numbers to help illustrate this. Before my deal with Orbit, I had 2,650 unique readers who added approximately 5,000 of my books to their shelves. The number of books being added each month was around 300 to 400. Orbit started releasing my books in Nov 2011 and they came out a month apart (so Nov & Dec 2011 and Jan 2012). By the end of January, I had 5,400 unique readers who had added more than 10,250 of my books to their shelves. As of the end of May, I have just under 50,000 unique readers with 120,000 shelved books. The number of books added each month these days runs 5,000 - 9,000...that's a huge jump from the 300 - 400 when I was self-published.

So, yes, I have a lot of reason to support tradition publishing, but I do think that Charles, James, and Lilith are overlooking some of the series transgressions of traditional publishing and ignoring the tremendous advantages that Amazon has brought to our industry.

First let's examine ebook pricing. At the 50,000 foot level Amazon wants prices low and publishers want to keep them higher. I can actually see both points. At lower prices people can afford to buy more. Getting 10 books at $2.99 is significantly better than one book at $29.99. But I do worry that Amazon is driving down prices to the point where authors will suffer. I can only read 12 - 15 books a year and I don't mind paying $6.99 - $12.99 for those books. To me they are a good value, much cheaper than a movie either at the theater or through pay-per view. If $2.99 (or $0.99) becomes the expected price in the minds of readers, less authors will earn a living wage. At those price points the number of sales that are required to earn well rises considerably, and not all authors can pull in those kinds of numbers. One of the reasons the ebook explosion has been so revolutionary is we now have many self-published authors that earn good money even when their books sell only a few thousand copies, which would be considered a failure under a traditionally published model.

All in all, I like the system we have now. Big books by big names are priced higher (at first) and go down in six months (or a year) once the paperback comes out. Self-publishing titles are selling well (as evidenced by Hugh Howey and Data guy's reports) and can provide voracious readers with less expensive alternatives. Plus, the bigger publishers are providing sales where readers can get their hands on top-selling titles from time to time. As I said, a model that seems to be pretty good as it is.

While none of us know for sure which terms are in dispute (although many have reported their speculations), it's pretty safe to say all parties want more when it comes to ebook share. When ebooks were only a few percent of the total book purchases, no one paid much attention. But for me I sell 68% ebooks to 32% print, and while that is higher than most, across the industry we are seeing 35% - 40%. That higher percentage combined the fact that ebooks are so much more profitable than print, makes the share of this format very important. Last year Harper Collins boasted to it's investors that they were earning a 75% margin on ebooks under the agency model and only 41.4% on hardcovers. At the time ebooks were sold under the agency model, and the relative shares were: 52.5% to publishers, 17.5% to authors, and 30% to Amazon. I agree with Evan Hughes, that traditional publishers would have been better off spreading around more of the digital profits to the authors as it would make them less vulnerable to Amazon who publicly states, "Your margin is my opportunity...after all 52.5% is a BIG margin.

But in business it's all about power, and in the relationship between author and publisher, it's the publishers who wield the upper hand. Because the big-five walk lock-step with a 25% of net royalty rate, authors have only two choices. Take the low cut or walk away. Few have walked so far, although I expect to see it happening more, especially if Amazon secures a bigger piece of the ebook pie. For my latest book, Hollow World, I was offered a nice five-figure advance for a contract that required print, ebook, and audio. I passed. Instead I kept the ebook rights, made a print-only deal for a smaller advance, and sold my audio rights directly. The result...the book was released in mid April and by the end of May I had already earned that full advance amount (and that doesn't include the $30,000 the book brought in through Kickstarter). But I digress...I was speaking about power...and publishers are finding the shoe is on the other foot as Amazon wields an amazing amount of power over them.

I suspect at least one of the points in dispute is that Amazon wants more than the 30% margin they were getting under the agency model. After all, most retailers (of products of any kind) get margins of 50% - 60% with higher margins going to those who sell the most. As a traditionally published author, I hope they aren't successful, because it will significantly erode my cut, which is already too low (imho). If 50% is the new margin I'll go from 17.5% to 12.5%. If 60% I'll go down to 10%. So yes, if Amazon wins my income is lower...but I feel like the publishers are still gouging me more than Amazon.

As to Amazon's tactics during the dispute negotiation, I can't say I'm pleased with what they are doing. It's not just because their actions are impacting my income (although they are), but because they are going against their founding principles...a commitment to doing what is right for the customer. I praise Amazon for their long standing tradition of leveling the playing field where big-five, small press, and self-published titles exist in an egalitarian environment. But eliminating or lowering discounts, removing pre-order buttons, and purposefully not stocking in sufficient quantity (even though there is a demand) is designed to provide a poorer buying experience for Hachette books. In their eco-system, it is typically the readers (through their buying habits), which raise the visibility of books, but during this dispute (and several others in the past) they are artificially manipulating their environment for no other reason than to apply pressure.

There are many jumping on the "Amazon is evil bandwagon," but they either aren't objective or blind to all that Amazon has done that is positive for both authors and readers. At a time when people were reading fewer and fewer books, Amazon innovated and made the first commercially viable ereader. This stemmed the tide of readership decline, and gets people reading more books than they did in a purely paper environment. They sparked the self-publishing revolution providing thousands of authors an opportunity to reach readerships, making it easier than ever for authors to earn a living wage. This has provided new opportunities as traditional publishing just doesn't have enough bandwidth and have had to reject projects (not because they are "unworthy" but), because there are only so many slots in their editorial calendar. Through audible.com another under served platform has exploded. My discoverability has been significantly enhanced due to the popularity of the audio versions of my Riyria books, which have sold more than $1.3 million in just over a year. They have implemented programs such as MatchBook where purchasers of print books get free or discounted ebooks...something that the big-publishers still have not embraced (to the determinant of readers). In short, Amazon has done more for readers, authors, and the health of publishing in general than all the big-five publishers combined.

In today's landscape, publishers are in a tight spot, but they have only themselves to blame. For years their "customer" was the retail channel. They didn't foster a direct relationship with readers and as such ceded that ground to Amazon. Back when Amazon was gaining dominance, why didn't they build a site to sell directly to readers? Oh, I forgot...they did. It's called Bookish and it's been a miserable failure plagued by delays, poor management, a terrible online experience, and rather than discounting books they sell at full price. Is Amazon "evil" for building a really good mousetrap? Similarly, there was a huge outcry when Amazon bought Goodreads. But why didn't any of the publishers pick it up first? A site with millions of readers talking about and sharing books, and no one but Amazon saw the value in such an asset? It's unfair for the publishers to criticize Amazon for their own lack of vision.

So yes, there is an imbalance of power, and Amazon is in a position of strength. It's because Amazon has been smart, forward thinking and innovative while publishers have plodded along with a "business as usual" mentality, leaving them behind the times. Does Amazon have to give publishers special treatment for their poor choices?

I started this article by expressing how signing with Hachette has aided my career, and I don't regret my decision in the slightest. I signed my contract willingly and actually expected that the day would come when my sales woud be affected by a dispute between my publisher and Amazon (I saw what happened with Macmillan in 2010). I saw the writing on the wall but balanced the overall benefit of traditional over the various bumps like the one I'm currently experiencing.

So what would I say to the two parties about what is going on? My message to traditional publishing: if I seem critical toward you it's because I want it to learn from past mistakes and start taking corrective actions before its too late. We all want a diverse marketplace. Publishers can, and do, add value and I want you to continue to be relevant. As advantageous as self-publishing is, it's not going to be a good fit for all authors. Many won't be able to navigate all that is involved on their own and their voices would be lost without traditional publishing. I don't want to see the elimination of traditional publishing any more than I want to see a return to the days before self-publishing became a viable option. The market is best served when their are options....many authors...many publishers...many retailers. Yes, Amazon has the upper hand at the moment...and yes publishers, and the authors who are signed with them, are going to suffer because of it. Instead of complaining about how "evil" Amazon is, a better use of time would be devise a way to beat them. Publishers need to focus on providing THE BEST customer experience for READERS imaginable. Take a page from the notebook of J.K. Rowling and Pottermore. Publishers already have access to fantastic content, now you need to step up and match that with an exceptional delivery mechanism...you have the backing of huge multi-national corporations. You have profits to reinvest. You have scores of employees dedicated to the power of the written word. If you don't like what Amazon is doing to "the book business" then push them out of it...they have plenty of other things to sell. The best way to deprive them of power is to make them irrelevant. The current battle is over...and Amazon has won...but it doesn't have to be the end of the war. Build that better mousetrap...eliminate them as a "middleman"...foster and strengthen your relationship with authors (it will be your only point of vulnerability once you control your own distribution).

My message to Amazon: stop the bullying (it is bullying when someone stronger uses its might against someone weaker). You are better than this. You've proven time and again that you succeed when you put the customer first...and what you are doing is going against that ideal. Don't provide the fuel to tarnish your brand. Just as the United States has to walk more softly as the last remaining superpower, you too have to realize that any action you do carries a good amount of additional baggage. Conduct yourself in a manner beyond reproach and prove to all the naysayers that you can be an exceptional conduit between authors and readers. You are certainly entitled to earn well, but you don't have to squeeze every last penny, especially when you know it will harm the content creators, without which neither you nor the publishers have any books to sell. We are indeed living in "interesting times" and the truth is I want all parties (authors, publishers, and retailers) to thrive. At the present time we each depend on each other, let's stop fighting among ourselves and get down to the business of getting more great books in the hands of more readers. That's my take...what is yours?