• Massim0Marin0

    Great information, Jane. Thanks for sharing.

  • Dina Santorelli

    This is EXCELLENT! Thank you for posting, particularly the key takeaways.

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  • http://jamigold.com/ Jami Gold

    Fantastic! About a year and a half ago, I’d wondered about the eCommerce vs. brick-and-mortar sales percentages. Thanks for finally answering that question! :)

    I’d love to see even more updated numbers on that aspect, so if you happen to see them, let us know!

  • simonepdx

    I was interested to see that the “independent bookstores” category increased and held steady as a percentage over the three years in the first chart. The increase in e-commerce sales wasn’t on their backs, as many people fear, but rather on the giant bookstores’ sales among a very few categories. (I am curious what might have happened with book clubs two years ago that cut their share in half ….)

  • http://www.janefriedman.com/ Jane Friedman

    Book clubs have been declining for a looooong time (think Book of the Month Club, Quality Paperback Club, etc). The publishing company I used to work for shut down their numerous clubs at least 5-6 years ago. “Clubs” have morphed into something else: websites, blogs, e-mail newsletters, Goodreads communities, membership and loyalty programs, etc.

  • http://www.bigskywords.com/ Greg Strandberg

    Good graphs, thanks!

  • Russell Blake

    The reason ebooks are so much more profitable for those intermediating (not writing the books) between authors and readers is because they take more than in the format where they actually have substantial manufacturing costs. Doesn’t that sound suspiciously like acting as a cartel to use an unfair royalty rate established when ebooks were an afterthought (if 25% was fair, that’s what they’d be paying in hardcover, too) and as an industry, stiffing authors on ebooks when the value of the publisher (printing presses, ink, paper, trucks, shelf-spacing returns policy) is limited to cover design, editing and pressing upload? Am I missing some nuance here? Note to self: start publishing company that pays 50% and handles all packaging and marketing. Still make fortune. Repeat.

  • simonepdx

    Good point. I hadn’t thought about how Goodreads communities in particular might step on those kinds of “selected by genre” clubs.

  • Geraldine Evans

    Interesting information. Thanks, Jane. Must click on your Pinterest link.

  • Deborah Smith Author

    There should be a Business 101 plaque posted at the start of all these discussions: Publishers, like all businesses, have overhead and costs that go far beyond what you continue to state as simply “manufacturing costs.” Please educate yourself. Publishers, whether as mega companies or running a small ebook press that has a 50-title list, do *not* make large profits, period. And by the way, falling in love with those mega corporations that control every penny you make (if you make any) sell ebooks as a so-called “independent” author is a very very unwise thing to do.

  • Russell Blake

    Deborah, perhaps you can explain to me, in simple language an obvious neophyte like me can understand, why the publishers, whose models did just fine with their fixed costs when it was just hard copy, suddenly require 25% more gross profit on ebooks to cover those identical fixed costs (actually fewer if you think it through)?

    And while doing so, perhaps you can also help me apprehend what book vendors, which are a channel (you know, B&N, Amazon, Kobo, Google +, Apple…), have to do with manufacturers/publishers? Beyond that one manufactures ebooks and sells them through the store, and the other is the store, which among other things, sells ebooks, including those manufactured by trad pub – and my own.

    Here’s a newsflash of the new reality. I hire editors and proofreaders, so I have production costs in each book, just like a trad pub. I hire cover artists, so I have those as well. I pay for advertising. So ditto on it all. How is my publishing company, which does these things efficiently enough for me to sell hundreds of thousands of books per year, any different when selling through the above mentioned electronic storefronts than a trad publisher, other than “fixed costs,” which in this case to me looks like layers of undesirable inefficiency? Bluntly, what will that publisher do for me in the ebook market I am not already doing in exchange for that mammoth difference between 100% of net and 25% of net?

    Citing fixed costs, WHICH WERE THERE EVEN WHEN THE MARKET WAS ENTIRELY PAPER, as the reason it’s reasonable for trad pubs to take considerably more of the net than from a paper book, is at best ill-informed and at worst specious, as is going off on an anti-Amazon rant thinly disguised as an anti-big-corp rant (the big publishing corps are somehow good, but the big store corps are, well, bad – because they don’t take nearly as much of my money…) when we’re discussing publishers, not vendors.

    Respectfully,

    Russell

  • http://madammayo.blogspot.com/ C.M. Mayo

    Fascinating, thanks for sharing these visuals. I was suprised to see how tiny the share of independent bookstores is… and I wonder why book clubs have lost so much ground– or rather, why some savvy entrepreneur(s) have not revived them. As a long-time blogger and blog reader I do not see how book blogs have quite filled that old niche. My own sense of things is that too many corporate players (large publishers and chain stores) have tried to treat books as a commodity. They are, of course, but they aren’t, of course.

  • http://www.janefriedman.com/ Jane Friedman

    As far as I understand the chart, “book clubs” refers to the old-style clubs where you received a monthly mailer and would receive the book of the month unless you took action NOT to receive it. That’s not a model that’s very practical (or profitable) in the digital age. As someone who used to oversee one of these book clubs and manage the financials, the profit margin was very, very slim, and was based on sending people books who couldn’t be bothered to return them.

    Digital-age book clubs (if you can call them that), look more like this (I hesitate to call them blogs—more like communities):

    http://250words.com/
    http://boingboing.net/2014/03/12/wink-daily-reviews-of-remarka.html
    http://www.washingtonpost.com/blogs/style-blog/wp/2014/03/10/new-rooster-app-crows-about-good-books-young-and-old/

  • http://lpobryan.wordpress.com/ Laurence O’Bryan

    Thanks, Jane, excellent information. The big question for me is where we will be in five years. Will ebooks reach 50% of the market? Will indie published books reach 40%? If that happens a tipping point will be reached, IMO, and what we know today as a publishing industry will be radically different.

    The challenge ahead for writers is real too. We must create books that compete well with apps and TV series.

  • Massim0Marin0

    Well, what publishers have to offer to new authors today has little to no interest. Their standard contracts are impossible to sign. Talking from personal experience.

    Times changed. The moment when a publisher offers you a contract and makes you jump to the roof with joy is over. You read it, you look at the clauses and you go “These guys are crazy” and use the contract to fill the garbage bin.

  • http://www.janefriedman.com/ Jane Friedman

    I’d be willing to bet 50% ebooks in five years; for genre fiction bestsellers, many Big five are already seeing 50% ebook sales. The average is brought down to 30% by other categories that don’t sell well so far in digital formats, such as illustrated works and children’s books.

    I think it would be wise for the larger writing/publishing community to focus less on competition among each other (e.g., indie v.s traditional), and look for ways to be competitive (and/or collaborative) with all other media, as you well point out. I’m 1 year behind on my New Yorkers and the reason is simple: TV and apps.

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  • William Ash

    Great series of charts. One question I have about ebook royalties is that we are looking at simply the physical cost of book production, but we are not looking at other costs in the chain–I assume editors and designers should be paid, hopefully well enough to make a living. Then there are things like rent and investing in equipment, etc. Are ebooks just making up for shrinking margins? The editing and design work is part a parcel of the ebook cost. I am not sure separating print books and ebooks of the same title is a useful way of looking at the problem–I assume the publisher is trying to get a return on the one title and the different forms (hardback, soft cover, ebook, audiobook) are all part of the equation. If the ebook is successful, but everything else flops, then you cannot say the book is a financial success for the publisher. Don’t royalties offer some kind of insurance that publishers can make a profit? So maybe the 25% royalties are not unreasonable? Certainly the numbers you show don’t answer this, unless I am missing something.

    On a bit of a side note, when you pin to Pinterest, it is assumed you have copyright over the image and that you transfer that copyright to Pinterest. While we can argue that your use is fair use, do you have the rights to transfer all copyrights to Pinterest, a for-profit company? Fair use does not give anyone the right to transfer the copyright to another. Even though I am a photographer, Pinterest is one place I cannot use for social marketing for this very simple reason. What I find more disturbing is that anyone that pin my work is handing over (illegally (and Pinterest makes the pinner responsible)) my copyright to that organization. Pinterest does make a copy of the source image and keeps it in its own database. Copyright is a disaster in the internet and certainly the graphic designers and photographers are really being exploited.

  • willentrekin

    The big question for me is whether we’re already there. Just looking at that first chart, from Bowker–I’m trying to figure out what they’re measuring by. I know Bowker issues ISBNs, so that’s my first guess, but even after following links and clicking around the Nielsen Market Research site I can’t figure it out.

    If it is by ISBN, it’s incomplete (and if it’s self-reported it’s likely even more so). While corporate publishers generally use them, none of the digital retailers require them for distribution when authors go through them directly. Most of the indie ebooks sold on Kindle don’t have ISBNs, and while I think Smashwords does implement them in their premium distribution, you can still publish to the iBookstore, Nook, and Kobo stores without them (again, if you go directly). Just looking at the top 20 Kindle bestsellers right now, it looks like 25% of them don’t have ISBNs (the Fixed trilogy, Hidden, Tied With Me, and Destroyed). In that first chart, that e-commerce portion is likely substantially more than 44%; there’s just no telling how limited a view of the book marketplace most publishing industry analysis is actually seeing.

    It’s also interesting to see NewsCorp talk about increased profitability despite decreased revenues. I like how they mention decreased returns and cost of manufacture; as was pointed out above, my guess is it also has to do with how much of the revenue are getting to the authors themselves.

    Great point about competition/collaboration with all other media, though. Especially when apps are so popular and widespread, and indie developers are achieving more with games than ever before. I just played a great game, Gone Home, that was one of the purest and most visceral storytelling experiences I’ve ever had. Highly recommended. But I’m also reading Stephen King’s It, and I’ll highly recommend that, too.

  • Deborah Smith Author

    As a hybrid author who sold through Big 6 for years and now runs a small press that sells mostly ebooks while still maintaining print sales, my point is: the statement that “traditional publishers have nothing to offer except the manufacturing of print books” was the discussion here. Not an accurate statement even for authors who are solely competing in ebooks and who, like yourself, are very capable of handling the publishing side of their own ebook business. If trad publishing had nothing to offer ebook indies, then the Hugh Howeys of the world would not be in partnership with it.

    I’m not pro-trad or anti-Amazon. I’ve made a lot of sales in both places, and I see the value of both venues. What I note is that the commentary on the indie discussion forums veers sharply pro-Amazon to say the least, while hurling a constant and consistent barrage of vague accusations, half-truths and often ignorant assessments of traditional publishing in general and big publishing in particular.

    But Amazon is not the Shining Knight to your rescue.

    Amazon is a platform, not a vendor. Authors provide product, content, entertainment for its general customer base. Amazon controls a world of its own, a massive one that is growing bigger with every second. A world that uses books as loss leaders and bait (read any informed background on Jeff Bezos for this well-known info) to lure customers to higher ticket items. The goal is not to empower authors in the big long-term picture, but to use their output as efficiently as possible to help the bottom line. Luring millions of self-pubs to Amazon was brilliant–they’re shoppers!

    The cuts in ACX royalties are no surprise. Cuts to KDP author profits probably won’t be as blunt but will happen before much longer. Ebook prices will continue to be driven downward by internal maneuvers and other pressures, all in an effort to woo Amazon customers into signing up for higher Prime costs and other new bonus programs.

    The hybrid authors I know, most of them veterans of 40-50 novels, now self-pubbing successfully in ebooks, are seeing the canaries starting to keel over in the coal mines. Profits falling. Book prices not just trending downward but plummeting. Rights sliding away as technologies and start-ups invent new ways to use books as a data-gathering tool, like a come-on outside a strip club–ways to sell books cheaper, not sell books better. Talk among the authors who’ve been around since forever, the ones with a lot of experience in trad and indie publishing, is turning to ways of finding the core readership and selling directly to them. Of focusing on fewer readers, not more.

    Pie in the sky stuff, but at least the discussion has been seeded.

    All I’m saying is this: Trad pubs are not an author’s best friend. But neither are the (Insert whatever term you want to call the places where you upload your ebooks while agreeing to the lending/subscribing/matchbooking/nibbling of profits system that controls how your books are sold.)

    Don’t make the mistake of assuming authors have any safe havens unless we build them ourselves.

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  • Russell Blake

    None of which answers my direct question: Why is it reasonable for trad pubs to get significantly more of the net on ebooks as opposed to paper? Simple question. Very long non-answer.

    A follow-on: I never said “trad pubs have nothing to offer, blah, blah”. See my above actual question to you.

    To clarify, Trad pubs have value for authors who can’t or won’t manage their own publishing business, and are willing to give away 75% of the net for someone else to do it. They also have value for authors who favor the advance over the actual book profits. And they have massive value in paper distribution – in my genre, airport sales are significant, and you can’t get those unless you’re with a trad. They also have an infrastructure, which can be replicated, but is a pain to do and carries with it a cost – editing, proofing, cover design, formatting. And they have scale, which is another way of saying that they can use profits from some books to market either those books, or more commonly, their big names. Which is one of the reasons I think their model is antiquated and needs tuning. But I digress.

    Amazon is a channel. So is B&N. So is Apple. So is Kobo. They sell books. I sell books. I use them all to sell my books. So do all the trad publishers. If they feel that Amazon is the enemy, perhaps instead of colluding to price fix, they should pull their titles from Amazon and test where the power in the new landscape lies?

    If, at some point, Amazon decides to lower royalties, they will hand Apple, Google, B&N, Kobo a massive advantage to be exploited. My hunch is Amazon doesn’t want to hand its competitors lunch. I could be wrong.

    Corps are for-profit entities. They exist to create shareholder profits, not for altruistic reasons. Every dime not paid to an author is another dime in the corporate kitty for a publisher – it’s zero sum in that respect. Thus, their imperative is to pay authors as little as humanly possible. That’s neither surprising nor alarming. It’s expected to anyone with a background in business, which by now you might have surmised I have. Amazon is also one of those money-grubbing corps, and its job is to do what’s best for Amazon. If it wasn’t doing so, management should be fired.

    As CEO of my publishing career, my job is to make smart business decisions that maximize my profit. Right now, Amazon pays me 4X what a trad publisher would on ebooks. That’s awesome for MeCorp. If they lower what they pay, as CEO of MeCorp I will need to determine how to adapt to the new environment. Until then, things that could happen, like me dying tomorrow, or a solar flare wiping out all electronic transmissions for years, or people ceasing to read or being unwilling to pay me handsomely for my prose, must take a back burner to the mundane business of commerce. And right now, barring a mid-six to seven figure advance from a trad on a one book deal, Amazon and its competitors are the best game in town. Are. Not might be. Or might not be at some point.

    I’m sorry if competitive market forces are reducing the price readers expect to pay for books, thereby adjusting to supply and demand. I view that as net very positive, as it means more content at more affordable prices, which would theoretically make reading more accessible or appetizing. The truth is that books are free these days – you can download more free content over a long weekend than you could read in ten lifetimes. Creating the perception of value for my content hasn’t been a problem for me – my work sells for $5-$6, and does so briskly. Net, that pays me far more than a trad pub would pay me for a similarly priced ebook, or even for one priced double – which assumes that consumers would pay double in a competitive market (which they are increasingly uninterested in doing for any but the largest names, which I think was one of your points, not mine).

    Having said all that, I would embrace a trad deal just as I currently embrace the ebook channels. It’s just business. Business 101, actually, to use your term. Our difference in view is that I don’t bemoan the good old days or view change as negative or positive, only as a constant of business. You either adapt or you perish. It’s always been that way. If Amazon lowers royalties, they risk competitive pressures burying them. Given that they already make 30-40% (blended) from content that they have zero production cost on, I’d argue that your prognostications of them doing what ACX did (yes, an Amazon company, but one without any real competition) might be a tad skewed and alarmist. At some point we’ll both know whether my take, or yours, is correct. In the meantime I will continue selling lots of books, earning a more than generous living doing what I love, and avoiding taking hyperbolic positions that relate everything in an adversarial light.

    Business is always about the other guy trying to eat your lunch. Always will be.

    To expect anything else…

  • http://madammayo.blogspot.com/ C.M. Mayo

    Thanks, Jane, this is very interesting to know… if depressing, the idea of selling books to people who cannot be bothered to return them (!) P.S. Sometimes I think a good business would be a personal off-site personal book storage service, as for wine storage.

  • Elizabeth Lang

    Some good points but also makes a few assumptions that miss some of the facts. A good article but needs to be a bit more rigorous in its logic in order to be more accurate in its conclusions.

  • William Ash

    Was this an article? It seemed to be a sting of comments based of some industry data. The author seems to be clear that this is a random set of information that she found interesting and wanted to share. It is not complete. It certain has no conclusion.

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  • http://thebookshepherd.com Judith Briles

    Daily, I still hear resistance from authors and their use of Amazon due to the “discounting” and cost of getting books to the warehouse when Amazon emails an order to the author/publisher. eCommerce will only continue to grow–a huge majority of the population uses it. Amazon as a primary distributor for we authors in a variety of ways and there are ways to simply contact Amazon with a “stock up” request of at least 5 or 10 books vs the one or two at a time which is its MO. The shipping cost to them is reduced.

    Thanks Jane… I will share this will all my channels.

  • http://thebookshepherd.com Judith Briles

    I miss the Book Club power. As someone who has had several of my own books featured in clubs in the past, including as the feature of the month and even the “gift” to new members–the exposure, and sales, were terrific.

  • Judith Grout

    It reinforces what I suspected. These will continue to change and one doesn’t need much imagination to see where things are going.

  • http://www.janefriedman.com/ Jane Friedman

    William,

    You bring up an interesting point, which is that margins on print are indeed likely shrinking, partly because of higher co-op costs from booksellers (including B&N and Amazon), and lower print run volumes, which drive up unit cost.

    That said, in a kind of acknowledgment of lower ebook royalties, publishers are paying higher advances (or agents are able to extract higher advances because of it). As ebooks become a larger sales base (and print smaller), it seems like authors ought to earn a lesser royalty on *print* (because of the higher costs that will be associated with it—the luxury of it), and more royalty on digital.

    As far as transferring copyright to Pinterest, I can’t find this in their terms of use. Maybe you could point me to language that says this? They do take a license, but it’s nonexclusive. Here is their copyright policy that I found: http://about.pinterest.com/copyright/

  • http://www.janefriedman.com/ Jane Friedman

    Yes, that first graph is representative of sales in the traditional book publishing market. I wouldn’t be surprised if, looking only at the indie market, if it was seeing 95%+ online retail sales (of either print/digital formats), and 75%+ ebook format.

  • http://www.janefriedman.com/ Jane Friedman

    I think that would be a great business, and I’d like to sign up my partner as the first customer! :)

  • http://www.turnofphraseeditorial.com/ Mick Spillane

    Great! All those self-published e-books flooding the market, filled with typos, poor grammar and syntax, a lack of integrity. Just a big pile of crap–destroying books and publishing!

  • Dam Spahn

    So, over half of “adults” have tablets or ebook readers. Considering how only around half of adults read for pleasure, I’d say the ebook readers have penetrated quite well into the readers’ world. P1 readers, in my experience, often have a ereading device, but still read print books. P2s and 3s are often the ones who don’t have a dedicated ereader, since they’re not frequent users of the written word.

  • Dam Spahn

    Proofreaders hired by publishing companies? Really? I’m skeptical, since I constantly stumble across typos that could only be missed by Microsoft Word’s spell check.

  • William Ash

    The actual business end of the publishing business is far from transparent. Thomas Woll wrote a book called Publishing for Profit in which he tries to break down the numbers of publishing titles. He does this in reference to the employees ended for a publisher. For example, he recommends $150,000 in net sales per employee of the company. This does not mean each employ generates that sales, but if you are going to hire a full-time employee, the total net sales has to reflect that. I really should read this book again, it has been a while. It is a 1998 publication and so the information is pretty old (but so it the publishing industry ;-) ). But I found it to be one of the best books I found on the business of publishing.

    I guess what I am trying to figure out is were does the business of publishing and the business of self-publishing merge and diverge–I am just thinking out loud. In some sense, they share some things, but in others they are wildly different–if I am producing my content, I have that production time and cost; if a publisher wants an MS, they can call up a writer and actually have as many books in production they can handle (I find I am working on one at a time). I think the backlist dynamic is different because of this as well. but on the other hand, I am far more focused on the titles I have, rather than a publisher with 100s of titles.

    As far as Pintrest, if you look at section 2 parts a and b in their terms, they clarify what rights they take and assume the pinner has those to give:

    http://about.pinterest.com/terms/

    The fact that the users get non-exclusion rights over Pinterest content is scary. It is like an automatic Creative Commons license that can also be commercial. As a photographer, this is a bit too much and the fact they will keep the copy in their database for an indefinite period, whether I remain a member or not, is worrying.

  • William Ash

    Sorry, that should be 2b and 2c…

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  • Debbie McClure

    This has proven to be not only a great article, with some really relevant, interesting information and key take-aways (which I love), but also as fodder for some great conversation here. I’ve learned as much from other reader’s comments as I have from the article itself. Thanks Jane and everyone else who has contributed. I’ll be sharing this with my circles. :)

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  • Kathy Miles Wheeler

    Thanks for sharing Jane. The door is still wide open for self-publishers. eCommerce is the place to be.

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  • Jane Freund

    I am both a numbers geek and entrepreneurial author, this article and information is very helpful. Thanks so much!