Blogger: Janet Kobobel Grant
Location: Books & Such main office, Santa Rosa, Calif.
In my post yesterday, we looked at sales in 2010. Today and tomorrow, we’ll take a peek at how 2011 is shaping up.
Last week Harlequin released its sales results from the second quarter of 2011. As with most other publishers, Harlequin noted that “declines in print retail revenues more than offset digital revenue growth.” Digital sales were up $7.3 million the quarter, but retail print sales were down $10.8 million. Overall, digital comprised 15 percent of revenue for the quarter–more than double the 7 percent it comprised in the second quarter a year ago, at roughly $16.5 million.
The company said “the transition from printed books to digital has been very rapid. Harlequin has been adjusting the volume of printed books distributed into the market and expects to see lower book returns relative to books distributed which should contribute to better year over year operating results in the second half of the year.”
What does this trend mean for the average writer?
Because the unit sales for e-books is gaining momentum faster than most publishers anticipated, publishers are over-printing and therefore suffering losses on returns. As a result, publishers are trimming down the size of their print runs. In turn, that means publishers have to find ways to make e-books more profitable. Let your imagination work over this scenario. How can publishers make the finances work? Here are some of the options:
- Charge more per unit. While cheap e-books have helped to convince readers to make the leap to invest in e-readers, publishers are unlikely to continue this methodology because they can’t continue to give books away for free or for bargain-basement prices and have a sustainable publishing plan.
- Find ways to make and deliver physical books to readers. Many publishers are looking for additional retail outlets. A few have tried direct to consumer, but unless a publisher (such as Guideposts) already has a direct mail component in the publishing plan, this is very difficult to pull off. As a matter of fact, Barbour Publishing just last week announced it would abandon its Heartsong Presents line, which made most of its sales through direct mail, because of declining sales. Still, publishers have to think outside the box and not be afraid to try ways to get physical books into readers’ hands.
- Charge less for physical books. Hardbacks especially are struggling to sell enough units to make the profit-and-loss statements work for publishers. And since, in the general market, hardbacks are the foundation on which a publisher’s house is built, publishers must figure out how to sell sufficient units until e-books reach the point publishers can charge more for them.
- Pay authors as little as possible. This part of the equation is pretty much in place, with most publishers paying 25% with no escalations. I know many agents are working to change this percentage and are succeeding for high-profile clients. But you can see why publishers are resistant to, as a matter of course, pay a higher percentage. They need the profit of e-books to help them during this transitional phase. As a matter of fact, during a recent negotiation, when I asked for escalators on e-book sales, I was told I was lucky the publisher was paying such a high royalty (25%). Which just gets to show that the person I was negotiating with hasn’t realized what a bargain publishers are getting on e-book royalties.
What other options do you see publishers having? By the way, it’s always a good idea to look at the world from the publisher’s perspective. That can be very hard for an author to do, but it’s invaluable to understand the forces at work within publishing. The more we understand, the more we can work to find win-win formulas for publishers and authors.
What do you wish publishers would do differently during this time of seismic change in the book world? Feel free to fling ideas out there. Even wild thoughts like, Pay bigger advances so writers can invest more in marketing their own books.
Very interesting post. I see why point number one is an issue. The authors I spoke to discuss volume as being the key, but I still don’t think it’s sustainable. As for hardcovers, I rarely by one these days. If I have a paperback, or better yet, a Kindle option, that is cheaper, that’s what I’m going to do.
Print on demand seems to come with bad connotations, but could this not help publishers to some degree? Though it would have a negative impact on bookstores.
As for what I wish publishers did differently, it would be taking a chance on more new voices instead of banking on big names. It’s tough to break in, and sometimes feels like pushing to open a door that’s being held shut by a mountain of heavy furniture.
Thanks for a great post.
I had a late thought inspired by yesterday’s post, but some of my ponderings carry over into today’s discussion. I wonder how it would be if publishers released the ebook version first? Sales response might provide a good indicator of the story’s reception in the market and how many paper copies would be prudent as a first run. In effect, the story could earn its right to be printed through the ebook version where risks and delivery costs are lower.
This model may well be premature while e-readers are still relatively new. Paper books are easier to market, but if the trend continues and especially if ebooks become multi-media attractions in their own right, leading with the digital version could reduce waste and returns. There will always be stories that just don’t catch on for one reason or another, and that’s disappointing, but wouldn’t it be better to know when there’s less at stake?
What about print on demand? I know that has been a model for self-publishing companies in the past, but what if, say, Bethany House teamed up with a POD company to produce their books?
The publisher would be taking less risk because they wouldn’t have to sell those 6,000 copies sitting in the basement. And with a model like this, it could make sense to give lower advances in trade for slightly higher royalties.
I’m looking in from the outside, but this seems to make sense to me. Put out the books as digital and POD at the same time, even the same price if possible. With brick and mortar stores dropping in popularity, POD has the ability to print and ship books for online stores almost as fast as an inventory warehouse.
Cheryl and James,POD isn’t much of an option for publishers because they understand that they need to stock copies of books in venues where people can impulsively choose that volume, even if they didn’t intend to buy a book, e.g., racks in grocery stores an airports, box stores, coffee shops, etc. These are significant sales outlets and places publishers are looking to as ways to deliver physical books to readers. If everyone shopped online, POD would make sense.
And Cheryl, I hear you about how hard it is to get your toe into the publishing door. I do have to say, since publishers have downsized and figured out ways to remain profitable in this ever-changing landscape, many have told me they’re open to new voices. So be encouraged.
Lynn, Tyndale Publishers is trying out the business model you’re suggesting. About a month ago, they released a handful of titles in their Digital First imprint. If a title performs well, Tyndale will release it in print format. So, great idea, Lynn! It’s too early to know how the concept will work, but I applaud Tyndale for trying something new.
I believe we’ll see the emergence of a new creature called “the eBookstore.” These will be located in malls and other high traffic consumer areas. They will inventory a few print versions of bestsellers, but the majority of the space will be line cards of books. These will have the covers and perhaps the first chapter of a book (or perhaps the whole book). If people like what they see they’ll scan the card and it will download it to their reader and bill their on-file credit card. I wouldn’t be surprised if Amazon took this on (just as Apple got into brick & mortar successfully).
This would allow booksellers to offer a massive catalog, while minimizing store square footage and inventory on hand. Still they would be able to preserve the ambiance of a traditional bookstore with comfy chairs, ornate displays and a knowledgeable, book loving staff.
A couple of years ago I blogged about the Espresso Book Machine that allows local bookstores to print and bind books on demand. Here’s a link to that post: http://tinyurl.com/45ybvq7
I think we need to consider the economic situation when guessing what will happen in the future. Deflation isn’t happening with most things, but many people consider books a luxury, so cheaper versions like e-books are more likely to sell. And maybe some people buy those because like to try out new tech things. I believe we’ll have both electronic and hard copy books for a long time to come, but we’ll have to wait and see what happens.
Michael, that’s a fascinating, futuristic view of a bookstore. Makes sense to me. I think people still want a place to hang and a bookstore ambiance–with fewer books.
Janet, thanks for reminding me about the Espresso Book Machine. I’ve heard some bookstores are doing well with it, but it’s still a pretty unexplored device. (I saw one at BEA several years ago. It was fascinating to watch it churn out a book.)
I’m mainly soaking up all this information and the creative comments this week. I don’t have any good answers, but I’m intrigued at the possibilities.
As for what I’d like to see publishers do, of course I’d love the cost of physical books to decrease (so that perhaps more copies would be sold). How to do that without sacrificing author/editor/agent salaries and livelihood, I’m not sure.
In some ways, as you mentioned in a reply to Cheryl’s comment, these changes are opening some encouraging opportunities.
I’m finding these posts so fascinating, Janet, for one big reason: I’m the proud new owner of a Kindle. And I’m just now diving into the world of e-books and figuring it all out.
As for flinging ideas out there…I would love to see more of an “entrance”, so to speak, when I start reading an e-book. It’s very satisfying to start a book by glancing at the cover and then flipping through the opening pages–yes, even the copyright page and the title page–before I start reading. (Maybe these things are already incorporated, and I just haven’t found them yet? The first couple e-books I’ve opened have jumped straight to Chapter One.)
I’ve seen discussions about all the added features e-books could utilize in the future, especially from an interactive standpoint. The question is would the consumer be willing to pay an extra dollar or two for those features?
Wow, lots to mull over. Thanks for opening the discussion.
Um. Wait a sec.
Publishers are charging *more* for ebooks than paperbacks in many cases, and the same amount in others. Now, if you try to tell me that prepping an ebook *for a new book* coats anything LIKE as much as a paperback, I will, in cold hard fact, call you a liar– because I’ve done it. It took me half an hour to go from electronic manuscript to PDF, epub and mobi files, and that’s with them looking as good as anything I’ve bought.
So how do you– or anyone else– manage to keep defending the publishers? There’s no logic here, unless it’s insane monkey logic or something.
The way to make money is to deal fairly with the public– and with the author. Right now, from what you’re saying?
Neither one is happening.
Thanks for mentioning the Espresso Book Machine, Jan. I knew there was something out there, but for the life of me I couldn’t recall the name of it.
My first thought was POD books as others have commented. Guess I don’t know how many you would have to print to get them onto shelves and then just print as stores ordered them. Maybe it would work out the same as that first run. I like the look-into-the-future store Michael describes. In Seattle, there are Microsoft stores as well as Apple stores where people can get that hands-on experience. It is nice to thumb through a book before buying. That’s the one thing I don’t like about e-books. Thanks for the perspective Janet!
I hadn’t heard the news Heartsong Presents is closing–too bad. It’s hard to see another category line disappear.
Thanks for all the insider info. Your posts give me a much better understanding of the current state of publishing.
Those figures don’t tell the whole story. There’s a $3m decline in revenue, but presumably the margin on paper books is far lower than for e-book sales.
Revenues are important, but profit is far more important.
I think what Tyndale is doing, with e-book only contracts and an option to do print books, is absolutely the future. You bring the gatekeeper/editing functions of the publisher in, and have essentially the same marketing partnership between author and publisher. I don’t understand why more publishers aren’t trying this in large number.
Now if the publishers will just realize they can get great covers for $500 or less and don’t need a five person committee to generate one, production costs will come down even more.