Thursday, October 27, 2011

Guest Post by Barry Eisler

The Bogeyman and The Axe Murderer

Barry sez: A lot of conversation in and about the publishing world is fixated on fear of Amazon’s purported potential monopoly power—on the possibility that Amazon will eventually enjoy such market dominance as a publisher that it will abuse its position and begin to punish authors, perhaps with extremely low royalties. Which leads to aquestion I’m not sure I can adequately answer, though I find it fascinating:

Why all the fear about what Amazon might do in the future, when legacy publishers are doing those fearful things right now?

Today, Amazon pays self-published authors 70% of the retail price of titles sold on the Kindle Store through Amazon’s Kindle Direct Publishing. Legacy publishers, by contrast, pay their authors 17.5%. Now, certainly 17.5% is appallingly low. But if appallingly low royalties are your concern, why would you expend so much energy speculating about a lower royalty that might eventually come to pass, while caring so little about the extremely low royalties in effect today? It’s like panicking about possibly getting sick in the future while failing to treat the pneumonia killing you right now.

I know from experience that some people will respond to the paragraph above by claiming New York publishers are not a monopoly. After all, don’t the big houses fight with each other over new manuscripts? Aren’t there sometimes bidding wars over a hot new property? And they even poach each other’s employees and authors, too. So of course there’s competition, right?

No. Everything I just described is, relatively speaking, a distraction—Kabuki competition, not the real thing. If the legacy houses actually competed with each other—if they actually strove to attract authors and serve readers and lower costs and improve performance—the publishing world would not be universally characterized by the following:

• An identical, lock-step, onerously low 17.5% digital royalty rate
• The practice of forcing readers who prefer digital to wait, sometimes for over a year, until a title is also ready to ship in paper
• Digital retail prices equivalent to paper ones despite the obvious lower costs of digital distribution
• Byzantine and opaque royalty statements, delivered twice-yearly as much as six months after the end of the applicable reporting period
• Non-compete clauses that attempt to preclude authors from meaningful control over their own professional and artistic destinies
• Morbidly obese contracts delivered months after agreement on high-level deal points, written in unendurable legalese and drawn up in nine-point font on 14-inch legal paper, the only purpose of which is to intimidate authors into not reading the document, and to obscure the meaning of what’s written just in case they do
• Payments tendered months after they’ve come due
• A refusal to share sales data with authors, even though authors have long clamored for such information and the web technology to provide such access was already old a decade ago.

We can argue about whether the system I just described is properly known as a monopoly, or as a quasi-monopoly, or as a cartel. What can’t be argued is that such a system is only possible—indeed, is only conceivable—in the absence of meaningful competition.

So don’t go for the head-fake—the bidding wars, the poaching contests. These are as meaningful between publishing houses as are election contests between Democrats and Republicans; wars between Hapsburgs and Bourbons; arguments between supposedly liberal and supposedly conservative media. The skirmishing on the surface is meaningless by comparison with the cooperation, collusion, and confluence of interests beneath.

Which brings us back to my original question: why are so many authors afraid of a possible monopoly while sanguine about a real one?

I can think of several possibilities.

First, fear is a powerful emotion, and, as Gavin de Becker observes in his superb The Gift of Fear, is by definition related to something that hasn’t happened yet. Once the feared thing has happened, we’re no longer afraid of it. New York’s quasi-monopoly is a longstanding and accomplished fact; therefore, it can’t be feared (though it can be loathed). By contrast, Amazon is relatively new in publishing. Whether it will attain and abuse monopoly power is currently unknown, and therefore is something people can fear. It may be that because of the nature and survival value of fear, the mind ascribes greater weight to potential threats than it does to actual problems, and this difference might explain the skew between fear toward Amazon and acquiescence to New York.

Second, and perhaps related, is the concept of the devil you know. Sure, New York functions as a cartel, but it always has, and people are accustomed to it. It seems normal. Amazon, by contrast, is unknown.So hey, your husband beats you, but it’s been going on for a long time and you’ve survived. Do you really want to divorce and remarry? Maybe the new guy will beat you, too. Maybe the beatings will be even worse. Better to stick with what’s familiar.

Third, and again perhaps related, is Stockholm Syndrome, or what might also be known as a serf’s attitude toward his feudal lords (Mike Stackpole calls it a “house slave” mentality). New York has been abusing authors for so long that a lot of them have come to identify with their oppressors—to think their oppression is desirable and even just. And rather than welcoming a powerful new player as a potential rescuer or reformer, these authors fear the new entrant and fling their bodies over their captors in an attempt to protect them from harm.

For me, that last metaphor really gets to the heart of the matter. Amazon is like an inkblot test of submissiveness to New York, with some authors welcoming a newcomer with the clout to crack the cartel wide open; and others fearing anything that might change their current circumstances.

Well, you know what the inkblot looks like to me. I think you’d have to be in profound denial to believe that Simon and Schuster’s recently announced Author Portal, which will finally give authors the kind of access to sales data they’ve been pleading for, is the result of anything other than a belated attempt to counter Amazon, which provides authors such information as a matter of course. If legacy publishers next clean up their royalty statements, which are currently designed to be as transparent as the Dead Sea Scrolls, the timing and circumstances of that improvement will be no more coincidental than their sudden conversion to the benefits of sharing sales data. I just got my first royalty statement from Amazon, by the way, and it’s the first royalty statement I’ve ever seen that I immediately and easily was able to understand. Amazon also provides its statements monthly, not twice-yearly, so expect legacy publishers to coincidentally change that practice in due course, too.

Will Amazon become functionally the same kind of publishing monopoly the New York houses currently comprise? I don’t know. But it’s silly to argue that you’re afraid solely because you believe Amazon wants to be a monopoly, as though a monopoly motive is itself dispositive. All companies want to be monopolies—a company wants competitors like an army wants a fair fight, like a politician wants a serious opponent, likea lover wants rivals. Without means and opportunity, motive alone is meaningless, and I’m confident that with competitors like Apple, B&N, Google, Kobo, and Smashwords, Amazon will be driven to continue pursuing business practices based on enlightened self-interest. Another thing that will be useful in this regard is more and more authors creating their own website stores, and cross-selling each other’s books on them. The more choices authors identify, create, and exploit, the more motivated Amazon and other publishers and distributors will be to continue to offer favorable royalty splits and to otherwise treat authors well.

Because, remember. If Amazon ever becomes a real monopoly, they could lower those 70% royalties a lot. After all, oppressively low royalties are simply what monopolies do, and Amazon could lower theirs all the way down to, I don’t know, 17.5% or something. And a royalty rate that low would really suck. Damn, just imagining it scares the hell out of me.

Will the New York houses be able to shake off their torpor and rebuild their businesses based on more enlightened practices? It’s hard to say. The same monopoly that protects a company’s profits also withers its strength and adaptability. A company coddled by monopoly is like a fighter who never trains—who never even fights. Will a company like that be able to answer the bell when a real challenger enters the ring? I don’t know.

What I do know is that a vigorous new player just kicked open the locked door of a dark and moribund fortress and is finally letting in some sunlight. If you see a better way than Amazon to reform New York’s previously unassailable quasi-monopoly and all the suboptimal business practices that monopoly has enabled, I’d like to know what it is. In the meantime, I welcome Amazon and any other new entrant that can continue to loosen the legacy houses’ monopolistic grip,and force them to rely on practices beneficial to authors and readers rather than on monopoly rents beneficial only to themselves.

Because, remember. A 17.5% digital split for authors would be a terrible thing. Little better than serfdom, really. We simply can’t afford to let that happen.

Joe sez: I've mentioned many of the things Barry brought up in this essay on previous blogs, but I'd like to add a few things.

Let's pretend that Amazon will lower author royalty rates on April 1, 2013. How does that prevent any author from taking advantage of the 70% royalty rate until that date? You can make quite a bit of money between now and then. Why worry about then, now?

But there is no set date. Amazon may never lower author royalties. So why would the possibility of something that may never happen prevent you from trying something right now? This isn't bungee jumping, where you can die, or gambling, where you can lose a lot of money. Right now, a system is in place where authors can earn 70%. Anyone who doesn't take advantage of that is, IMHO, irrational.

I see irrationality creeping up in other areas too, concerning Amazon and self-publishing. Authors have flat-out asked me how much they can expect to earn by self-pubbing, as if it is a guarantee of money. When I reply (as always) that luck plays a part, they respond they'd rather wait for a legacy deal and the chance to make it big.

There is so much wrong with that logic I don't know where to begin.

No matter which publishing path you choose, luck plays a part. Having played for both teams, I can tell you that legacy publishing requires a lot more luck than going solo. The more people involved in something, the more chances it has to fail. When you throw in poor royalty rates, dwindling paper distribution, returns, and non-existent marketing budgets, it is almost astronomical that any new author ever makes money.

Which is why most don't.

Holding out for a legacy deal isn't a guarantee of anything, other than an advance.

I'm not going to name names or point fingers, but I've been watching Amazon rankings of some self-pubbed authors who signed legacy deals. I've watched these rankings go from awesome, to mediocre (or worse.)

A notable exception is John Locke, because he kept his ebook rights. The rest have got to feel disheartened, unless they got a huge advance and sales don't matter.

But sales do matter, don't they? That's why we became writers. To be read by as many people as possible.

Right now, this very minute, writers have the ability to directly reach readers, quickly and easily with a great royalty rate.

Luck still plays a part. And this moment might not last forever.

But if you want to make a go at this, there has never been a better time. Missing this opportunity isn't smart. And if you're sitting on intellectual properties, waiting for some legacy publisher to sweep you up and make you a bestseller, you might as well be running for Mayor of Deludedville.

It's a bird in the hand, guys. Make money and find readers now, or hope to win the lottery later. This is especially deluded because those authors who have won the lottery (like me and Barry) are giddy to be able to get away from legacy publishers.

We've seen and heard from dozens of authors who had legacy deals, and are now thrilled to be self-publishing.

But where are those authors who have given up self-pubbing and are now singing the praises of legacy publishers?

Are there any?

Don't you think there is a reason there aren't any?