Mark Coker, Agency Pricing, and The Indie Surge

Check out Smashwords founder Mark Coker’s blog post on the big sales/profit advantage indie authors now enjoy (thanks to The Passive Voice for the link).

One thing Coker says raises again for me the question of whether the agency model, with its artificial inflation of traditionally published ebook prices, may actually have been a good thing for the growth of indie publishing:

If an author can earn the same or greater income selling lower cost books, yet reach significantly more readers, then, drum roll please, it means the authors who are selling higher priced books through traditional publishers are at an extreme disadvantage to indie authors in terms of long term platform building. The lower-priced books are building author brand faster.  Never mind that an indie author earns more per $2.99 unit sold ($1.80-$2.10) than a traditionally published author earns at $9.99 ($1.25-$1.75). (accessed 7/26/12)

Indies are selling a lot of units because their prices are so much lower. That means they actually account for a far bigger part of the book-selling pie than you’d realize if you quote the usual 30% share, which is based not on units sold but on sales in dollars. Selling more units = introducing more readers to your brand. Add to that benefit something Coker doesn’t mention — many indie writers are able to put books out there (i.e., grow their product line) much more quickly than they could were they publishing traditionally — and you end up with a pretty big head start over traditionally published competitors. Especially during a quasi-global recession.

So wouldn’t anything that magnifies that advantage be good for indies? And hasn’t the agency model done just that by artificially inflating the prices of traditionally published ebooks? I think the only way to believe this hasn’t happened is to think that books simply don’t compete with one another. And you know, I’d love to think that books are somehow outside the competitive marketplace, that readers don’t purchase on a budget, weighing our precious artworks thusly: Hm, I could buy this book for $12.99 or these four books for $2.99. Sure, I wish books transcended such base calculations, but I really doubt they do.

Would indie publishing have made such amazing strides over the last few years if traditionally published ebooks had been more reasonably priced, starting in 2010? Dunno, but I suspect the vast price differential has something to do with The Indie Surge, and that the agency model may have been busily putting the nails in the coffin of traditional publishing these last few years — quite the opposite of its intended effect.

6 comments

  1. There’s no way trad can ever compete, not unless they close down their offices and all work from home, because their overhead is astronomical compared to the average indie. They HAVE to charge more, or they don’t pay the rent on the Fifth Ave. suite.

    1. Agreed, Fred. They’re in a terrible bind. I assume there’s only one explanation for the Big Six’s claim that producing and selling an ebook only costs 20% less than producing and selling a paper book (despite the latter’s attendant costs for printing, shipping, warehousing, and remaindering): they’re producing ebooks with an infrastructure designed to produce paper books. Add to that the fact that indies rely on contract labor instead of salaried employees who get benefits and 401Ks, and the difference gets even bigger. To survive the “electronicization” of the industry, I publishers would’ve had to recognize it very early and change themselves radically. Realistically, it’s probably too much to expect.

  2. My concern is that they have this enormous apparatus in place, all these mouths to feed, and that they’ll take it out of the author’s cut even more than they have been in order to maintain the “lifestyle”. Maybe instead of posh Manhattan offices, they need to consider moving their operations to some little village in Montana where rent’s $200 a month, and taking a pay cut.

  3. Heh. I don’t think they can do the Montana thing, and taking more out of the author’s cut isn’t workable, not when the indie movement, with its super-high royalties, snowballing as it is.

    I’m not sure how big these companies are, in terms of employees, but I have a feeling that down-sizing adequately wouldn’t just be a matter of attrition and golden parachutes. Maybe if they’d started five years ago, but not now. And it wouldn’t even just be a matter of number of employees. It’d have to be a huge reorganization. At the same time, they can’t abandon their ability to produce and distribute paper books. What a conundrum.

    Beats me what the right solution is, at this point. I’m glad I’m not in that industry. From this layperson’s perspective, it seems to me they’re in an awful bind.

    Hey, I’m reading your blog right now!

  4. I must admit to disagreeing with a lot of this article because it ignores some facts while stressing others, which gives a skewed vision of the publishing industry.

    “$2.99 unit sold ($1.80-$2.10) than a traditionally published author earns at $9.99 ($1.25-$1.75)”

    I have a real problem with this math because it’s untrue. You give the impression that writers get a huge percentage if they don’t go with trad publishers. The numbers listed assume 70% royaltlies, which anyone who publishes with Amazon and bothers to read the fine print, knows isn’t true. Not if you publish at $2.99 or less which the majority of writers do, because they don’t dare price their books any higher. You only get 35% at that price. And factor in the fact that all of the technical work is now passed back to the writer. If you look at it that way, then the value the writer is getting is far less than 35%.

    You don’t get ($1.80-$2.10). For books sold at $2.99 or less you get at most $1.05. With traditional publishers, you get different royalties on a sliding scale depending on sales. Mainly because they pay advances, and you need to earn back that advance. Amazon pays nothing to writers ahead of time, they have no interest in investing money in writers by taking the risk of losing money on authors that might not sell. The more you sell, the more you get in royalties.

    “they’re producing ebooks with an infrastructure designed to produce paper books. Add to that the fact that indies rely on contract labor instead of salaried employees who get benefits and 401Ks”

    Isn’t it even more correct that trad publishers put a lot of professional work into a book that self-publishers don’t bother with and honestly it shows. That is why trad publishers have much higher overheads. NOT because they use salaried workers.

    Face it, most self-publishers don’t have a clue what a proofreader is, and most have never heard of the term, nor do they know the difference between job of an editor and a proofreader. Self-publishers use cut-rate cover artists or do it themselves as opposed to the professionals who trad publishers use. It’s not the difference between salary and non-salary, it’s the difference between quality which costs and those that the self-publishers use, who are usually part-timers. Have you taken a look at book covers on Amazon. I have never seen such laughable art work. Images slapped together without bothering to balance the lighting on each object, the color tones not matching, fonts that are so badly chosen that they blend into the background. You don’t see that with professionally done covers. Not to say that some self-publishers don’t put out the money to hire good cover artists, but then that’s the other issue, isn’t it? The author is now stuck with the onerous task of finding and funding their own covers.

    Plus publishers pay advances and like with most authors, most will never recoup the cost of publishing them. Maybe Amazon is smart after all. Why invest in people? The majority of which they know will never make more than pocket change? Why be like the idiot traditional publishers who actually believe in an author enough to put money, time and resources into the publishing them without asking for a single penny in return for those services?

    Artificially inflating book prices? When Amazon artificially deflated them because it costs them no overhead to sell books by publishers.

    I think the publishers have every right to price their own books. I don’t think it’s artificial at all.

    If they think the value of a book is in the work of the author, and not the paper it’s printed on, and should be priced that way, I agree with that.

    Don’t forget that every book regardless of whether it is print or ebook, has work that has to be put into it along with the work of the writer. That is common to all books, regardless of print or ebook.

    The cost of physically printing it shouldn’t be that much compared to that. Unless people want to believe the value of a print book is actually in the paper and not the words printed in it.

    1. Hi, Elizabeth. Thanks for your thoughtful and detailed comment. I really appreciate it. I’ll raise a couple points in reaction:

      The “math” you quote is, of course, not mine but Mark Coker’s (it’s his Smashwords blog piece I’m reacting to in this post). You’re certainly right that touting the higher royalties indie authors get does present an incomplete picture. The sum of the royalties (whether 70% or 35%) an indie author gets from each sale must be compared not to the sum of the smaller royalties the trad-pub author gets per sale, but her total royalties plus her advance.

      That said, I have heard from other authors that most advances for unknown first-time authors are rather low these days. Not for everyone, certainly. I have a traditionally published friend who recently got a six-figure advance, albeit not for a first book. But if many advances are more in the neighborhood of $2K to $5K, one can earn that back fairly quickly with the 70% royalty rate. For instance, I just brought my book out in April, and while it’s by no means been a big seller, it has already earned about $600. Given that it will be available and actively marketed for years to come, I think several thousand dollars in earnings is not an unreasonable expectation. That might be about as well as I’d do if I’d traditionally published that book. I’ve heard that many (most?) trad-pub books don’t earn out.

      And of course, many indie books were rejected by traditional publishing houses, so anything those books make is 100% “gravy,” so to speak. An advance plus lower royalties wasn’t even an option for them. If trad-pub had been those authors’ only option, their earnings would be $0.

      I’m surprised at your error regarding Amazon royalties: $2.99 books make the 70% rate. (Amazon pays 70% royalties for prices between $2.99 and $9.99.) Many of the indie authors I know are now pricing novels at $3.99 or $4.99. I wonder what evidence you have to support your assertion that “the majority of writers” price in the 35% royalty range “because they don’t dare price their books any higher” (quoted from comment above on 7/29/12). I’d be interested in seeing the supporting research on that one.

      I agree with you that many indie books are poorly edited, unproofed, and horribly covered. That’s why I always devote some attention to those issues (as well as formatting) when I write book reviews. But these problems are not present in all indie books. I think many of us understand that good covers and proofreading are important investments. True, substantive editing is beyond the budget of most indie authors. Then again, I’ve heard from a number of trad-pub authors that in-depth editorial attention is increasingly rare for your run of the mill book. A big-ticket book? Some great editor’s going to be all over that one. A straight-to-mass-market fantasy? Maybe not so much.

      Perhaps the term “artificial” wasn’t the best choice on my part. After all, all pricing is “artificial,” in that someone has sat down and said, “Hmmm, let’s sell this one for $X.XX, but let’s sell that one for $Y.YY.” As for whether the publishers had the “right” to do what they did with ebook pricing, that’s a matter for the courts, at this point. However the legal chips fall on that question, I certainly hope you get your way: nothing would please me more than to see my trad-pub competitors’ books continue to be priced well above mine.

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