Fifteen years ago, the steps to becoming a published fiction author were clear: publish short stories, write a novel, brag about the shorts to an agent, the agent acts as an editor getting your manuscript publisher-ready. Then you let the agent drag the novel to all the major publishing houses in NYC. If a publisher liked what they saw, they would add their expertise in commercial appeal, investing in it and making it ready for the big time. Some serious investments were made. Then the book would be published with a measured amount of publisher-funded publicity and you were in or not, at the fickle mercy of the market. How do I know? Stephen King said so in his book, On Writing published in 2001.
About that same time, just before the explosion of the Internet, the world’s major publishers started buying each other up. The business model was sound: Company A had $N Billion in revenue, made $X profit after $Y costs were subtracted. Company B had a similar formula. Therefore, Company A could go to the bank, borrow twenty times $X to buy Company B and then cut costs by sharing editors, accountants, publicists, salespeople, etc across both companies. After debt service, profits were three times $X. No problem.
Hundreds of publishers went into the blender until there were 6 (click here for list).
Then there were problems great and small.
We saw the beginning of the cost-saving moves cutting into rational decision making. A Million Little Pieces sold like hot cakes until it was discovered to be fiction not memoir. A Harvard student, chosen because of the word “Harvard” in her resume, plagiarized two other YA books. Someone tried to put OJ Simpson’s literary confession on bookshelves. More and more publishing scandals piled on. The reading public asked, “Where was the editor?”
Laid off. Consolidated. Editing Company B’s books after Company A’s books were done.
Yet, despite the scandals, the business model continued to work. The merger debt was paid by the continued cutting of backroom costs. So what if they lost a little integrity? Who you gonna call?
Then the business model changed.
Amazon.
First they changed distribution from stores to mail order. OK. Sucks for Borders. Then Amazon changed distribution from hard copy to e-books. And the new business model affected the debt load.
Big 6 publishers pay established authors about $2 a book and charge Costco, Barnes and Noble, etc ~ $10 a book, getting back a chunk to pay the editors, distributors, printers, artists, etc. They built their entire Mergers & Acquisition strategy on that formula remaining a constant until the year 2020. They have that M&A debt, remember? But e-books don’t have debt. Armed with a social media platform, an independent author can make $2 in royalties while only charging $3 or $4 for a book. The buying public cries out against e-books from major authors that cost nearly as much as the hardcover without the printing, shipping, and return costs. The angry mob yells, Why do I have to pay $13.99 for Steve Berry when I can get JF Penn’s Prophecy for $2.99? Same quality, similar topics, why $10 more?
Whoa. Whoa! WHOA. But those independent authors are a mixed bag. Some are good and some stink. Yeah? For $2.99 Mary can afford to drop a book after thirty pages. At ten times that, Mary keeps reading, curses the publisher, and posts nastiness in online forums. Besides, the winnowing is already beginning. On indie-author sites, much is said about investing $2,000 in a professional editor (laid off from the Big 6 for having coffee with the editor of the YA fiasco) and professional websites, book covers, art work, etc. They’re growing up fast.
Where was I? Oh yes, Same quality, similar topics, why $10 more?
M&A debt.
How do the Big 6 become competitive again? IMHO: Dump the debt. Chapter 11. If I were Chase Bank right now*, a meeting request with Hachette would make me wince. An email from CBS (aka Random House) would make me flinch. A voice mail from HarperCollins (News Corp) would make me change my passwords. (Yeah, low blow … couldn’t resist.)
Publishers provide a necessary service. They are, when they wanna be, the best at polishing books and providing us great entertainment. They have a proven system. Look at the consistent quality of James Rollins and John Sandford. But ask yourself, Are Patterson’s novellas (fluffed as they are with PLENTY of whitespace) really worth $27.95? Would I get as much if not more entertainment reading R.E. McDermott’s Deadly Straits for $14.95 in hard copy?
How do you think the next 24 months for the Big 6?
Peace, Seeley James
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* Just for fun — please do not make any financial decisions based on this OPINION. Do not construe anything factual about these companies. I do not have any insider knowledge of the finances for any company involved. I am merely stating my guesses about the future for the sake of thought provoking conversation. Anyone who incurs financial losses because of this posting is an idiot.
