November 25th, 2007

woods, Elizabeth, camera, April

Copyright: Market & Myths, #1 "follow the numbers"

The first rule of business is "follow the money."  I spent my early years in a hardware store downtown in a small town...I learned some basic rules of business in a very practical way that had an impact on what groceries my mother could afford.   And my mother had trained as an engineer, among other things; she was incredibly good with numbers and money, which meant that we lived better on less than anyone else I know. 

So, though I ended up in a creative field, I started with nuts and bolts (literally) and had the run of every store on Main Street.  This has led to my becoming notorious for insisting, when someone makes claims about something, that I want the hard data: the numbers.  And in the case of publishing, the money numbers.   (It really annoys people, by the way, when they make an assertion and you say "What data support that?  What numbers do you have?" 

This may be a two-parter, thanks to LJ's 4300 character limit (grump again) but here goes.

First, let's talk numbers as they matter in the writing business.  Publishers (of magazines or books)  need to make money to survive.  Publishing  requires money for the entire process: staff for editing and copyediting, paper, typesetting, printing, cover and sometimes interior artwork,  storage, shipping, advertising (including website design and maintenance) and (these days) payments to bookstore chains to get guaranteed "placement" in the bookstore (front of store tables, end of row displays, face-out display...)   Publishers know, to the penny, how much income per page they need to cover costs...and thus how many copies a 300 page book needs to sell to cover its costs vs. a 350 page book, and how many more copies must be sold to cover the art costs of a book with a cover by an expensive artist, or interior artwork, and every other related expense.  These things enter into their decisions to buy or not buy a given book (they won't buy one they don't think will tank), and how much to pay the writer in an advance.  Two important things about the advance (no, three, and don't anyone mention the Spanish Inquisition...)  1) A book will break even for the publisher before it "earns out" for the writer and the writer starts getting royalties.  This is the publisher's safety net.   2) Advances are not paid in full on signing...they're metered out between "signing" and "publication" with a variable number of payments along the way.  3) Most books do not "earn out"--the advance is all the writer gets.

"Numbers" in book-talk cover a range of things: the size of the initial print run (determined by pre-orders from bookstore chains for established writers, and by the editor's best guess for less-established ones), the raw sales figures and the shape of the sales curve (early peak, later peak, flat), and the sales/return ratio, known as the "sell-through."   Since bookstores return books that do not sell within a given time period for full credit, they don't really care about sell-through. 

Each of these numbers has different implications.  Initial print run determines how many books can be sold in the first few weeks...maybe 5000 people would have bought the book, but if only 2000 are available, only 2000 will be sold.  It takes time to reprint a book and ship it out...and by that time the 3000 people who would have bought it but couldn't may have spent their book budget on something else.   It is common for initial printings to be small enough that the book would not earn out even if every copy sold.   Writers often push for a larger initial printing., knowing that having their book in front of potential readers is the best way to make a sale (most people won't special order a book that's out of print, in order to nudge publishers into reprinting it) ..but if sales are low, that larger initial printing becomes a lower sell-through and lower net income from the book.  Though the actual printing cost of a book is only a fraction of the total cost of production, printing more does mean a higher total cost--so more must be sold to cover the cost.  

Publishers care most about sell-through, because sell-through is what makes or breaks profit.   They also care about total sales, but high total sales with a miserable sell-through can still tank a book.  Here's why.  Say you ship 10,000 books that cost $5 to produce and you're selling them for $20  with a $10 discount to the bookstore (yes, publishers sell books to bookstores below the cover price.  That's how bookstores make money, even with discounts.)   The publisher looks to make $5/book.   But half those puppies come back, sent home by the bookstore, which now wants $10 credit for each one it sends back.   5000 of the books sell, netting $25,000 for the publisher.  They cost $25,000 to produce.  That's not a good ratio but it's survivable.  But say the sell-through is below 50%...say the book tanks and only 20% sell.   The cost to produce those 10,000 books was $50,000...the return is only $10,000...the publisher is now in the hole, not somewhere they want to be.

Raw sales figures are what matter most to bookstores.   If someone's first book sells 15,000 copies, and their next sells 26,000, the chain stores will see that writer as viable.   With the reverse, they won't--and they won't order that writer's next book at all...thus deepsixing that writer's career.  (Publishers won't publish what they know bookstores won't carry.)   If the writer has one book with lower raw sales--even if previously that writer's sales were high--the chains won't order the same number of his/her next book.  ANY drop in sales affects future sales...even a single point downward suggests to the beancounters in chain bookstores that the writer is becoming a has-been.  Been there, experienced that with two different books, and it took years to regain publisher and bookstore support (and equivalent income.) 

woods, Elizabeth, camera, April

Copyright: Market and Myths 2

One of the claims that proponents of free file sharing make is that having a story or book up on the internet, available for free downloads, actually increases sales.    "More people will see your book, and if they like it, they'll buy it...it's like advertising."

Once again, "follow the numbers" is a good idea here.  Because...there are no numbers.   There are numbers for hits on a page and clicks on a link, and downloads of files (in some cases) but there is no tracking of how many people who read something online then go out and buy it.   (Not even self-reporting numbers on websites that carry free downloads:  no little checkboxes for "And now I'm going to go buy this book" or "Heck no, I'm not going to buy this book.")   There is no evidence--none, zilch, zip--that anyone's shown me that putting up the whole text increases sales of that book.  (There is evidence it makes the writer's name better known, but not that it increases sales of that book.)  

And--based on long-term marketing and my own experience with my work (things I've done online, things my publishers have done online, and things people have done without permission online)  it's highly unlikely that offering unlimited quantities of any product free will produce enough sales to offset the loss of sales.   Because of the nature of digital files, availability really is unlimited...it's not like the traditional freebies publishers give away to reviewers and random attendees at conventions, where the publisher could budget x-many copies for advertising purposes. 

Cheap goods drive out expensive ones (unless you're rich and buy expensive goods for status.)   Most of us have limited spending money.   We want more for less.   We buy at bargain prices, at sales, when we can find them (have you ever told a store "Oh, no, I'd rather pay full price...never mind the 30% off..."?)   Hence the success of Wal-Mart.   Lower prices attracted more customers; more customers gave Wal-Mart more clout with producers.   The universal desire to get more for less means that American jobs are lost and the metal in our tools is much lower quality than it was fifty years ago (it's expensive to make high-quality steel--remember, I started in a hardware store.  I know tool metal and fastener metal by touch, smell, taste--and most of what we get now is crap.)    As recent problems with products out of China have shown, "cheap" isn't always "good" or even "marginally acceptable and safe"...but by golly things are cheap.   (I don't recall whether it was Thoreau or Emerson who said that there was always profit in putting sand in sugar and chalk in flour...and there is.)

So the existence of unlimited freebie files will--by all the history of commerce since ancient times--result in people choosing the cheaper alternative.  It's cheaper to download that freebie file than to buy the book, and easier than going to the library or bugging the library to buy a copy.  The file may be adulterated, full of errors from careless scanning, but (like badly made clothes from a sweatshop in Honduras or India, like the mishmetal screws that bend when you put any real stress on them)  you may think "Oh, it's good enough."   You may tell yourself that one missed sale doesn't matter...you may have ideas about a writer's life that let you feel envious and justified in "sticking it to them" by choosing an alternative that doesn't give the writer a sales credit.  And so the slow hemorrhage begins.  The death of a thousand cuts,  no one of which is fatal, but in combination causes fatal blood loss...just like the independent bookstore, the hometown department store, the local factory that produced high-quality parts for larger companies' products...the writer's career shrinks and finally vanishes.

Where can free downloads be helpful instead of harmful?   Early in a writer's career, partial works--the opening chapters of a book, a few paragraphs of a story--do expose that writer's work to more potential readers, do build name recognition, do increase sales of that book.   Free samples (from a piece of sausage to a test drive in a car) have long been shown to work in getting people to try new things.   My experience with posting one to three chapters was very positive, as I've said.   Posting related material on the writer's own website (background,  artwork, etc.) is a help, and so are publisher websites that have room for the writer to expand a bit on his/her work.  Online interviews, podcasts--all these are parallels to traditional advertising and they do have a favorable impact.   Posting an entire book, even for a minimal fee (Against the Odds in Baen's Webscription program) did not produce a "bump" in that book's sales that exceeded what could be expected from putting up three chapters.   Moreover, with the increase in illegitimate file sharing, I've seen slower than expected rises in sales with books people express enthusiasm for--the book industry as a whole reports falling sales.  It's not a steep dive yet, but it's troublesome.   I have had, as I said before, communications from people who expressed glee that they could read my books without profiting me in the slightest...the "gotcha" phenomenon.  If one bothers to write me that, I'll bet there are others, and that's not counting the people who, having read the book online or in a downloaded form, just don't want to spend the money on the paper one.

In the long run, a new publishing paradigm will emerge, one that gives writers more control over online publication.  Some writers have already experimented with this (I was going to, about eight years ago, but some family stuff ate my time and I didn't ever get it done.)    Publication by subscription, on the writer's own website, has now worked for more than one writer.   This may be either serial (for writers whose work doesn't change drastically during the writing--mine does!) or all one piece at the end, after the money's been collected. However, right now the income from  these experiments does not match (for most of us) what traditional publication  produces...and it requires the writer to spend time on tasks which were previously handled by the publisher.  (Editing, copyediting, etc.   Most of us benefit from editorial help--I know I do.)

In the meantime, readers need to understand the harm that copyright infringement does, and refrain from supporting it.   If you like someone's writing, buy their books.  Or at least bug your library to buy their books.   Or download them from legitimate sources (which will probably cost something, but probably not nearly what a hardcover would.)   If the download source is the publisher, or an e-rights subsidiary, the writer will get credit for a sale (not much money, but it counts as a sale when the bean-counters are deciding which writers are acceptable.)    Publishers don't give writers any credit for how much or your stuff is downloaded from pirate sites.