Money flows to the author

As is the usual practice, here is the text of my talk at this year’s Greenbelt Festival. This essay is published under a Creative Commons licence: usual rules apply, and comments welcome.

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 2.0 England & Wales License.

Introduction

The old model of publishing is broken: it’s been broken by changes in technology, and broken by changes in society. The breaking of the model leads to both new problems and new opportunities for all those involved in the model: reader, publisher, seller and author.

The old model

Before we talk about the old model, we need to identify what the old model was.

Author writes book. Publisher buys book rights from author with an advance. Publisher pays for book to be edited and packaged. Book sellers buy book from publishers at wholesale cost and returns – sending unsold books back – are guaranteed. Readers buy book from book sellers. For every copy sold, a small percentage of the cover price or ‘royalty’ is nominally given to author. When the author has earned out their advance, royalties are then paid to the author in addition to the initial advance.

At every stage, there is both added value and added cost. The money that the author receives in the form of the advance is an amount that the publisher believes they can secure the rights for. It also has a relationship with their projected profit, but only tangentially. Having bought the rights to the book, the publisher now has to pay other people to read it, ask for changes to be made by the author, and on the final manuscript, point out any errors in spelling, grammar and continuity. The art department creates covers and the marketing department creates a strategy as to how the book will be sold, where advertising will go, who to send review copies to, writing the blurb and all the incidental things that go into a finished book. The book sellers will then buy the number of copies they think they can reasonably shift over a set period of time: because shelf space is finite, some books won’t make it in the shop at all, while others will be piled in huge stacks on the floor. Unsold copies go back to the publisher.

The percentage of the cover price that goes to each group is roughly 10% to the author, 50% to the publisher, 40% to the seller. Remember those figures, because they become important.

So that was pretty much what happened for a couple of hundred years. For the author, there was therefore very little choice: either you took the 10% offered by the publisher, or you personally bore all the costs and the risks of the publisher without the benefit of being able to sell through bookshops.

What happened to the old model

It’s difficult to pin down a date when the traditional model started to come apart. All the pieces were probably in place by the time 1990 came around. Let me tell you youngsters what was here in 1990, and remind your more forgetful elders what we had.

We had the internet. When I say ‘we’, what I mean is ‘academics’. I was just finishing a PhD in a Physics department, and we were knee-deep in JANET, FTP and X 25 routers. We told the computers to do things by programming them ourselves. Graphical User Interfaces – icons you could click using a mouse – were rare. Websites simply didn’t exist: it wasn’t until the end of 1990 that Tim Berners-Lee wrote the paper suggesting the use of hypertext documents and browsers to view them. Most books were still written on typewriters. My thesis was written using a combination of Microsoft Word and LaTex. The university mainframe was the size of a room.

And while all this is of historical interest, you can probably already see where I’m going with this. I was an unrepentant geek working in a science department in a university. I had access to some pretty decent kit, and these days most people’s phones would thrash the computers we had then in terms of any sort of benchmark test you could set.

Even then, we had the ability to change text without having to type the whole page out again, which was something that no one had ten years previous to that – can you imagine how revolutionary that was? We had built-in dictionaries to check spellings. Simply being able to store the text and print it out whenever we wanted was incredible.

Publishers benefited from the technology too. The physical typesetting was replaced by electromechanical typesetting, which was replaced by electronic typesetting. They gained the ability to edit and publish a book without having to ever print one out. The ability to manipulate electronic files rather than hard-copy saved backs in the editing suite and the post room too. The whole publishing process, while keeping the same steps, could be streamlined by instant communication via email.

Throughout the 1990s and early 2000s, these incremental changes built up until revolution became inevitable.

Self publishing

Firstly, it revolutionised self-publishing. Self-publishing used to be exactly like traditional publishing, except that the author paid for all the steps described. Then it became possible to submit electronic copy to printers. Then it became possible to bypass the printing stage altogether and produce written work on disk, and later CD. Then with the advent of the world wide web, even physical distribution became unnecessary. Along with the explosion of blogging came the explosion of on-line fiction.

The author could hire editors, artists, printers, use their own software to produce covers, typeset, use their web page to promote and even sell their books online. These innovations weren’t perceived as a threat by the traditional publishers because there was no sure way to monetize e-books, and readers still required an inconveniently large computer on which to view it. Physical books were still superior technology, and the publishers still controlled what went into bookshops. It made the market place bigger, but the bookshops were where most people went for their books.

Until Amazon. Amazon’s only been around since 1994. Amazon effectively broke the link between book buying and the bricks-and-mortar book store. A big book store will physically hold tens of thousands of titles, and be able to order a hundred thousand more which would be at the store in a week or two. Amazon could offer far more, all buyable at the click of a button, and delivered to your house within a week. The same technology that permitted the self-published author to sell their self-published books over the web was the same technology that allowed Amazon to sell everybody’s books over the web.

Book shops started to close, because publishers didn’t really care who sold their books, as long as they were selling. Remember those percentages I talked about at the start 10%/50%/40%? The publisher still had to bear the majority of the production costs of the book, but Amazon starting hitting publishers for 50-60% discount. Amazon exploited this discount by undercutting physical stores’ prices, and eventually ended up as a virtual monopsony – a single marketplace to which all sellers must go.

And still the publishers considered their position safe, because they were the ones still producing most of the books. Self-published and small independent presses couldn’t swallow the huge wholesale discounts, and e-books were still in their infancy. Project Gutenberg, an attempt to collate out-of-copyright books in electronic format, only had a 1000 titles in 1996. Google attempted to digitise whole libraries, but ran into difficulty – and class actions – because they didn’t respect the copyright holders’ rights.

Electronic books

The first ISBN issued to an electronic book was only in 1998. E-books from major publishers started in 1999. Dedicated e-readers were first seen in 2000. Within a few years, however, e-readers became light, easy to use, with a long battery life – and are becoming cheaper and more common with every passing day. Books began to move out of paper and into digital form – and downloadable digital content could now be charged for.

For publishers, this initially appeared to be an unqualified boon. They no longer had to worry about printing, stock control, distribution, or brick-and-mortar shops. They could connect directly with readers, who could purchase a book and have it delivered to them instantly. Anyone with a computer, or a 3G connected e-reader could have access to every single book in print, and many which weren’t. At the touch of a button.

I just want to pause here and say: how cool is that? I was a reader long before I was writer. I have several thousand books in a good dozen or so bookshelves in my house, and that’s only a fraction of the books I’ve ever read. Yet the internet and the e-publishing revolution makes it possible for me to have thousands more and not have them take up any more room.

From being safe in 1990, to having everything in place to blow the whole publishing model apart by the end of the decade – it took just ten years. What’s happened subsequently is simply an unwinding of all those changes I’ve described. It took an age to push the boulder to the top of the hill, but one final shove sent it on its way. Now, it’s careering downhill, out of control and unstoppable. No one knows where it’s going to finally land, or who it’s going to crush on the way.

The map of the now

There are two forces at work propelling the boulder to ever greater speeds and unpredictability. The first force is this: anyone can now write a book, publish it and sell it themselves, alongside and indistinguishable from, books produced by the traditional model, bypassing bricks-and-mortar bookshops, publishers, agents, editors and artists, with all that goes with that.

The boom in self-publishing, and specifically self e-publishing, as I’ve suggested, could never have happened without the rise of the enabling technology, and the rise of Amazon. Without the technology, the cost bar would be too great for a mass movement; without Amazon, traditionally published books would still be overwhelmingly prominent in the market place. However, it is now simple for someone to write a book, upload it to Amazon, and sell it or give it away through them. The hard part is writing the book. The easy part is bringing it to market. It used to be the other way around.

The self-publisher can sideline all the costs of publication. They don’t have to pay an editor to suggest changes to the book. They don’t have to get the manuscript copy-edited. They don’t have to pay an artist to produce a cover. They don’t have to pay for adverts or review copies or glossy brochures. They can sell their e-books for whatever they want, and almost inevitably it will be less than traditionally published books. Amazon sold e-books from the major publishing houses at a loss for years, so we’d all buy Kindles, and get used to the idea that e-books were cheap. Then they offered authors of self-published books up to 70% royalties on books sold within a certain price range.

You could reasonably argue at this point that a self-published book that hasn’t undergone any editing is genuinely worth less than one that has. You would, in a lot of cases, be right. You could go on to argue that that in a diverse marketplace, quality commands a premium, and therefore those readers seeking out quality books would preferentially purchase products that have been edited and checked for typos. Just in the same way there is a place for Poundland, there’s a place for Fortnum and Masons, and everywhere in between. You would also be right.

However, the digital marketplace makes no such distinction. One of my writing friends has put it thus: “there is a tidal wave of free product out there, and I feel drowned by it.”

Beforehand, a book that took a year, six months to write was worth something. Now, it can be easily considered worth-less. Which is a problem if you’re a publisher, an editor, an artist, an author.

And that’s where we start to realise the size of the problem, and the mis-firing strategy from the traditional publishers. The very conditions that created the opportunity are the ones that create the threat. What publishers forgot to do was to keep hold of their profits. First of all, they handed more of the cover price of every book to Amazon than they kept themselves. Then they handed them the dominant e-reading platform. Then they allowed e-books to be deeply discounted with respect to physical books.

When it was a triumvirate of authors, publishers and book shops, each one needed the other two: a symbiotic relationship, although one in which authors were nearly always the junior partner. With the rise of a monopsony and the concurrent e-publishing revolution, it made it possible for authors to break free of the symbiotic relationship. That freedom came at a cost, and left them vulnerable to a parasitic relationship, one where the parasite has the capability to so severely weaken the hosts as to leave them vulnerable to any other illness that might pass by. Normally this would be fatal to the parasite too, but hosts are throwing themselves at the parasite in vast numbers. The parasite does not care whether the host is a new author or one who’s been writing for five decades. They’re not there to build up careers or make relationships. They’re there simply to feed.

There is another problem, of course. The second force that is destroying the traditional publishing model is this: the ability to take an electronic copy of a book and distribute it in its original form without further cost.

Here be pirates

So let’s talk about the effect of piracy. If the publisher can create and sell as many digital copies of a book as they need without degrading the original or incurring extra cost, so can everyone else. It’s not just possible, it’s easy. And it’s not just a problem for those who rely on the traditional publishing model, it’s a problem for the self-published authors too.

Let’s try and define e-book piracy in as neutral terms as possible: the unauthorised distribution of an electronic copy of a book. There are obviously authorised distributors – the publishers, iBooks, Amazon – and there are unauthorised distributors. Authorised distributors collect payment if due, and pass an agreed proportion of it to the publishers who in turn, pass a percentage to the author. Unauthorised distributors do not.

Now, the unauthorised distribution of digital information is not unique to the book industry. The first sector to have problems with it was software. The second was music. That e-books have been similarly affected ought not to have come as a surprise. E-books ended up, just like games and music, on file-sharing websites, where they can be copied, in their original quality, an infinite number of times. And, as the software houses and the music publishers have discovered, there is no way of stopping the unauthorised distribution of their work.

When I say no way, I mean no way. Digital Rights Management, or DRM for short, does not work. And when I say, does not work, I mean that in a entirely literal, all-encompassing way. DRM does not work. It doesn’t work because someone, rightly or wrongly, will spend every waking hour on cracking any particular DRM algorithm until it is broken, then spread the answer across the internet.

That DRM is also stupid doesn’t help either: with DRM I can’t even transfer the music on the CD that I bought onto my own MP3 player. Neither can I read my paperback at home, and take my kindle on the bus and carry on reading. DRM is a blunt instrument, and it ends up doing crazy, unintentional and often dumb things to the legitimate rights holder.

Home taping is killing music

When I was younger – much, much younger – there was a campaign by the major record labels which told us that “Home taping is killing music”, the premise being that if everyone recorded their friend’s vinyl LP record onto a C90 cassette tape, the music industry would fall apart. Artists wouldn’t get paid, studios wouldn’t get paid, distributors wouldn’t get paid.

We can reasonably say that such an apocalyptic scenario didn’t come to pass. With each step in technology, the copy becomes less distinguishable from the master, and it’s now reached the point where they’re identical. And we can still hear music going on outside.

There are parallels which can be drawn between the book industry and the music industry. There are also significant differences which we need to be aware of.

The first and most obvious similarity is that both involve intellectual property. What’s being sold is ideas – notes and letters arranged into chords or words. This is not physical stuff; even in the days when samizdat printers were busy behind the Iron Curtain reproducing copies of banned texts on battered typewriters and illegal presses, it was the ideas, not the medium, that was the message.

The second is that they’re both industries where the content can be digitised. I appreciate that this is blindingly obvious, but it’s an important point: you can’t digitise a loaf of bread or a cow or a car. Music or words that exist only as a digital file can be infinitely replicable without physical matter.

The third is that they’re both industries which have traditionally separated the functions of creating, packaging and selling the product. This may well acknowledge that the artists and authors are not the people you want editing their own work, or indeed marketing it and selling it, but the split is there.

What kind of pirate are you?

Piracy is nuanced and layered. In order to find out precisely what damage piracy is doing, we have to identify the kinds of pirates who are operating in the digital world. I’m not – quite deliberately – going to talk about the content aggregators, the torrent sites like Pirate Bay. What I want to talk about are the people who download material from them.

We have people in the developing world. There are whole nations that are effectively priced out of the market. They can’t buy legitimate digital downloads because they’re priced in dollars, sterling or euros, and they don’t have that currency, let alone that amount of money. They would not be customers at the western levels of charging.

We have young kids in bedrooms the world over, doing what kids in bedrooms the world over have done for forty years. They’re sharing their favourite music with their friends. They’re making the equivalent of mixtapes for their boyfriends and girlfriends, they’re swapping albums and they’re working out what sort of music they like. They’re most likely, even if they’re living in a developed nation, on a tiny budget – blowing a whole week’s pocket money on new album is still a big deal, and chances are that they still do that. This group are core consumers of music: some of them are customers already, and as they get older, more and more of them – just like people of my generation did – will pay for their music.

However, and this is the area of piracy that is most concerning, the abundance of paid-for content available as free digital downloads are starting to persuade successive cohorts of young people that music ought not cost anything. These people, as they get older, get jobs and earn money, continue to visit torrent sites because they’ve grown used to simply taking what they want. There appears to be no issue of morality here – or rather there is. The usual morality would suggest that creators should be paid for their creations, but instead it’s been replaced by a morality which insists that everything on the internet should be free, and if you charge for content, you’re the one doing something wrong.

The big difference between musicians and writers is that musicians can and do play live, to a live audience, who will pay to hear them. It used to be that a tour by an artist would act as a loss-leader to encourage people to pay for the recorded music. Now, the recorded music is there to encourage people to pay for the live experience. The cost of an album’s worth of music used to be £15, only twenty years ago. Now, with a digital download, it can be less than £5. Meanwhile the cost of going to see a popular band live has increased considerably.

The reason for this can be placed at the door of piracy, and specifically at the door of people who could reasonably be expected to pay for music, but don’t. The same pressures on price are affecting the writing industry, which is far more vulnerable to piracy than music was, because people aren’t going to turn out in their thousands to listen to an evening of great writing. To be fair to my colleagues, some of them might be able to pull it off, but I’m certainly not one of them.

Personally, I don’t have particular problems with people who, because of geography or income, can’t afford one of my books and download a torrented version. These people were not my customers in the first place, and perhaps they’ll become so. I quite like the idea of having fans in the far-flung places of the world, and I do believe in giving stuff away to people who, like my friend Robert, would have to spend almost his whole month’s spare cash on a single title.

What I do have problems with is with those who can afford to recompense me and my colleagues and refuse to do so. The situation is pretty much classic game theory: the greater the number of cheaters in any given scenario, the fewer interactions there are between co-operators. If the number of cheaters becomes too great, the game becomes unplayable.

I don’t know where we are any more

To summarise: the assault on the traditional publishing model is an assault on its ability to monetise its product successfully. On the one hand, self-published e-books are now beginning to overwhelm the market for fiction, both by sheer volume and in undercutting price. On the other, publishers have given away more and more of their profits to third parties, some of whom are direct competitors, rather than using the available technology to keep the money in-house. On the third hand, the premium product can be taken by unauthorised distributors who make copies, indistinguishable from the paid-for product, available to everyone, everywhere, for nothing.

It doesn’t take a genius to realise that the traditional model of publishing is in grave trouble. This is the contradiction, then. The e-book revolution means that more people will be able to read more books more cheaply than ever before in history, not just in the developed world but everywhere there’s an internet connection, which is more or less everywhere if you count satellite internet. At the same time, the model we have for rewarding the people who write, edit and publish those same books collapses.

I would argue that it’s not in civilisation’s long-term interests for this situation to become reality. Unless we suddenly develop into a post-scarcity utopia predicated on a gift economy, authors and editors and artists are still going to need to eat, keep warm and pay the mortgage, and for most authors, editors and publishers, their only source of income is selling copies of books.

Show me the money

The question then becomes – and trust me, it’s a question that is being asked by everyone involved in publishing – how can we make money in this brave new world?

It’s worth saying at this point that no one has a single answer. Lots of people are trying lots of different things, most of which will fail. It is, however, better than doing nothing, which unfortunately is what most of the major publishing houses have been doing until only a few years ago.

The model I’d like to explore is, on the face of it, quite a conservative one, but it has radical elements that build in viability. It pictures a future where there is a multiplicity of content commissioners – or publishing houses as we currently call them – but who also act as content retailers, and whose income sources are not solely dependent on retail.

For example, if you were to discover that I was published by the Little Brown imprint Orbit, and you found out that my books were the award-winning Metrozone trilogy, and you went to the Orbit website – you’d soon realise that you couldn’t buy my books from there. In actual fact, there is nowhere on the Orbit website’s front page that allows you to find out where you could buy those books, or any other books they publish. This is insane, for all the obvious reasons. Other publishers, like HarperCollins, have added a ‘buy with Amazon’ button on their books. This is also insane, because you’ve just handed half your cover price to a competitor. You can deal directly with Penguin, which is good business practice, and you’ll see a lot more of that happening.

Furthermore, you’ll start to see companies, both big and small, refusing to do business the Amazon way, taking their selling and their ability to set their own prices in-house. The heavy discounting of books, enabled by Amazon’s wholesale percentage and their ability to dodge domestic taxes, has contributed to falling revenues for publishing houses, authors and book shops, while at the same time the sheer volume of sales allows them make a profit. You’ll see cover prices increase, but at the same time, the amount of direct discounting by publishers will grow.

Publishing houses will become leaner and more fleet-footed. They’ll be able to turn a novel around in a matter of weeks, rather than months. They’ll acquire the world rights to every single book they buy, rather than country- or language-specific rights. They’ll introduce larger price differentials between e-books and paperbacks, and reintroduce deluxe hardback and slipcased versions, signed and numbered collectors’ editions and with additional content in hard-copy versions that isn’t available in digital downloads, something that independent and niche publishers have been doing for years.

They’ll offer heavily-discounted e-books available only to the developing world, sold in local currencies and country-specific. They’ll make it easier to purchase a book than pirate it.

They’ll run subscription services – for an annual fee, every subscriber will be given the entire output of that imprint, either on paper, or as digital downloads, or crucially both. There will be subscribers’-only content and freebies.

Publisher-sponsored book clubs will proliferate, agglomerating similar genre content from many publishers. Again, subscription packages set at various levels will be offered, along with free samples, recommendations, articles, and the critical single-click purchase buttons.

Publishers will also seek sponsorship from organisations that promote cultural projects, both nationally and transnationally. It won’t just be book prizes sponsored by big companies, but books themselves. It’s also conceivable for publishing companies to be bought by multinational conglomerates, much in the same way that Hachette has done, but then run them as a philanthropic exercise.

Publishers will offer authors different terms than they currently do. They will offer different royalty terms on books sold through different marketplaces. Authors will be retained with honorariums. They may even be employed by the publisher: paying twenty authors ten grand a year, plus bonuses, for writing full-time would genuinely be a very attractive and interesting proposition.

Having a secure income stream and the ability to attract the best authors with the lure of advances, publishers will continue to act as a gatekeeper for content quality, and will in fact have an enhanced role in this area as the number of self-published books continues to increase. Even though much of their inward practice has changed, their outward function remains one of producing quality books.

But while that’s happening inside the traditional publishing companies, what’s happening outside them? Several things: some of them not pretty at all, and some of them quite hopeful.

It will never have been so easy to start a publishing company. Buying in the services they can’t provide in-house, working with printers for bespoke, high-quality product, and having exactly the same ability to access the market to advertise and sell their books as any of the existing publishing houses, niche, genre-specific, independent publishers will provide aggressively priced e-books and limited edition hardcopy. Authors offered contracts through these start-ups will be working on royalty-only agreements, or small flat-fee payments. Expect some of these start-ups to be swallowed up by the big publishers as imprints – without changing the contract terms. Expect some of them to vanish like snow on a summer day. Expect some of them to be run by incompetents and some by crooks.

In an expanding circle around these small independent publishers will be what I’ll call the professional e-book writers. These are the elite of the new entrepreneurs: those who self-publish their own work and make a living doing so. This can be done, and seeing how they do it is enlightening. Essentially, they become their own brand.

They price their books to undercut the mainstream publishers, discount them often, market aggressively, blog hard and write furiously. There’s no gap of a year or two between books: new titles appear every few months. These are people who work like dogs, somehow squeeze extra hours in a day that aren’t available to other mortals, and have achieved their position by one of two routes: either they’re authors who’ve previously been published by traditional publishing houses and who have an existing fanbase, or they’re new authors who have built up a following by tirelessly marketing themselves as well as writing good stories.

It’s this very small section of authors who have benefited the most from the technology revolution. They’ve made the calculation that they’re better off being independent than throwing their lot in with a traditional publishing house, and in many ways resemble the small independent publishers. Be in no doubt that living and working like this is punishing, physically and mentally. And for those without socialised medical care, it’s often one illness away from disaster. There is a very good reason why some of these pro e-book writers take the publishing houses’ coin when it’s offered. It’s simply less stressful.

Outside of these elite is an ever-expanding cloud of semi-pros and amateur writers. These people offer their work for little or no money, and will see sales and downloads at the same level. Yet this vast group of people, whether they’re writing as a hobby, simply for the pleasure seeing their book listed on Amazon, or taking their first steps on a career, are still part of the whole industry. There is no question that money is being made by these people’s endeavours, but it’s not the authors who are making most of that money: it’s the marketplace providers, the hardware sellers, the advertisers that are cashing in. You might be happy – or at least content – with that, but it does violate the cardinal rule of writing, which is that money flows to the author.

Conclusions

Authors: being paid for the work that you do has an inherent dignity about it, and writers should charge for their work. The book I’m writing at the moment, Ignite, is an absolutely massive fantasy/science fiction mashup. It’ll probably be three hundred thousand words by the time I’m done, and it’ll have taken me over a year to write. That represents a considerable amount of labour. It also represents a considerable amount of time I could have spent doing other things, and I need to justify the allocation of that time and resources to the rest of my family. If I was alone in a garret, Ed Reardon-like, it wouldn’t matter. But I’m not, so it does. Getting paid is part of that justification.

Publishers: you need to catch up. You need to stop giving away your profits to your supply-side competitors and start investing in your own digital infrastructure. Form ad hoc alliances and co-operatives with other organisations and companies, find sponsorship from institutions and philanthropists, consider different ways of supporting authors. Make sure it’s easier to buy a book than it is to find it on a torrent site. Spend as much energy explaining to people why it’s important to pay for books as you do trying to chase copyright violators.

Parents, it’s time you brought this subject up with your kids. You may even have to shell out a bigger allowance in return. This is hurting us more, trust me. I don’t want to have to send the attack helicopters round, so play fair.

Readers. Paying for created work is the way you show your appreciation. If you can afford a Starbucks coffee or a pint of beer as a treat, that takes comparatively little time to make and a short time to enjoy, you can afford to buy the book that took a year to write and may stay with you forever.

I wish – from a purely professional point of view – that this hadn’t happened while I was attempting to have a career writing. All the old certainties are gone, and with it, the comfortable relationships we used to enjoy. Even when I was unpublished and unrepresented, I knew where the ladder was that I need to climb. Now the landscape has changed beyond recognition, and the country is filled with puzzled people looking for landmarks.

One last thing. My fate is not entirely out of my hands, because there is one thing that I can do that’ll swing the odds in my favour. And that’s write. Write well. Then write better. Then write better than that.

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Published under a Creative Commons licence 2012 Simon Morden