Wednesday, April 11, 2012

New Models for Publishing

My last two posts have focused on why publishing is a crazy business, as well as one that's in flux.  This time I'm going to talk about two new models that may offer promise, mostly by building on the kind of direct connection to readers that social media and electronic communication make possible.

First, though, let me mention (and not dismiss) the possibility that each writer could become his or her own publisher.  CreateSpace, for example, allows you to build your own book and sell directly through Amazon.  No publisher is needed.  Amazon itself is the only middleman, and the author immediately gains access to millions of potential buyers.

The problem is that the book has no way to distinguish itself from hundred of thousands of others. The average self-published book sells 70 copies.  That's fine for a family memoir you want to print up for your grandkids, but it's disappointing to someone who has worked for a couple of years to design a fine work of fiction.

The other problem is that good publishers still do provide a function.  They edit, which makes books more readable and enjoyable.  They format and design, which makes books more visually appealing. And, much as authors hate the fact, they serve as gatekeeper, ensuring that the books they present meet some standard of literacy and merit.  Sure, there are bad books from publishers and great self-published books, but with no gatekeeper at all, self-published books, unfortunately, are more likely to be bad.

So how can traditional small publishers survive? John Oakes and Colin Robinson of OR Books, founded in 2009, evangelize for a new model.  Both veterans of small publishing, Oakes and Robinson have concluded that the returns model is what is killing the book industry. Because of returns, it's difficult to tell when a book has really sold.  Payments are delayed by 6-9 months.  Stock is destroyed.  Between that and the long chain of discounts, little money is left to pay authors or pay for marketing.

Oakes and Robinson run their business on a few simple principles.
(1) They use Publishing on Demand, and they don't print a book until it's sold.
(2) They build their contact list and sell at discount directly to consumers when possible.
(3) They sell to wholesalers or retailers at a 50% discount. No negotiation.
(4) They accept no returns.  All sales are final.

By only printing books that have been sold, OR avoids overstock and warehousing charges. That makes sense.  But how can they sell for no returns in a business that expects to be able to return anything?  The answer is that they offer retailers a better deal than wholesalers do.  Remember, distributors pay 45%-50% of list price to publishers and then sell through wholesalers to retailers, who pay 70% of list price.  OR Books only charges retailers 50% of list price, leaving them more room for potential profit.  The bookstore has to pay up front and make an informed decision about what will sell instead of using the publisher act as a bank making a loan.

OR's other advantage is that they have a defined and devoted readership.  OR prints liberal, progressive books that their followers devour.  OR spends a lot of time and effort building the list and keeping their readers informed, which means their marketing money is spent on people very likely to buy their books.

That's the OR model, going without a distributor to increase margins.  Another model might focus on decreasing the original barrier to entry, the cost and risk of producing the first print run before you know whether the book will be a success. Could crowdfunding play a role?

For a long time I've wondered whether there's a way to let people invest in a book the way they do, say, in a Broadway play or a movie. Could books have angel investors who chip in part of the cost of book development in return for a small share of returns?  Imagine if a publisher had shown you an early draft of The Hunger Games and asked you to chip in $100 or $1000 for a share in the book. How big a share was offered would depend on how the publisher perceived the value and potential of the book, and your decision to invest would depend on your own sense of the book's prospects. Right now, you would be pretty pleased with your investment.

Although large publishers with adequate cash reserves will probably not take to this model, small publishers might, now that the JOBS act is going to allow for small investors to take a share in startups.  I don't know any details of the law, but in this case the publisher would be selling shares not in the company as a whole but in a particular book the investor has previewed and believes in. Friends, relatives, and devoted fans could invest, as could newly recruited strangers.

A simpler version of the same idea would simply be to convince a large enough set of customers to buy the book, as with OR Books, before it's printed.  Anything that reduces the publisher's risk will increase the variety and number of new books published.

What do you think of these ideas?  Do you ever buy straight from the publisher instead of going to a physical or online bookstore?  And can you imagine helping to support small publishers and the business of literature by investing small amounts in books you believe in?


Marva Dasef said...

Interesting idea. My immediate thought is that the "investment" would come from authors wanting their books published. Then it becomes a vanity press. I think there'd have to be a strict policy against authors investing in their own book.

Penny said...

Then there's Kickstarter. Check out this book, Wollstonecraft. The author was looking for $4000 but has raised over $25,000 so far from over 800 backers. That's a pretty strong sign of audience interest.

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