I’m happy to report that my interview with Jeff Rivera is on The Huffington Post today. So click on over and learn how we view author’s works as investments, not “deals,” and how we Focus on Finance and the Future for our clients.
Archive for the ‘Business’ Category
Apparently some of the country’s most successful authors of fiction work for the General Accountability Office (GAO). They resolved to check on the usefulness of the EPA’s Energy Star rating system that rates “green” appliances. So they created four imaginary companies and filed requests for Energy Star status for twenty fake devices, of which fifteen were approved. My favorite is an air cleaner that was only a feather duster taped to a space heater
Fortune Magazine has the whole story at: How to ‘green’ an appliance.
The challenge of being a novelist is being held to a higher standard for made-up stuff.
Elizabeth Woyka, writing at Forbes.com, reports on a report that Apple has refined their e-book categories. Visit the Forbes site for the whole story, but the book specific information is this:
AppSlice’s findings point to a highly organized approach to bookselling. Apple has designated about 20 “top-level” categories for books, including “Fiction & Literature”, “Reference,” “Romance,” “Cookbooks” and “Comics & Graphic Novels.” Below those categories lie more than 150 sub-categories, including some very specific genres, such as “Manga” under “Comics & Graphic Novels,” “Special Ingredients” under “Cookbooks,” and “Etiquette” under “Reference.” Some sub-categories, such as “Fantasy” and “Science Fiction & Literature,” even have sub-sub-categories (“Historical” and “Paranormal,” for example.) There are also two sections for “Erotica” books; one under “Fiction & Literature” and one under “Romance.”
We don’t know if the iBookstore will become visible tomorrow or on April 3, when the actual iPads will be in Apple stores, but there’s lots of speculation and hand wringing. Commentators range from the enthusiasts (like me) who think the iPad will increase e-book sales to the Apple haters who assure us the device will flop. You can follow the flop predictors at iPad Death Watch. Great fun. One of the doom crieers, John Dvorak, has shown how great it is to be a writer. He’s almost always wrong, yet keeps getting paid for his opinions. My favorite was his column almost three years ago today, when he commented on the announced but not yet delivered, iPhone:
I’d advise you to cover your eyes. You’re not going to like what you’ll see.
Clearly people did like what they saw as Apple sold over 8 million iPhones in just the last quarter. Although Amazon won’t release sales numbers for the Kindle the most optimistic estimates are about 2 million sold to date. That means that in the three months over the holidays, Apple sold four times as many iPhones as Amazon sold Kindles in two years. Anyone going to buy an iPad?
UPDATE It’s Friday March 12. The Apple online store came online exactly at 8:30 EST and is taking pre-orders for all iPad models and Apple accessories.* Orders for the WiFi models are marked “for delivery on 4/3″ so we assume you will receive an iPad on that date. Some accessories are marked “ships on 4/3″ and others have less specific info, so they may come later. The 3G models peg delivery as “late April.” All orders made at the Apple Online Store ship directly to you (free standard shipping). If you have an Apple ID or iTunes account, you can use that identity to order and everything happens instantly. If not, you can create an identity while placing an order. If you want to RESERVE an iPad for pickup on 4/3 at an Apple Retail Store, all you do is select that option from the main iPad page at the Apple web site. You can’t reserve from inside the online Store website. All reserving does is to add your name and information to a list, you must pay at the store like any walk-in purchase. Reserving should eliminate waiting in line on April 3. Since none of the WiFi models require any AT&T setup, delays should be minimum.
* The iPad Camera Kit, which includes a USB connector and SD card reader is not available at the Online Store, but a VGA cable that allows connecting an iPad to an external monitor or TV has appeared. The other new item is the AppleCare extended warrantee (equivalent to the AppleCare for iPhone) at $99. Unlike dealer extended warrantees on electronics, AppleCare is a good investment since it includes unlimited phone support for two years from people who speak English (or your local language).
Check out this interesting essay on TUAW, Macmillan trying to sell ‘hardcover’ ebooks, which gives a technologist’s view of the e-book controversy.
In the words of Gilda Radner, “Never mind.” (Clic the pic for sound.) However, let’s not fool ourselves that the war is over. This is only a skirmish. There are some new insightful blogs on the underlying causes of the conflict. We suggest you check out: Scrivener’s Error and Charles Stross’ blog for a legal perspective and a supply chain analysis respectively. Great stuff.
UPDATE: A biting and appropriate summary by John Scalzi on his blog.
Amazon will still allow customers to buy Macmillan titles from used book resellers as part of their partners program, but no longer displays the “Ships from and Sold by Amazon.com” text. The biggest impact is the elimination of royalty generating sales for authors on the web’s largest book retailer. The New York Times reports that the reason is the ongoing dispute between Amazon which wants to drive down the cost of e-books to $9.99, and publishers who want to hold up the price.
Technically Amazon is justified: book prices have risen due to increasing costs of manufacture and transport to place physical books on display in local bookstores. Ebooks have no cost of production, delivery or (shudder) returns. So ebooks don’t “need” to cost as much as paper books. Publishers, of course, don’t want to see revenues drop and want to continue the business-fiction that books are valued by the “format” of the book, rather than by the content. They are historically justified, because a hardcover costs more to produce than a paperback. But when there’s no physical object involved, the argument collapses. Alas, while my sensibility as an agent, makes me want to see strong, healthy publishers, there’s no good guy in this battle. And the only loser is the author.
Facilitators of delivery like Amazon and Apple don’t need the same margins as brick and mortar bookstores because they have no fixed costs for stores (not that Amazon doesn’t spend a lot of IT dollars on their computers). That’s why Apple’s iTunes and App stores have always passed 70% of the consumer price on to the rights holder. Amazon used to require 65% of the take for ebooks sold for the Kindle, but scared purple by the iPad, they dropped their share to match the Apple business model.
This fight, and the pulling of the Macmillan titles, is over the list price of the e-book. Publishers have been demanding agents and authors accept 15% of the ebook list price or sometimes a larger percent of the “Net receipts.” Our agency has been fighting the unfairness of publishers holding high percentages of e-book revenues for years. The problem is that 15% of the list price is not profitable for authors if business partners (say, Amazon and Macmillan) decide to price the e-book at $2.99. Likewise, the apparent niftiness of a 25% net receipts royalty is a bad deal if the delivery facilitator decides to collect 65% of the sale price, which Amazon used to do. Too many contracts have authors incomes tied to the publisher’s ability to artificially inflate the price of e-books; a fight I don’t think they can win.
It’s time to rethink the business model for publishing. Print runs are falling, even NYTimes bestsellers are being stocked in big chain bookstores in smaller quantities, and consumer spending is falling. Arguing over the wrong things for the wrong reasons and arguing against technological reality is not the way to improve the world. I’m concerned, but not worried; I love all the editors we work with and want them to have long careers, but my fiscal duty is to the cash flow of our authors. I think I’m the only literary agent who is also a computer software guy; someone who can edit books and refactor software. (They are very similar activities). I was in the BBN network control center the night the Internet, then called ARPAnet was first turned on. I’m pretty sure I’m the only agent with the iPad development system running on my laptop. All this e-book and web stuff is fun and it is not going away. So to Amazon and the Publishers, I want to say: stop fighting kids. The author, and agent–at least this one, is your friend. You can’t fool me; but you don’t have to.
All the signs say publishing will change significantly by Noon, California time on Wednesday January 27th when Apple announces the iThingy. Speculation about what this iThingy will be sounds like publishing genres: from Romance (it will be love at first sight), to Fantasy (it will be a full color e-book reader that provides total laptop computer capability with a touch screen interface that plays games) to Religion (it will be the Jesus Tablet).
I don’t know any more about the product than anyone, but I can offer a few observations about Steve Jobs and about Publishing.
Today’s rumors report that Jobs thinks “it’s the most important thing I’ve ever done.” This supposed quote feels genuine and if so, and from what we know about Jobs’ Apple, should tell us something about the product. When Apple introduces paradigm-shifting products, the speculators and pundits always predict they will somehow encompass a whole bunch of historically desirable features and support traditional activities. What really happens is that Apple removes features and simplifies use. The immediate response of the Apple haters is to say, “Well no one will ever buy a product without that feature” and dismiss the Apple gizmo just long enough for Apple to dominate the unseen market that never cared about that feature anyway. For example:
The first iMac (thebrightly colored gumdrop), lacked a 3.5″ floppy drive. Pundits fried the iMac for its lack of backward compatibility. However, consumers appeared not to notice it was missing, and the line sold well.
The iPod completely revolutionized music players and electronic devices in general by replacing individual buttons (and the documentation required to explain them) with the click wheel. The iPod was the first all-digital device with an analog control. The iPod also simplified use: with “1,000 songs in your pocket” the iPod user had plenty of music available at all times. Of course today’s iPods hold many times the music, games and videos.
The same story unfolded with the iPhone. Most positive speculation of the iPhone design expected an iPod click-wheel that somehow turned into a rotary dial or some slide out keyboard that other vendors had done poorly. The iPhone offered a completely new interface that changed up the game for smart phones. The speculation that predicted the failure of the iPhone is now as faded as the earlier speculation that the iPod would fall to the superior resources of Microsoft and their partners. Remember the Zune?
So will the iThingy wipe out the Kindle and all the other, newly announced e-book readers? Technically, it probably will. From the business point of view, it has already caused change.
Here’s how music players, like the iPod, are different from e-book readers, like the Kindle.
First and foremost is the user experience. Music players, including the iPod are out of sight and seldom touched while being listened to. The minimal click wheel is all that’s required to control the iPod. iPhones and the iPod touch are highly visual and the touch sensitive screen is key to the usability. Reading a paper book is entirely a visual experience with a subjective tactile quality: the feel of the book.
So e-book readers must survive being looked at a lot and they must be good to touch. Many existing e-book readers certainly provide convenience, but beyond the steadily improving quality of e-ink screens, many are ugly and distractingly covered with keys. So any Apple e-book reader will have to do lots better.
The second aspect of e-books is the source of content. Music players were originally introduced to acquire songs from existing sources and make them available in your pocket. People seem to have forgotten that iTunes was free on all Apple computers for almost a year before the iPod was released. iTunes was a digital jukebox presented with the slogan “Rip. Mix. Burn.” It allowed users to move songs they already owned to music players and burn new albums as CDs. Personal creativity was not creating music (that’s hard and requires talent) but choosing how to combine music and share the playlist with friends. Piracy of music was well underway long before iTunes and the iPod, but with the iTunes Music Store, for the first time, consumers could purchase legal music, and they did.
But e-books are a different story. Despite advances in scanners, there’s no book reader to move an existing library onto any form of e-reader. To scan a book today, you either have to devote a lot of time to holding the book down on a scanner, or destroy the book to feed the pages into a scanner. So the only way to get content legally on an e-reader, other than texts that are in the public domain, is to buy each book as an e-book at published prices. This is fine for brand new front list titles, but the book business, before the “hits” model that developed in the 1980s, was a backlist business. Older books sold every year and good books could stay in print for decades. The very essence of publishing, backlist bestsellers, hasn’t driven e-books and e-readers; but it should.
How to make an e-book market explode?
The missing bit of technology that could explode e-books is the $200-300 book scanner that would read a paperback or hardcover book in less than an hour of clock time and spit out the book no worse for wear. For mechanical reasons, this would be a hard product to build. Lacking this device, e-book retailers and publishers could announce that anyone who bought the paper book (non-returnable paper book and some proof of sale required) could download the e-book edition for free or a nominal cost like $0.99.
Eliminating the need to ship heavy paper books around the country, e-books should be highly profitable for both publishers and authors whenever the pricing gets right. In the past two decades the price of all formats of paper books has risen to levels that drives down consumer book purchasing. Now, when e-books as a format, have the ability to remove the high price levels, all we hear from publishers is their intent to keep prices high. But trends can reverse.
With the recent announcement by Amazon that they are conforming to the iTunes model and dropping their share of the consumer price as well as the target price, Apple has already influenced publishing while having no product in the space.
Let’s see what Wednesday brings…
The Ashley Grayson agency believes in the Berkshire Hathaway approach to business: we select our clients and their works as long term investments, not just for the drug-like rush from a hot sale. This year we will be more open about our approach, so read on to see how we think. And how you should be thinking about investing in yourself and your own works.
Last week, CNN Money ran an article derived from a new book by Professor Burton Malkiel (Princeton, economics) and author Charles Ellis, titled The Elements of Investing. For some reason, the article didn’t mention the publisher, which is Wiley. I haven’t read the book, but if it has even 10% more value than the article, it will be worth buying. While not new advice in any way, it’s smart. The 6 biggest investing mistakes should be read by every author. Click on the article title and enjoy the wisdom of Malkiel and Ellis (not our clients), which is all about finance and the stock market, but here are the key points, restated for authors.
The six biggest investing mistakes for authors are:
Surveys show that everyone feels he or she is above average in most things. Authors are no different. Authors develop real confidence over time as they master their voice and craft. New authors should not expect to get everything right with their first work but have no recovery plan when faced with the reality that their book needs more work. The biggest external sign of overconfidence is self-publishing. Self-publishing is a valid tool, but it is best wielded by an experienced author to achieve a financial target, not as a way to get noticed. If Big Experienced Publisher (or agent) doesn’t feel they can make money with a book, why does the author so frequently assume they can?
Following the herd
Herd following investors can make money, and their willingness to pay ever more for stocks drives up overall shareholder value, but there is a top to everything and the big rewards belong to those who get in before the stampede. Herd following investors are often said to subscribe to the “bigger fool” theory: If I will pay $100/share for this stock, some bigger fool will pay $115 and then I’ll sell. At the moment, the herd-following authors are frantically turning out sparkly vampire novels and DaVinci Code-type books. Some trend-following books will sell, but when the market is saturated, there will be no place for those books to go; and unlike the herd investor, they can’t unload their investment at $80/share because an author can’t get his or her time back
Knowing when to get in and when to get out is key to success in both stocks and books. Often tied to herd following, timing depends on what the author feels about the nature of his or her work. Timing is frequently a danger for non-fiction authors. Offering a truly unique book that’s way ahead of the buzz may produce the “there’s no category for that” response from publishers, while developing a book to join six other robust titles may fail because the category is over published. Generally, if the author feels the book is likely to lose value in the short term, it is not a good writing investment as a book, but it might be a hot blog.
Investors who are making the control mistake place too much faith in their system, be it day-trading, technical chart analysis or guru-newsletters promising hot bargains. Again, self-publishing teases authors with the illusion that with control of their sales, they can somehow outperform the big publishers at selling books. Our advice: don’t get obsesses with control. The author’s job is to write the book, not make the sales.
Even cautious investors who seek the security of funds and portfolios managed by certified professionals can end up with low yields or even losses if the management fees are too high. Authors have some protection in the standard 15% of agent commissions, but a dozen other pseudo-professions have arisen to suck up author assets: self-publishers,, publicity services, editorial coaches, and even fee-charging find-an-agent services. Good advice is always worth something, but paying for some information, like, “you are up in a balloon” doesn’t pay any return.
Stockbrokers make money on every trade whither you make or lose money. They want you to trade because they make money either way. Traditional agents are different, we only make money when you do. But faux agents who charge a marketing fee, representation contract fee or other fee still thrive. Be careful in who you work with, even if they are apparently working for you.
Here’s the really interesting part. The six big investing mistakes for publishers are exactly the same.
Authors have just won a great battle in the war over their royalties without having to negotiate anything. Since the Kindle was released, our agency has been unwilling to embrace the platform, not because of the technology but because of the business model. Amazon claimed 65% of all revenues, a full 15% higher than common retailer rates for paper books. We have always favored the Apple iTunes/App Store model that pays the owner 70% of all revenues. Apple just hasn’t been selling ebooks. With Publishers receiving only 35% of the retail price of Kindle books, they’ve been unable to offer authors more than 15% for selling the authors words in electronic form; a crazy bad deal since there’s no physical book involved and zero risk of returns. While some publishers have obtained better terms from Amazon, all details have been secret and authors and agents had to agree to royalty rates, the value of which lay beyond a locked door.
A few days ago, Amazon opened the Kindle to individuals who could format to their standards. This was big news because previously Amazon wanted authors to go through “publishers” who would rake off income, but do little beyond formatting text files.
Today, Amazon has adopted the Apple model. Why? Because the rumors of the Apple iTablet-thingy are so compelling. We will have more as this develops but you can read the news at many business websites. Here’s the Motley Fool Story.
There are hooks and obligations in this new Amazon business model, so this does not mean that every author should jump in blindly. However, it does mean that published authors with control of their out of print backlist can now consider ebooks as a viable business. Our advice is that while this is good news: good for Kindle owners, good for authors, and good for Amazon; we should all wait until after January 27 to start negotiating contracts so we can see what Apple announces.
As I was looking at our agency equipment expenses for 2009 and planning new purchases I suddenly realized that printing has all but ceased in our offices. We now have more scanners than printers. We print something every week, but we scan something almost every day. Print devices are better than ever: better color, faster speeds, higher resolution, but there’s little reason any more for us to print documents. We read author’s works on-screen, on the Sony Reader or on the iPhones. We review and negotiate contracts by email attachments. Looking forward, I see more scanners for us. They free up so much time to think and space to shelve those wonderful published books that make us all some money and provide a comfy read.
This year we acquired a small USB-scanner that looks like a fat foot-ruler. It will (slowly) scan a legal page but we use it primarily to scan those pesky lunch receipts, the financial record of an agent’s favorite sales activity. They fill up your wallet or purse, and have to be sorted, recorded and accounted for taxes and such. But now we don’t have to fight the paper clutter. One scan, a bit of OCR and the computer will tell me when I was where with whom. Cool. But even before we have pulled all the benefit from this small scanner, I can now take a picture of the receipt right in the restaurant with my iPhone and a new type of product that turns your mobile phone camera into a scanner will eliminate several steps.
Increasingly, what you see is all you need to keep.