Sunday, July 24, 2011

Book Industry Part I: The Divorce of Big Publishers and Big Name Author


The Internet has consistently upended existing business models. The Internet is a disruptive technology in the truest sense. In most cases the Internet by itself is not sufficient to disrupt an existing business model, but often the pairing of the Internet with another technology. The Internet is a great tool for creating connections, but by itself generates nothing. The Internet is most disruptive when new tools are made and connected to the it. It is at this point that business begin to sweat.

Currently, it is book publishers that are sweating. For so long, the dead tree, paper, book has been safe. Publishers, the great gatekeepers of content, have long ignored the Internet as little more than a tool for marketing. Now, the book industry is in a state of flux. In a period of less than two years, e-books have become the dominant format for books.

This rapid change was enabled by four things: the Internet, social networking, unified online E-book marketplaces and online self-publishing. These four things are critical because they in effect replace the need for a publisher. Social networking replaces the marketing department. A unified online e-book marketplace replaces not only brick and mortar stores, but multiple smaller marketplaces from the competing publishers. Lastly and critically, the ability to publish online independently. With these three tools, enabled and linked together via the Internet, every author can publish themselves. They can tap into a massive existing market, e.g. the Kindle Eco-system and market themselves via Twitter, Face-book, blogs, etc.

So, what does this have to do with Big Name Authors and Big Name Publishers getting a divorce? Well, the book industry has long modeled itself on the movie industry model, e.g. it depends on blockbuster movies to drive revenue and profits. The Stephen Kings, Tom Clancys and J.K. Rowlings of the book world drive its profits. Mid-list writers, the bulks of all authors, are lucky to pay back their advances...luckier still to earn enough writing to write full time.

The difference between the movie industry and the book industry, is that it takes lots of money to make a movie. It just takes some free time to write a book. This means an author with all these new Internet tools can bypass book publishers. This is very advantageous in the most important way...money. Self publishing directly means an author keeps 100% of the sale. Publishing via the Nook or Kindle eco-system means the author keeps 70%. Publishing the traditional way? Try less than 10%.

This sets up a very volatile relationship between Big Name Publishers and Big Name Authors. The publisher’s lifeblood are the sales of these authors. These authors are instantly recognizable and have rabid fan-bases that buy any book that hits the shelf. Conversely, these authors are loosing almost all of their money to a publisher who at this point provides very little added value.

At this point, I find it shocking that any Big Name Author would let a publisher control the rights to their e-book sales. I also think these authors are starting to figure this out. You honestly have to look no further than J.K. Rowling’s Pottermore creation. The fact that J.K. Rowling is going to self publish her books is a staggering idea. You are talking about one of the most successful authors ever and one of the most popular properties ever. She took her content, gave the middle finger to the publishers and did her own thing. She is going directly to her fans and keeping all of the money.

This is why I believe Big Name Authors and Big Name Publishers are headed for a divorce, or at least a separation. Big Name Authors have a built in audience. They barely even need to market themselves beyond announcing a new book. They have millions of fans who follow them online via Twitter, Fan Blogs, etc. These authors can easily distribute their books via the Kindle or Nook services. If they feel up to it, they can set up web portal to sell direct as J.K. Rowling did via Pottermore. More so, these authors have enough capital reserve to cover the relatively minor cost of editing and cover creation to ensure they still provide a high quality product.

Ultimately, this is a direct threat to Big Name Publishers. Their business model is unravelling on them at an alarming rate. I seriously doubt publishers will go away as they have weathered many storms already and come out the stronger for it. But, they will need to adapt as it is becoming an inescapable fact that their most valuable asset no longer needs their services.

In my next post I will give my ideas on where I think the industry is headed and what I believe will be the rebirth of the mid-list author.

Video Source: Official J.K. Rowling YouTube Channel

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