Cutting Out the Middle Man

Fanseyeview reports that Amazon and authors are cutting out the middle man, in this case the publisher.

Well, in every market we see a long term trend of price wars at the retail end squeezing margins across the whole supply chain. As an ecosystem, the publishing world produces a few gems and a lot of noise, for example the ever-increasing pile of self help books from minor celebrities.

For a few years, the print end of the supply chain has reduced costs, through digital technology, then a move to Asia and China, where we can get a 250 page book printed in relatively small quantities for £0.78 (about $1).

While it's easy to focus on the greedy retailers such as Amazon and their cut-price-to-win-market-share-at-publisher's-expense strategy, we shouldn't overlook the role of distributors who are still looking for 50% of cover price to hold stock for a publisher.

The evolution of any market in this state is "disintermediation", or the cutting out of the middle man.

However, it is easy for people to see the publisher as the middle man, and say that with self publishing, who needs a publisher?

Duh....

Self publishing means that the author becomes the publisher. And then, instead of writing, or talking to readers, or holding signing events, the author spends his or her spare time managing orders, maintaining ISBN records, designing book covers, formatting manuscripts, setting up pages on Amazon, setting up distribution arrangements, locating niche retailers and all the other things that we do as a publisher.

So disintermediation can't take out the publisher. Remember, this is the publishing industry. You can't take bakers out of the bakery, all you can do is get the baking process closer to the customer.

In the case of publishing, you can't get the reader any closer to the author, otherwise the author would never sell any volume of books. Having read a few news stories, blogs and other commentaries on the subject, it seems that most people overlook the fact that the author's work is not the book, the book is a physical product that the publisher creates to convey the author's work into the reader's hands.

Projects like Unbound are not a revolution in publishing, and they don't replace a publisher. Unbound is a publisher, they just have a different business model, as outlined in my previous post.

Print costs are rock bottom. Cover prices and sell prices are rock bottom. Who do we cut out? The people who actually turn the manuscript into a saleable book? Or the people who take a cut just for moving the book from one place to another?

Why is Amazon moving into publishing? Because they know that it's the retailers and distributors who are the middle men.

Publishers Still Control the Book Market

Once again, The Bookseller provides us with an interesting snippet of news about the progression of the publishing industry.

"Despite the collapse of two of the world's largest high street book chains the book publisher Penguin lost only £36m in sales in the first half of 2011, while profits narrowed marginally. Digital sales made up 14% of its overall business, resulting in total sales of £64m at a growth rate of 128%"

Despite the collapse? That would be like saying that despite the collapse of Marks & Spencer, sales of woolly jumpers were down only 5%, or despite the collapse of Tesco, people have surprisingly not starved.

I think that what this demonstrates is that the major publishers have the upper hand with the book stores. Clearly, the majority of Penguin's profits were generated as a result of its own marketing, not because readers go into book stores and have a browse around. When a reader wants a particular book and they find that Borders has disappeared, they just go somewhere else. Let's face it, people haven't stopped decorating just because Focus has gone. Our local focus now has a sign on it directing customers to the nearest B&Q.

I think that this demonstrates that the major book stores are just a shop window for the major publishers. Mind you, that's what I've been saying for the past ten years.

The only reason that book retailers like Waterstones buy books from self and independent publishers is to prevent the likes of Amazon from owning that share of the market; a market that is fast growing. Let's not kid ourselves that they actually support authors who choose not to publish with the dinosaurs.

What Penguin have demonstrated is that the retailers can fight amongst themselves; it really makes no difference to the book market.

Unbound: A Threat to Publishers?

According to The Bookseller, the new self publishing service, Unbound, is the beginning of the end of traditional publishing, or at least a business model that will accelerate the demise of the printed book. Or the ebook. Or neither.

The Bookseller says, "Unbound, a publishing platform that allows readers to choose what is published, was devised as a response to the “difficulties of the existing publishing model”, with the programme aiming to get 35 to 40 projects off the ground in its first year."

Here's the idea; instead of self-publishing, you pitch your book idea to a social network of readers. If they like the idea, they invest in it to cover the publishing costs. In return, they get anything from a 'goodie bag' to lunch with the author.

If an investor puts in more than £1,000, they might get a royalty share of book sales too.

Whhooooaa! £1,000? How much are they saying it costs to publish a book?

Oh, of course, I forgot. We're talking about a traditional publishing house trying to muscle in on the ebook and self-publishing market.

"Supported by Faber, the platform was created by “QI” writers John Mitchinson and John Pollard, and Crap Towns author Dan Kieran. Authors are required to pitch their idea to readers on the site, and have 50 days to attract support through readers pledging money to fund the publication of the work. If enough money is pledged, the work will be published, primarily as an e-book or “beautifully bound, limited edition hardback”, or both, with each pledger’s name inscribed in the back of the print edition."

In the old days, there were publishers and there were vanity publishers. A publisher buys the licence to print your book and in return pays you a pittance of a royalty. They use your book to market their business, and if they really go to town on marketing, you make some money. But not nearly as much as the publisher, and quite rightly so, because they've done all the hard work in marketing and getting your book onto the shelves. Which they control.

Vanity publishers just charged you to print your book for you.

So, an aspiring author had two choices; take their manuscript around all the publishing houses, facing rejection, or pay to see their book in print.

In today's world of ebooks and print on demand, anyone can get their work into circulation for a very small amount of money, but, is it any good? And will it sell?

Today's author is faced with the choice of taking their manuscript to the traditional publishing houses, as before, self-publishing and now, getting the readers to buy the book in a limited print run before it's even written.

"As The Bookseller went to press, of the five ideas currently on the [Unbound] site, author Terry Jones’ idea for “a darkly funny set of linked tales” had received 2% of its required funding, while Gavin Pretor-Pinney’s idea, an iPad version of his book The Cloudspotter’s Guide, was still on 0%."

We presume they're both well known authors, so these figures either show that the Unbound concept is in its infancy, or it's a silly idea.

As a business model, it is very similar to the 'micro loans' concept that hit the headlines a few years ago. The idea was that I go to a website and post a request for some money, then some other people offer to lend me various amounts which together give me what I need. I then pay them back, through the website. Each micro investor makes a return, I get a loan, the website makes a profit off the top.

Unbound is not a new concept in publishing, it is a simple and blatant attempt by an existing publishing house to shuffle the risk around - so that it lands anywhere but at their door.