Archive for November, 2007

Will E-Books Kill Paperbacks?

Wednesday, November 28th, 2007

I think that the Kindle may signal the beginning of the end for paperbacks. Finally, we have an ebook platform, that while still far from perfect, may soon have a reasonable market share.

Why would that spell the end of the paperback? CDs and MP3s haven’t killed off other music formats. Well, except that digital music really HAS almost killed off analog (CDs vs. pressed vinyl). And getting your music piecemeal, and by download, is becoming ever more popular. It does begin to look as if getting a physical copy of the music file (a CD) will be the less common choice soon.

Books are a little different than music. Hardbacks are most commonly bought now when readers don’t want to wait for the paperback, when we need extra sturdiness (for reference or libraries, for example), for the look or status value (for a gift or coffee table display, etc.), or for the physical experience of a book.

Readers of paperbacks tend to want the content and to be price sensitive. Once ebook platforms reach a certain level of quality, and gain modest commercial momentum, they’ll carve into the volume that makes paperbacks a lower cost alternative. And ebooks will be inexpensive, too. Price pressure may well produce a sudden movement toward ebooks.

Do you think paperbacks will continue to be popular when they are no longer the most inexpensive alternative? Or even when they cost almost as much as a hardback because of the low sales volume?

And if a large portion of our paperback sales move to ebooks, what happens to wholesalers and distributors? To bookstores?

Since DRM is pretty universally reviled by ebook readers, and since it can always be broken, what can we do to make sure that we get paid for most of the copies out there?

What else should we be thinking about and preparing for? Any thoughts?

How Do You Estimate Sales?

Thursday, November 22nd, 2007

In another comment I was asked:

How do you project sales for your first title. I got to compare it to the competition’s sales with similar distribution, but what I’d like help with, if at all possible, is to get access to the info you recommended on Bookscan and Ingram. You mentioned iPage and Bookscan and Amazon and take the average of all three.

Backing up a bit, in the PMA-U webinar, I started from each book’s projections in order to assemble the sales and direct expense projections for the company as a whole. Sales projections for your books begin with the selection of comparable titles. These books should not only be available now, and similar in topic and quality, but they should be distributed in ways that are comparable to your plans.

Once you have selected your comparable titles, you need to collect information on their sales. This is not usually publicly available. You can, however, use several sources to make an estimate, and then average these estimates to get a number that is probably closer to accurate.

Common sources include:

–Insider information. If you know someone in the other company, call them up and ask. Publishing folk often trade this kind of information, knowing that they’ll want a similar favor in the future.

–Bookscan. This Nielsen company assembles Point of Sale data from about 70% (by volume) of all the book trade outlets. It does NOT collect data from non-booktrade outlets, so craft books, for example, have heavily under-reported sales. Bookscan memberships cost $795 per year through PMA’s member discounts (last I checked) and are definitely worth it if you’re publishing more than a couple of titles per year. If you’re not, and you’re selling “bookstore books,” you probably have a distributor and the distributor probably has a membership. Ask them to look up the sales data on your comparables for you.

–Ingram. If you are selling directly to Ingram, you have access to Ingram’s iPage program. If not, your distributor does. Look up your comparables in this database as well.

–Amazon. Their sales ranks are roughly inversely proportional to the sales over limited ranges. Over longer ranges, it’s more complicated, but if you choose your comparables wisely, and if you know the true sales of just one of them, you can determine the relationship for all of them.

(For more information on all of the above, see the lecture notes for “Making Profitable Financial Choices” toward the bottom of this page.

Bookscan, for a trade book, captures about 65 to 70% of the total sales. Ingram captures between 35 and 45% of total sales, for many trade books. Your type of book may be different. For most of the book trade, Amazon represents 10 to 12% of total sales. Whatever each venue’s right fractions for your books, divide that venue’s reported sales by the fraction to get an estimate of total sales for the book.

Then average all your estimated sales, and you have a better estimate.

When you’re working with estimates, it’s important to remember that the solid-looking numbers aren’t really definite. Try several different sets of comparables, and try different approaches in order to get a good feel for the range in which you’re operating.

After you have estimates for each comparable title’s total sales, there are many ways you can use it. One of the best is to derive a demand curve for titles like this. It will be quite “fuzzy” because there are a number of confounding variables, but you can get some idea of how many more copies you’ll sell for each dollar’s drop in price. And that can be used to pick the most profitable price for your book.

I know that some of the math above sounds a little intimidating. Because many of my clients feel the same way, I created an Excel package that does most of it for you. More information about it is listed under “Pricing Package” in the Software portion of my site.

Upcoming Seminar

Friday, November 9th, 2007

If you like what you read here, you may want to attend a webinar (seminar over the web) that I’m giving for PMA. The topic is Building a Better Budget, and you can find more information here.

Publishing professionals tend to view budgets as both intimidating and useless masses of numbers. After you take this course, you’ll be empowered to take control of the process and you’ll know how to use it as part of your strategy for success.

I hope you’ll join me, Wednesday, November 14 at 2 pm EST, or at least download the resulting recording later. This is an important tool that’s all too frequently neglected.

What About Returns?

Thursday, November 8th, 2007

Publishers would be better off if books weren’t returnable, wouldn’t we?

Well, no, I don’t think we would. We’ve all heard that full return privileges can induce booksellers to try a book about which they’re unsure. And that’s obviously true. There are costs to the bookseller in returning a book, but not so many that they won’t take a modest risk.

But what about more predictable books? Because you can’t know how many more copies will sell out of which locations, there will always be some books left over, even on bestsellers or predictable backlist performers. These are the bulk of what is now returned. Someone somewhere is going to bear the cost of those extra books. Because booksellers have so much more power than publishers in the book business, that cost is going to be borne almost exclusively by the publishers.

If we have to bear the cost, either in the form of higher discounts, or as returns and credits, we might as well get as much as possible from it. Returns offer publishers something to sell (as hurts or as remainders), and information. There are lots of ways to make money from a returned book, if it’s in decent condition. Small publishers have found that they can sell small numbers of damaged copies and remainders quite well through Amazon’s Marketplace and various other second hand book venues. You can also donate books (and take the tax deduction for donating) to foreign ESL programs (novels) or to other worthy causes. You can strip and tip hardbacks to make the first run of a trade paperback re-issue.

As for the information to be found in returned books: Were the books even unpacked and put on the shelf? Were they taken off the shelf and examined (and scuffed)? Were they thumbed through? At what stage in the buying process did the examination stop? Can we learn anything from examining the returned book?

Or is there a pattern in the over-ordering and under-ordering? Which demographics did well with the books and which didn’t? Is there a correlation to your marketing and publicity? To your author’s background and travel? Something else to be learned?

In short, we’re going to be paying for the average bookstore’s average excess number of copies. At least the current system gives us something back. And it charges the publishers whose books are worst the most, rather than making us all pay an average rate. Are we really sure we want to change this system?

Why Are Publishers So Backwards?

Wednesday, November 7th, 2007

It’s pretty common to hear people from outside book publishing speak at length about the things publishers do badly, and the stupid choices these dinosaurs make. But publishing execs tend to be very smart people. Why are they doing such obviously stupid things?

Maybe they’re not. You see, book publishing is an unusual industry. Our products are relatively distinct, but they’re sold in both low volume and at a low price, or more specifically, with a low profit margin. That determines some of the stupid looking choices.

For example, it seems unbelievable that we have so little market research. But you can’t apply the focus groups on one combination of cover and contents to others. And you can’t afford to do much research for a single title, since the research costs more than you’ll make from the book.

Other peculiarities of the business have influence. We have hundreds of thousands of titles annually, thousands of retail outlets to serve, and tens of thousands of small presses. That results in very high transaction costs for each order, invoice, payment, etc. Other industries, faced with even higher numbers automate. (Think about the origins of the UPC system, for example.)

Why doesn’t the book industry do something similar? Those trade partners that do thousands of transactions (big NYC publishers and Ingram, for example) do automate. But it just doesn’t pay anyone to extend that automation down to the mom and pop level. And much or most of the book business is at that level (bookstores, authors, free-lancers and publishing companies all included). There are aggregators, but every extra player in the game means someone else drinking from the shallow pool of profit.

Why don’t authors sell their work electronically or by POD directly to the reader, as musicians are beginning to do?

This one is more complicated. Stay tuned for another post on that topic. In the meantime, what’s your favorite aspect of the industry that seems really stupid?

Who Is and Who Is NOT a Publisher?

Monday, November 5th, 2007

The short answer: whoever buys the ISBN from their national ISBN Agency. (In the US, that’s RR Bowker.) This is the minimum requirement for a publisher. Successful publishers do far more.

If you didn’t buy the ISBN from the Agency, you’re not the publisher, even if you pay a “self-publishing company” and make all the decisions. If you use one of their ISBNs, they’re the publishers, and it CAN matter. Why?

First: The ISBN identifies both the book and the publisher. The publisher will get all of the orders, information requests and returned books. It is possible to buy a single ISBN, but that doesn’t give a publisher ID. You’re better off buying a block of 10 or more.

And also: If the publisher is a vanity publisher, aka POD publisher, aka self-publishing company, your book will be judged by the quality of all of their other books. And that’s almost always bad.

Okay, so what else makes you a publisher? Do you need to do your own printing? No, but you do need to find and work with a printer. You would be wise to send out at least a dozen RFQs as well, before selecting one.

You also need to get your book’s cover and interior designed and laid out. You need to get the manuscript edited (copy and line editing are a minimum, and a deeper edit is usually a good investment). I cannot over-emphasize the importance of design and editing. There will be other posts on these topics later.

Publishers handle the distribution of the book. (Small publishers usually outsource this.) This includes soliciting orders from the large national accounts, getting the catalogs that include the book to buyers (not the end customer, the folks that order for the store’s stock) at the smaller bookstores, processing the orders, issuing credit and collecting on it, warehousing the stock, and picking, packing and shipping to fill the orders.

Publishers market the book. Authors are well-advised to do some of the marketing themselves, but publishers handle getting out review copies, getting blurbs, issuing press releases, giving appropriate and timely article ideas that might reflect upon the book, or draw attention to it or the author.

Publishers provide the capital to do all this. Authors get advances, which may NEVER earn out. The designers and editors do their work about 6 months before the book is published. (More or less, and what schedule does your company use?) Printers are paid before the books sell. Bookstores take 90 days to pay, if you’re lucky, after the books leave the warehouse. So the publisher puts up the cash long, long before there’s any possible return. And if the book tanks, and you have no sales, or sales and then 75% returns, the publisher still needs to come up with more money to finance the next book.

Did I miss something you think is important? Do you disagree with my definition?

Where to Cut Plant Costs?

Friday, November 2nd, 2007

A question came in:

In your reply [to a listserv post] you mention a “plant cost of $2000”.

Does this refer to editing, design & typesetting of the manuscript to get it into a print ready digital format? I understand typesetting alone for trade fiction could cost $3 per page. That’s if input is digital. If it’s a paper manuscript with editorial changes, then it could cost more. So for a 300 page book, typesetting alone could cost upwards of $900.

Is this estimate correct?

Considering the challenge that small publishers face which you’ve outlined, what kind of savings in this area (without a compromise on quality) would be worthwhile?

Let’s start with the typesetting number. It may well exceed $3 per page, even if you’re sending a digital version of the ms.

As you noted, plant costs include more than just typesetting and cover design. They also include all the different types of editorial work you may have done, proofreading, any special permissions or illustrations that the publisher commissions, etc.

Your book and your audience will determine where you can cut plant costs without cutting quality enough to harm your sales or your reputation. (Another “it depends” answer, no?) For example, art books will require very high levels of design, but may have a lower copyediting cost. High level technical books need to be carefully copyedited and proofread, but you can often get away with really bland layouts.

As for whether this is different for the small press — I would say not. Small presses that want to compete against larger ones in the bookstore and for review attention can’t cut corners. There’s already such a presumption of lower quality for a relatively unknown house that you need to go overboard to overcome it.

Does that help?

Publishing Jargon

Friday, November 2nd, 2007

I tend to use various publishing terms frequently. Here are some definitions:

COGS: Cost of Goods Sold. Includes PPB, Plant and Royalties

PPB: Paper, Printing and Binding (and almost anything else that comes on the printer’s bill, plus freight into your warehouse)

Plant: Those costs of preparing an edition for printing for which the total expense does NOT change with the number of copies sold or printed. Examples include design, editorial and proofreading.

RFQ (or RFP): Request for Quotation (or Proposal) — the document you send to printers asking for their bid. It will include all specifications for the book to be printed, including trim size, quantity, paper type, cover, and all the rest of the printing, packaging and shipping details.

I have many more of these on the Reference Desk section of my site. Enjoy. (Or something.)

Distribution — Who Needs It?

Thursday, November 1st, 2007

You may. In large part, it will depend upon  the books you publish.

NB: If you use a “self-publishing company,” vanity press, POD publisher, or subsidy publisher,  NONE  of the following applies. You aren’t the publisher, and the book trade isn’t likely to be interested. No matter how good your book is.

Bookstores can’t afford to buy directly from small presses for routine stocking. They have to go through wholesalers or distributors. If you want your books on bookstore shelves, you’re more likely to get them there through a distributor.

Similarly, large wholesalers can’t afford to deal with tens of thousands of tiny publishers. If your sales are less than  $100,000 per year, after all discounts and returns, you need a distributor (or a fulfillment house that gets you into Ingram) to get you into this channel. 

The next reason to use a distributor is marketing. The distributor doesn’t do your marketing for you, with the exception of producing a catalog showing the titles it handles, but it does make your marketing more effective.

An example: If you don’t have a distributor on board, most of the important reviewers, such as PW, LJ, SLJ, Kirkus, or even the NYT, just won’t be interested. They can’t waste review space on a title that won’t be available in bookstores.

Selling is also an important function You’re unlikely to get an appointment with a Barnes and Noble category buyer, but larger distributors’ National Accounts Reps do. Each title may get less than 30 seconds in front of the buyers, but that’s a critical 30 seconds indeed.

The last common reason to go through a distributor is the cost-effectiveness of their services. Distributors warehouse your books, process your orders, handle credit and collections, and pick, pack, and ship the books. And they do it for less than you probably can. Most indie publishers don’t recognize this, because they don’t accord the labor its full cost. That cost is the value of the task your people would perform instead. That task could be marketing, or developing new projects, or whatever, but the chances are good that you have more work than you can do. And if you, or someone on your staff, is doing fulfillment, more of that other work is going undone.

In short, to get into bookstores, a distributor is probably your best option, even if it is expensive. There are other choices, of course, and not all books are designed for bookstore sales.

What are you using? Distributor, fulfillment house, DIY, or something else? How is it working for you?