Wednesday, March 28, 2012

Going It Alone

Ebooks just got a major boost!
J.K. Rowling just pushed the Harry Potter series into digital publication!
It isn’t that Rowling is making her books available as ebooks that is so important. What is so important about this is the fact she is only selling the ebooks through her own web site, the Pottermore Shop. The books are not available from Amazon, Apple iBookstore, or Barnes & Noble.
Up until now, it has been publishers that have taken the hit as more and more writers choose to self-publish via ebooks. Now the distributors are in danger. It isn’t like no one has been selling their own ebooks before. But that Rowling is the first top-name author to do it exclusively through her own channel, going directly to the reader with absolutely no middleman.
There are huge financial advantages to this move.
When you sell your ebook through a publisher, you might be lucky to get 5% of the sales. At 5% royalty, that means when you buy a book for $15, the writer gets 75¢; before taxes. Royalty checks show up about every six months. According to some writers I know, that’s if you are lucky. Usually, they have to call the publishers and remind them that royalty checks are overdue by a few months.
Sell through one of the big three ebook distributors, you can get between 65%–70% of the sales. That’s a hell of an improvement, but they hold the royalties for 60 days before transferring the funds into your account. That’s not so bad, and they are quite prompt in paying. Just don’t go spending money that you don’t have in your pocket.
Sell directly to the reader, and you get to hold onto 100% of the money they spend on your book! And, that money is available to you usually within a few business days, if not immediately.
Of course, there is a catch to doing it all yourself. The catch is, you have to do all of the persnickety financial setups in order to make things work.
You will have to set up commercial bank accounts. One for banking, the other for clearing credit card charges sent to your business. Banks charge for these accounts on a monthly basis. How much, depends on your bank. Do not ever directly use your commercial checking account for credit card receipts. If there is a charge back on a credit card, the cash disappears immediately and it can take months to get that money back, if at all. (Learned that one the very hard way!)
Second, you need to register your accounts with the credit card companies. Visa, Master Card, Discover, American Express, etc. In addition to taking a small percentage of each sale, there is a monthly charge for those, too.
Yes, you get nickel-and-dimed all the way when receiving credit cards directly.
Then there is the software you will need on your web site to receive credit card orders. The cheapest, quality software will run you about $10 per month. Many high-end internet service providers (ISP) can supply you with good and secure shopping cart software that will handle your transactions for you, once you have all your bank accounts ready.
You might be thinking you could write your own software or get free software to receive the credit card numbers and then enter them yourself. Well, if it takes you five minutes to enter a credit card transaction on a credit card clearing device. It works if you only get a few orders each day. But if you have one hundred orders, it is going to take you over eight hours to enter in all those transactions.
Then you have to take sales taxes into consideration. Laws vary from state to state in the US, so I am not going to touch too deeply on this. Just remember that it is your responsibility to collect those taxes and pay the states that ask for them.
If you have large sales numbers and your wares are flying off the shelves, then it makes a lot of sense to take on the chaos of directly accepting credit card orders. The 20% you gain in revenue can be a significant amount of money with large sales figures.
However, if you are selling less than a couple hundred copies of your book per month, the fixed costs associated with accepting credit cards directly might actually be greater than the 20% you could gain doing it yourself. So, in that event, it might be wise to go through the ebook distributors and let them handle the headache and accounting of those sales.
Rowling will obviously have significant sales of the Harry Potter series as ebooks. If she sells just two million sets of her series at $57 each, that is a gross sales of $114 million. Taking on the sales herself instead of going through a distributor will gain her over $22 million in net profit. I am being extremely conservative with two million as an estimate. The Harry Potter series sold over 450 million sets. With seven books each, that’s over three billion books! You can bet that out of over 450 million people, there will easily be more than two million who will be willing to part with $57 for the ebooks—this month alone!
For comparison, I’ll be happy if I can sell 10,000 copies of my ebook in a year. (Launch day is getting closer!)
Another thing Rowling did was state that she wanted to sell her ebooks in a way that meant her readers would not be forced to be locked in to any single platform for a reading device. That means the ePub file format. Anyone with a Nook, iOS or Android OS device can read the ebook on whatever they want. (For Kindle owners, hampered by Amazon’s closed format, she offers her books as MOBI files as well. The day Amazon accepts the ePub format into their system will be the day I go out and buy a Kindle Touch.)
This is a huge boost for the open format.
Rowling has fired the first warning shot across the bow of the publishing industry, showing how easy it is for a major author to step out and do it themselves.
What this means for everyone who is or wants to be a published author is that the publishing and distribution industry is going to need to come up with new ways to convince authors to go with them rather than eking out on their own. It won’t be sudden, it will take years. But even the “Big Six” will have to adapt if the market continues to change, or die like the dinosaurs.
Where there are companies that don’t want to change, there will be the opportunity for dissatisfied employees of the publishers to break away and start their own company. Smaller, hungrier companies may be more willing to accept smaller profit margins than the behemoths of the industry, and be more capable of adjusting to new market paradigms should they appear.
The opportunities for new authors may actually grow over the coming years. Publishing houses, in the hope of reeling in the next Rowling, Steele, or King, may start offering better deals for new writers. Offering better financial incentives than what has been the tradition.
And it isn’t just writers that can benefit from this.
For one thing, how about accountants? Take a look at the numbers listed above. Then consider this:
Q: What do you call a writer who can count over ten?
A: Barefoot!
I bet there is a market out there for accounting services for self-publishing writers.
If a writer gets 70% at best from the distributors and you can help them improve that take to 90% by managing their accounting if they sell directly, there could be a decent business niche out there. Of course, there are a lot of terrible writers out there, so you may want to set some standards before you take someone on. Or, set a base of a minimum fee for services. This would filter out unprofitable clientele.
Already, there are people who are starting their own services for independent writers. Editing, ghostwriting, typographical services—they’re all out there and starting small businesses, breaking away from the corporate bullshit that goes with managers who don’t understand the product their companies produce. 
I’m a good story teller and a decent writer. But I need other people to catch my mistakes. Often, I see the story and not the mechanics and I have a difficult time noticing mistakes. This is actually very common among writers. I’m lucky that I have friends and relatives who are actually very talented at catching my mistakes and suggesting the corrections.
For this reason, there will always be a need for these professional services. There will always be a need for the work a publishing house can do. What will change, are the terms and interaction between these businesses and authors. This change will certainly not happen overnight, and some businesses may fail due to unwillingness to accept giving authors better terms. In truth, it does mean serious downsizing. Letting employees go means some of those employees could form their own companies and easily replace yours.
Necessity is the mother of invention. Adversity is the mother of opportunity.