Bad Business

I posted about Hachette trying to get their advance back, or at least part of it.  Included in the lawsuit filing was the publishing contract. To say the contract was bad for the author, is putting it mildly. Kristine Rusch  has looked into it in far more detail than I can, not being a contract professional.  Here’s her post. I’m not going to quote from it because you should read everything she said. Then read the comments.

Then read this post from Passive Voice.

A Real Book Contract

The way this contract is written, the publishing company can screw the author in just about every way possible.  In the case at hand that doesn’t matter very much because the advances were large enough that the royalties and other issues were not a major issue. The problem is that the mode of doing business is also done to the typical midlist title with the same kinds of clauses as well.

To me the problem isn’t the contract itself as the kind of thinking that lets a contract like that exist in the first place.  For the matter the kind of thinking that thinks that books about regency zombies and civil war vampires based on rewriting the original texts would be anything more than a gimmick.

“Also gratifying is the strength and stability of our physical book sales. You will recall that we never bought in to the gloom and doom about the future of print. Instead we said that print would always be important, even as digital became more so. We made significant improvements in both, and the care we’ve taken with our physical supply chains, operations, and distribution centers is especially paying off now as consumer demand for physical remains robust.”

–Markus Dohle, CEO of Penguin Random House, in a letter to staff about the company’s financial performance this year. (Sales at PRH in the first half of 2016 fell 10.7% to €1.5 billion, or about $1.67 billion, largely because of “an expected decline in e-book sales in the U.S. and U.K. due in part to new retail sales terms,” offset somewhat by “steady physical book sales and growth in the audio format,”
This is what happens when the people in charge don’t understand the business.  When all you know are the most superficial parts of the business, you follow trends and fads, until the roof falls in, which it inevitably does.  Of course by the time that typically it’s the next guy’s problem.  Meanwhile the people that create the stuff that make your business work get the shaft.
The fact is that karma always bites back even in business.

Major publishers are in trouble. Publishers Weekly reports declines across the board at all five major publishers. What is happening here is not new, as much as publishers would like you (and themselves) to believe. For the past four to five years, publishers have found growth almost exclusively through acquisitions, mergers, layoffs, and the largesse of their primary retail account, Amazon. All of those forces have run out of room.

As self-published books took off and began commanding a growing share of the book trade every quarter, publishers were able to weather the storm mostly because of increased profitability as more of their business moved to Amazon. Even as they damned the online bookseller, they profited from lower returns rates on physical books thanks to Amazon’s predictive on-time ordering. (The returns rates at bookstores could be around 40%. Amazon shaved those to under 5%) Publishers also made bank on ebooks as Amazon paid publishers their full amount while discounting to the bone and taking the hit on the retail side. When publishers fought for a return to agency pricing, they fought for an end to this discounting, which has pushed more and more sales to self-published authors. Those sales (those readers) are probably never going back.

Let’s dispel a couple myths: The first is the idea that book sales are languishing because there hasn’t been a breakout hit like (whatever book sold well the previous year). I’ve been seeing this line trotted out for two decades, whenever a publisher has a lull. Usually it’s a single publisher explaining their performance in a quarter due to “Not having a hit like we had in Insert-Book-Title-Here last quarter.” These days, it’s the running excuse for the entire book trade. And it’s absurd. Think about the number of damning things publishers are saying about themselves when they make this quarterly excuse:

•They are admitting that they can’t create a bestseller

• That none of their marketing and promotional tools work!

• That book sales are either all luck, or…

• Completely dependent on the talents of the authors that they have historically abused.

Beyond the weirdly circular reasoning of, “The reason we didn’t make as much money this quarter is because we didn’t have a book sell a ton of copies this quarter,” there’s a lot to be wary of in the above bullets. As a writer (the peeps I care most about), it should be eye-opening. None of the promises a publisher makes to you can be kept. It’s out of their hands.

Whatever they tell you they’ll do to make your manuscript a bestseller, they said to thousands of authors in the past year, and they failed at all attempts. Meanwhile, I know of a dozen self-published authors who have broken out over this time. I had a married couple on the boat for lunch this week who are both deciding when they should quit their day jobs, as they are steadily making 5 figures each month. If you go to writing conferences, you’ll run into dozens of silent success stories like this.

Probably the most damning evidence that publishers can no longer drive sales is the sad excuse for books that have kept them afloat. Last year, it was a rejected rough draft of To Kill a Mockingbird, published against the wishes of the dying author. This year, it’s a play not even wholly written by JK Rowling. And over the last two years, it has been coloring books hiding the slide in physical book sales. None of these things are books. Publishers are no longer in the book trade; they are in the what-the-hell-can-we-do-to-make-a-buck trade….

Major publishers have colluded in order to screw the reader, have offered ever worsening book contracts to screw the writer, and have resisted innovation in an attempt to harm their top retail account. Higher prices, fewer rights to authors, and fewer sales channels have been where they’ve exerted their muscle. Let that sink in.

A Peek Behind the Curtain

What the professional managers in the big five and indeed in many industries do not understand is that the path to success is in intangibles.  Success is the product of taking risks, not counting tokens.  All the analytics and number can only tell you what was, not what is coming.  It’s those intangibles like customer loyalty and the acceptance of the surprise of a new product that make a success.  By downplaying the roles of the people that create your success in favor of a bigger bonus for yourselves yo can make the numbers look good, for a while. But you have just created the kind of business that will have no future.

For more on the dysfunctional economy click Here or on the tag below.

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