Saturday, January 25, 2014

What Traditional Publishers Should Have Learned From iTunes

Some posts that I've read recently on the blogs of JA Konrath, Hugh Howey, and Passive Guy have convinced me that legacy publishers (and many people that are still clinging to that industry for life support) are ridiculously out of touch with what is happening right now. Digital revolutions have taken over many antiquated, top-heavy industries and while legacy publishing wants to believe that it isn't true with e-books vs. paperbacks, it's definitely headed that way. The sad thing is that they should have seen it coming and innovated their business model accordingly.


So legacy publishers, I'd like to take you to school for a little while. Here's a history lesson from the music industry and the things you should have learned from watching it happen. I'm grabbing all of my facts from articles on Wikipedia. Alright, get ready to take notes.

For a long time, record companies were able to dominate music sales. When a popular band or singer released a new album, you had one way to get it. You had to buy the CD. The CD was anywhere from $7.99 all the way up to around $15 in most cases. It didn't matter if you only liked one song on the entire album because if you wanted it, you were going to shell out money for the entire album. I still remember buying CDs because I liked 2-3 songs. It was a colossal waste of money and I buy a lot more music now that CDs have pretty much bit the dust.

What changed? Well around the year 2000, Napster started to offer an alternative. Free sharing of music. No more $10 a CD. A lot of people refused to resort to piracy to get the music they wanted, but on the other hand a lot of people didn't care. At its peak, Napster had 80 million users. You can imagine how much music was shared for free. Napster was hit with a nasty wave of lawsuits and went bankrupt in 2002. Back to overpaying for a handful of songs you like, right? Nope.

Apple launched iTunes in 2003. What was nice about iTunes is that you could take all those CDs and download them to your computer. You could then sync them to an iPod and take thousands of songs with you wherever you go. No more need for CD players that could do 7-15 songs at a time.

iTunes also started to offer the option of buying individual songs and many of them were only $0.99. Wait... so no more ridiculous amounts for every sale? Nope. A dollar for a song... and then you owned it. I know it sounds very close to piracy, but it isn't. It's just a really smart pricing model. Some were a little more. Some were a little less. Sometimes things were even free. There's no way that was a feasible business model though, right? Surely iTunes went under. Quite the opposite, actually.

iTunes has been the largest music vendor in the U.S. since April 2008 and the largest in the world since February 2010. In the first quarter of 2011, the iTunes store brought in $1.4 billion. Notice I said that's what they brought in in ONE QUARTER. They've sold over 25 billion songs.

Well surely iTunes was very much anti-piracy and encrypted everything, right? They actually did add DRM onto their songs at first. Then they started to remove it. By 2009, 80% of the songs on iTunes were DRM-free. Now none of the music they sell has DRM. Guess why? I know that this will be difficult to understand, but DRM IS NOT GOOD FOR CONSUMERS. It's an annoyance that doesn't need to be there. If someone buys a digital copy of anything, they should be able to transfer it to any of their devices.

Apple is now the undisputed king of music selling. No one had been able to dethrone them. Not Google. Not Amazon. No one. If you paid close attention to how early they started innovating in that industry and making moves that were good for consumers, you'll understand why. Guess what else? They continue to improve the quality of the music they sell. They're making smart moves in other areas as well. When they sell a digital movie, they generally price it BELOW the cost of the DVD or blu-ray. Crazy move, I know, but it's paid off for them. Billions of dollars per quarter.

Now what is legacy publishing doing wrong? I'll list a few key things, because I don't have time right now to go over everything. The first thing, that I know annoys most self-published authors today, is their insistence that if it didn't pass through the ridiculous hurdles to get traditionally published, it's crap. Guess what? Way off. I know what I'm pointing to as examples are outliers, but legacy publishing in almost every case TURNED THESE AUTHORS AWAY. They went on to sell hundreds of thousands or even millions. Most of JA Konrath's books weren't accepted by legacy publishing. He's sold over a million books. Hugh Howey was rejected by them. He's pulled in millions and sold the film rights to his Wool series to "Alien" producer Ridley Scott (he also turned down selling his ebook rights to the Big 5 legacy publishers. He told them they had to exclusively take over the paperback rights or he had no interest in signing with them because he was just doing just fine selling e-books on his own.) How about Russell Blake? More than 400,000 books sold and now he's co-writing with Clive Cussler. I know for a fact that the "gatekeepers" of legacy publishing turned Mr. Blake away too. Nick Russell made the NYT Bestseller list selling thousands. I've read his books. His books honestly kick the shit out of most traditionally published books I've read. I could go on and on, but what's the point? Legacy publishing knows they screwed up in these cases. Now I just wish they would learn from their mistakes. Self-pub authors can't all be labeled "crap" and then filed away as "not a threat."

What else are you guys doing wrong? Artificially keeping prices high comes to mind. When Dan Brown launched his latest, it was $14.99. You're probably thinking that was the paperback or a special edition of the hardcover, right? No. $14.99 was the price of the e-book. Can you say ridiculous? They go on the record over and over saying that $0.99 and $2.99 are terrible price points that no one but self-publishers would want to sell at. Fine. If you want to totally ignore readers who enjoy a good book at a good price... I'll take them. All of my books are priced between free and $5.99. I have 20 titles (most of them are shorter works) and in the couple of years I've been doing this, I've sold just under 600 books. Only 600? That's no significant blow to legacy publishing, right? Well it's 600 sales legacy publishing will never see and it gets scary when you think how many more self-published authors there are out there who, like me, are taking small amounts of business away from the bloated cow that is legacy publishing. My best selling e-book is priced at $2.99. But surely the self-published authors who have "made it" are selling at a much higher price point, right? Nope. Hugh Howey has most of his shorter stuff free or $0.99. The most you'll pay for a Russell Blake book is around $5 for a full-length novel and the starting books for most of his series are at $2.99. Colleen Hoover, who has sold over a million books, made it to the top of Amazon with an e-book that was priced $3.99 at the time. I think it's still even at that price point. Let me go check. Yup. Colleen Hoover's Hopeless is still at $3.99 for the e-book. So guess what? Readers aren't always going to accept that they should have to pay $9.99 - $19.99 for an e-book just because it made it past a "gatekeeper" in the traditional publishing industry. Readers understand that it costs a lot less to distribute e-books and they expect that to be reflected in a lower price. Sounds like solid logic to me, so I'm not sure why you're still fighting it. An e-book should never cost the same as a paperback. That's just stupid and very much counter-intuitive.

Moving on... here's another thing legacy publishing is doing wrong. When they first release a book, they release it as a hardback. Why? Hardbacks sell at the highest price point and make them the most money. Paperbacks generally don't come out until months later. I remember being forced to buy Dan Brown's Lost Symbol in hardback. It really pissed me off, because I wanted to read it but I didn't want to drop $20 on it. I paid it, because I thought that was my only option. I was pretty mad though and felt like I had been ripped off as a fan of Dan Brown because I didn't want to wait several months for the paperback. Well guess what? Most self-published authors release the e-book, paperback, audio book, and whatever other format they can all at around the same time... because it's GOOD FOR READERS. I try to have all of my books available in as many formats as I can because I think everyone should have a chance to read what I write. Now I don't always have control over my price points for audio book and paperback, but I keep it as low as I can in every case. Most of my audio books are $5. I have paperbacks as low as $5-$6. My paperbacks with a ton of pictures are a bit more... because that's what my print on demand service charges to make them. I take under a dollar royalty per sale on all of my paperback sales. Could I raise prices on my paperbacks and still sell about the same amount? Probably... but I won't. Hugh Howey said on his blog a little while ago that hardback books should come with a code for a free download of the e-book. I think that's totally fair. I still buy blu-ray movies because a lot of them come with a free digital download to iTunes. I don't feel like I'm getting ripped off if I can get the physical media AND the digital media for an overall reasonable price.

I won't go much into royalties other than to say that you're paying most authors 25% per e-book sold. That's so ridiculously wrong. As a self-published author, I make royalties of between 35% and 70% on all of the e-books I sell. How can you feel good about ripping your authors off like that?

DRM. It isn't a good thing. I don't use it. Most self-published authors don't use it. Stop using it. It hurts your readers. Stop covering your ears and start caring what your readers want. If they buy a digital copy, let your readers read it on any of their devices.

I have a feeling that I could keep going. On and on. I won't though. I just wanted to take the Big 5 to school for a little while. Maybe if enough people keep telling them the same things they're doing wrong over and over, they will eventually listen. What I'll do instead is get back to writing books... and I know it doesn't yet... but that should honestly scare the living hell out of legacy publishers.


  1. Seriously, I am living off the sales from three novels of modest popularity. This is not possible for a trad published author.

    1. Another great point. The number of midlisters living off their author income or making a significant amount of money is, I'm assuming, MUCH larger in the self-publishing world than it is in traditional publishing.

  2. But I'd rather you didn't clue them in, Randy. I like the nice edge we get from their practices.

    1. No need to worry. Authors more successful than I have told them these same things. They still refuse to listen. By the time they try to do anything to innovate and adapt, indies will be even more powerful than they are right now.

  3. Great analysis, thanks for sharing.

    I'm a shiny new self-published author. I didn't bother submitting to an agent or publishing house because of analysis like this. Or I have a crushing fear of rejection. Both arguments are valid.

    1. Well I think you made the right choice. The indie community is far more willing to help each other out with advice and many even post their sales numbers (like I did for 2013.) The legacy industry is more interested in keeping data like that away from the internet. I wish you luck in your self-publishing career.