Nearing the breakeven point selling your own ebooks
Mar 7, 2011 [permalink]
It's very possible that we're near the point where authors will earn more in direct-from-the-author sales of their works in ebook format than from advances and royalties from major publishers. Authors have an important, life-long decision to make.
If first novel advances are in the realm of $5,000 for new authors (which might well represent minimum wage!) :), and a self-published author earns around 70% on a $9.99 ebook (70% is Amazon's model; about 97% for sales via one's own web site, 85% via Smashwords, and so on), they only have to sell 714 copies over the life of the book to earn $5,000. (Ignoring time value of money since it's basically countered by the price of the ebook rising with inflation.) They don't get that $5k up front, but they still have a not unreasonable shot at earning it. Copyright lasts your life time plus 70 years, so that's selling 714 copies during not just your entire life, but the entire life of your grandchildren or even great-grandchildren. [**]
Now if you're talking $50,000 advances, yes, a self-published author would have to sell 7100 copies, which is much more unlikely for a new author. But what percent of new authors' manuscripts land $50k advances? Very few. Most go unsold, so the author earns $0. If it's a really awesome book, and the author gets lucky on word of mouth publicity, or the author already has a reader base, it could sell 7000 copies. I'm not sure what the (low) odds are on either happening, but I have a gut feeling that the odds of selling one's book for $50k to a publisher vs. self-selling 7000 copies might be similarly low.
Which is not a trivial consideration: If your book isn't going to sell at all, whether because it isn't written well or because it's too niche for a publisher, etc., then authors can make more money self-publishing. (More than $0.) They still have the shot of going viral.
Unless you already have a large reader base. Stephen King doesn't need a publisher in a mostly-ebook world. He can put out his book himself, send out a press release, and bam, millions of sales.
Midlist authors who have a medium sized reader base are perhaps are tricky to analyze. Time and experimenting will tell. Can they reach those readers if they self-publish?
Those who have a more visible presence certainly have a better shot. Those who have active blogs, etc. and bring in readers, interact with them, etc. will have more success. Those who want to sit quietly and just write and never interact with readers, they'll want publishers to do the work for them since they'll have no channel to the readers.
Life+70 years is a looooong time.
Getting selected by a publisher lends a certain mark of quality to a book (which can sell more copies); they do handle the print copies, which is profitable today; and publishers do perform some marketing (perhaps the most important thing they can do for you). What's not clear, however, is if that earns the author the most money, long term. (You can also get a handle on the quality and improve your book by sending it through an unbiased workshop, like Critters. You should do that anyway.) :)
Considering the duration of copyright (author's life + 70 years, and growing longer over time, not shorter), and that publishers are now essentially taking a lifetime contract on that book — and at much lower percentages, such as 25% of net (vs. 70% of gross) — for perhaps a hundred years or more — one would really have to think hard which will be the better deal in the long run.
I'm not talking about market conditions today, I want to make that clear. Ebooks are 10% of sales today. It's still 90% paper. What I'm looking at, as I've pointed out before, is that the curve of ebooks overtaking paper is smokin hot. Digital may well be the dominant sales medium for books, and fairly soon. Even today at 10% ebook sales, revenue to the author could conceivably match or exceed print revenue. As that percent grows, and so far it's growing very rapidly, the decision tilts more toward authors selling their own work to make more money. Whatever the point is where the revenue from paper isn't that critical. In that world, self-publishing will be a much more viable option for all authors. And that breakeven point (or "tipping point" is probably more accurate) may be very close, if not already here.
Today (or "last month" as the case may be, with ebook sales at 10% of total), publishers paying authors 25% of net (i.e. after deducting some of their costs) might make some sense (certainly to publishers!). The problem I see is that 25% won't ever get renegotiated. It's locked in until 70 years after you're dead. If ebooks were to become 50%, 70% or 90% of sales, publishers would be taking 75%+ of the proceeds for the next 20 years, 50 years, 100 years, and not necessarily doing any further marketing on your behalf. Pure gravy for them. By that time they might be offering new authors deals paying better than 25% of net, but they would have no incentive to change the old 25% contracts people signed today. Authors could have been earning 70% to themselves on smaller unit sales and making much more money.
If you assume your book will hit the shelves for three weeks then drop below the radar forever, or you desperately need the money up front even at the potential cost of earning much less over future years, then it makes sense to take the advance money and run. If your book might be a steady earner going forward, and you aren't desperate for the cash up front, it may make more sense not to sell to a publisher. There may be some smaller presses offering better terms than "25% of net forever," I don't know.
Even having a timeout clause such that the 25% isn't "forever" could be very important. Personally I think 5 years at 25%-of-net after which the deal gets renegotiated would be author friendly. That would allow for everyone to see how things shape up without either side giving up the farm. When I worked with SFWA to press Amazon about a "forever" contract they had, Amazon changed it to a more reasonable duration.
Authors should think hard about which path will make them more money: Not just today, but in the Life+70 years of the copyright of their work.