True Lies 10: Reality Sucks

Back in 2004 my wife and I owned a house on Hilton Head Island.  Real estate was booming and it seemed everyone was a mortgage broker offering great terms.  A guy who did some painting on our house also offered to broker a mortgage for us.  Back in those days, being self-employed, I could get a no-income-verified loan.  I know—shocking in the current environment, eh?  I had to sign over my liver and kidneys and heart to get my current mortgage.  And pay well above the going rate.

My wife reads the NY Times every day.  The paper version.  All of it.  I mean everything in it.  And she remembers what she reads.  I keep track of numbers.  And we both started to notice some disturbing things in 2003 into 2004:

1. Mortgages were way too easy to get.
2. The Fed was at 0%.  It couldn’t go lower.  It could only go up.
3. Variable rates were as low as they were going to go.  They could only go up.
4. Like tulip mania (look that one up—Jen did), house prices just couldn’t keep going up.  Yet everyone acted like they would.

So we talked about it, and even though we liked our house, we put it on the market.  Even the realtor told us we were crazy (along with a lot of other people).  We showed it 72 times.  We sold it.  We then moved to the other side of the island and rented on the intracoastal (a great place to live and where I set my latest Green Beret book, Chasing the Lost).  We rented for eight years after that, because we felt things hadn’t yet bottomed out.  (BTW the way, the puppy shot is just for fun)

Not long after selling our home, the housing bubble burst.

We watched a special on HBO about a neighborhood where everyone’s prices nose-dived and they interviewed the owners.  And the one thing we heard again and again:  “We never though it could happen to us.”

My wife and I were quite shocked because we always think anything can happen to us.  Mine comes from my paranoid Special Ops background and my wife’s, well, let’s keep that to ourselves.

The ability of people to fool themselves into inventing their own fantasy world is phenomenal.  Because reality sucks.

But it is reality.

I prefer to live in reality, even though it is difficult at times.  At Cool Gus, we run our business on a reality base, not a wishful thinking base.  What brings this to mind is something I’ve been watching that, for me, is a harbinger of where the publishing world is headed.  Since 2009, Harlequin’s sales have steadily declined.

2009:  $493 million

2010:  $468 million

2011:  $459 million

2012:  $426.5 million

2013:  $362 million.

Doing math, which is part of reality, we see an accelerating decrease.  Those years coincide with the rise of indie/hybrid/Martian authors.  As a member of the Romance Writers of America and a lot of other writers’ groups, I can tell you that RWA, by far, is the most advanced and savvy group of authors around.  Surprisingly, SFWA (Science fiction, fantasy writers) is one of the least tech-savvy, business savvy groups.  Romance writers have been leading the way in embracing indie publishing.  Thus authors who might once have fought for a HQ contract are now doing it themselves.  And some very successful romance writers have jumped ship and gone indie.  Their defection has not been offset by successful indies going trad.

Add in a second factor:  the decline of print sales.  Spare me the numbers touted by publishing.  Take out your top 5% of authors whose books get brought in to COSTCO on pallets, and print sales are dropping fast.  Especially for mass market paperbacks, which is HQ’s bread and butter, much like garbage was the Sopranos bread and butter.  We still make a lot of garbage but there is less and less shelf space for print books and more and more readers are going digital.

Jeremy Greenfield of Digital Book World had a recent article in Forbes where he interviewed the CEO of HQ.  I found it a bit weird.  Which harkens back to reality.  At the end of 2013, people in trad publishing were breathing a huge sigh of relief, feeling they’d weathered the digital storm.  An exec at one trad house even said, “Anyone who is going to buy an eReader has already bought one” just before Xmas.  I get a sense of “things are going to be okay” from trad publishing.

That isn’t reality.

The CEO of HQ first blamed the revenue on pricing.  He complained about eBook pricing.  Which is odd since HQ gives the lowest royalty rates around to its authors, so they keep most of that income for very little overhead.  I do agree that the .99 eBook is kind of low. But we use it for the first Atlantis book as a leader into the series and it works.  We also use free on Section 8 Shadow Warriors as a loss leader into my thrillers.  It’s been ranked #1 in Men’s Adventure and War on Kindle Free since we did that.

But, the point is HQ and trads can’t control how indies, who are their competition (which they don’t seem to take too seriously, yet complain about) price their books.

I thought years ago that HQ would be on the cutting edge of digital.  After all, they have their niches locked down.  Readers love their series, and are not particularly attached to specific authors. HQ did start Carina, but that looked like a step in the wrong direction.  It was as if they were relegating digital to red-headed stepson status.  I watched Carina bounce around, without much focus or direction.  Pretty much working under the “let’s publish a lot of stuff and make a little bit of money off it” instead of using the HQ brand to branch off established lines into digital.

Here’s what really strikes me about the article.  First, the CEO says that quality will allow them to demand a higher price.  Which insinuates that someone like indie author Bella Andre isn’t putting out quality, except her quality is good enough for HQ to give her a print only deal.  Hmm.

The closer was the most interesting part:  HQ is optimistic in its earnings report, predicting a stabilization in 2014.

Why?  What’s changed?  The wishful thinking that things are going to get stable kept people in houses that went further and further under water as the housing bubble imploded.

“We’re just in transition.”

How? The numbers say income is decreasing at an accelerating rate.  How will that change?  Of course, transition doesn’t always mean transitioning to something good.  We can also transition to something bad.

The reality we see at Cool Gus is things are going to get much harder.  The market is saturated and will get even more saturated.  While there are great benefits to digital, a downside is that every book is out there forever.  There’s no rotating on the shelves, so to speak.  Actually not the shelves, but the store.

We believe it’s going to get harder for all authors: trad, indie, hybrid and Martian.  The solutions are varied and somewhat different depending on each author’s platform and product (thus our focus on a handful of authors and tailoring our partnership to fit their needs).  But I do believe trad authors really need to take a long hard look at their digital royalty rates and question how much their publisher contributes in that arena to take most of the income.  I firmly believe an author must earn at least 50% of the price of the eBook.  And get paid at least every three months, if not every month.

Also, once an author is no longer frontlist at their publisher, but it still controls their rights, the lack of marketing and low digital royalty rates will destroy careers and livelihoods.  I can personally attest to how trad publishers deep six their backlist.

Yes.  Reality sucks but it can be dealt with.  The first step is to get past the denial.

*****Admin Note From Jen*****

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True Lies 9: “Say not ‘I have found the truth’ but rather ‘I have found a truth’.”

So says Kahlil Gibran Kahlil.  I made the error during Beast Barracks of buying off on the pitch from the brand new Arabic instructor at West Point—it was the first year they were offering the language and they needed enough bodies to fill a section.  So I signed up.

I had not yet learned the military maxim:  never volunteer for nothing.

Lots of numbers being bandied about in publishing now.  Lines are drawn.  Bayonets are being sharpened along with pencils and you know what?  Readers don’t give a crap.

Indie authors apparently make.  Whatever.  In all these surveys, I doubt my numbers are getting counted.  60 titles spread over a bunch of genres, most indie, some with 47North, some with the Martians.  I also have a nice revenue stream from Audible ACX.  Why does everyone suddenly care what I make?  They never did in traditional publishing.

One truth is that all the numbers are completely skewed in traditional publishing by a handful of mega-bestselling authors.  Take them out and the whole thing changes drastically.

Maybe that’s the key to all of this.  We need to clean up our own house.  Because that’s what we control.

Hugh Howey tweeted something interesting, something I’ve been harping on for a couple of years.  It’s not about who makes more money or how or whether they’re hybrid, inbred, or have two heads.  It’s about RIGHTS.

When music imploded digitally, the musicians who not only survived, but prospered, did it one of two ways.  On tour.  (Which aint likely for authors).  And/or controlling the rights to their music.

In case no one has noticed, author rights are being sold. E-reads was just sold.  Along with all those contracts.  I was with E-reads so long I got my rights back after seven years.  This selling of rights is going to happen more and more. Sort of like your mortgage during the bubble.  Remember that?  Authors could end up with the Russian mob owning their rights.  I watched a special where David Geffen talked about trading Poco’s contract to another agent for Neil Young’s.  Really.

And if I see one more indie author taking a trad deal and bubbling about how much is being offered them, how wonderful it’s going to be, I would make a gentle suggestion.  Let’s hear from them in a couple of years.  If you haven’t been trad published, you are likely in for a very rude awakening.  I cringe sometimes when I see someone who has been successful self-publishing, who signs away their rights for not just the up front money but what they think is going to be all the great distribution, marketing, yada yada yada.  I recommend any author who is thinking of going indie to trad, research back a couple of years and study the first authors to do that.  Where are they now?  How glad are they now they sold away those rights?  I might be wrong, but I haven’t heard much about some of them.  I can, however, check their rankings on Amazon.  I’m reminded of when a Roman consul/emperor returned to the city and they held a Triumph and there was a slave in the chariot whispering “Respice post te, hominem memento te.”

The flip side is that indie publishing is getting tougher and tougher. Take out the top 5% of indie authors and the numbers are also skewed.  The market is saturated.  Bestseller lists have very few consistent titles, even day to day.  What many indies aren’t saying is that the increasing competition is making it tough.   I know Hugh Howey thinks the pie can grow bigger, but Joe Konrath speculated that a couple of years ago, and it’s simply not reality.

For trad authors thinking of going indie, here is some food for thought.

1. Where will you be in five years when print is mostly via POD? I’m seeing Createspace (Amazon) Kiosks in airports printing books soon.
2. Where will you be in five years if you don’t own any of your rights and you are no longer frontlist with the publisher that does own those rights?  Think they’ll be pushing you?  Hahahahahaha.  Sorry.  Had to do that after looking at royalties for my three co-written NY Times bestsellers that are backlist with St. Martins.  I made more yesterday indie than I do in six months on those books.
3. Percentage wise, the revenue you would receive from indie publishing will likely more than make up for the loss of what your traditional publisher is doing for you.  Seriously.  I can do the math of your royalty statement.
4. Control.  How much do you have?  Date of release?  Cover?  Editing?  Pricing?  Library distribution?  Cover copy?  Marketing?  Running specials?  Most importantly creatively?  Can you write what you want to write?  What your fans want?
5. You can’t really self-publish.  Not if you have multiple titles.  It’s so much more than just cover, formatting, etc.  The digital dance (trademarking that now, like I should have done hybrid author) is complex.  But I don’t think you need to give up 50% of the royalties for those services.  You need a partner who will do that for you, giving you more than they get.  A concierge service for authors where the creator of the content is valued more than the mode of delivery.

There’s another saying which is considered also a curse:  May you live in interesting times.

Ah yes– FREE for the next 2 days:  West Point to Mexico, the first part of my Duty, Honor, Country trilogy.  From West Point in 1842 into the Mexican War.  My West Point-Civl War version of HBO’s Rome.  Did you know the Mexican War was the bloodiest in our history percentage wise?

*****Admin Note From Jen*****

Blog Contest for this Week: Sign up for Bob’s Newsletter and get your name put in for a drawing to win all three Duty, Honor, Country books in AUDIO. The complete trilogy! Bob sends out a newsletter no more than 4-6 times per year. Besides interesting information about Cool Gus, Sassy Becca and The Big Orange (Bob’s new Jeep), Bob also gives his newsletter subscribers exclusive content. You can sign up here.

Frak Publishing, Frak Agents, Frak Authors, Frak whatever

It seems that cursing and acting like a bad ass as an author is in vogue.  I read blogs where authors curse up a storm and act like they just got back from a tour of Call of Duty.  Which is a game by the way.

It’s not real.  Just because we write fiction doesn’t mean we are the fiction.  There is no shortage of authors telling the rest of the world how to fix publishing, how to fix self-publishing, what other authors should do, yada yada I had the bisque.

You know what?  No one is shooting at you, dude.  They say less than one percent of Americans have served in the military.  Growing up, all my uncles had served.  Whether drafted or enlisted, whatever.  My dad was in the Navy at Okinawa in WWII when he was 17 years old.  Can you say kamikaze?

Here’s my advice: . . . . .

Sorry. Go to my archives. I’ve given out enough free advice over the years.  Invented the term hybrid author a while ago on this blog.  You’re welcome all you hybrid authors.  And hybrid publishers.  And hybrid wookies.

I remember one year at the Maui Writers Conference, which attracted a lot of big name authors as presenters, one of the attendees, a very successful CEO, told me he was quite shocked at the caliber of presenters and the fact they weren’t being paid.  He said in his business, this level of expertise would command tens of thousands of dollars and people would be paying top dollar to attend.

Writers sell themselves cheap and their advice cheap.  Really.  I love Harlan Ellison’s rant about this.

I do business consulting and presentations outside the world of publishing using my Who Dares Wins concepts.  A couple of hours of my time doing that is equal the typical advance for a Big 5 author.  Why?  Because you’re paying for my sweat and blood equity in Special Forces and as a successful entrepreneur.  We took Cool Gus from zero to seven figures in 18 months.

I don’t give a frak about the Big 5 or Apple or Amazon or Fred.  I care about our authors at Cool Gus and helping them sell books.  Colin Falconer is finally starting to break out here in the States after being an international bestseller for years.  I like writing his royalty check (okay technically we wire him his royalties because he lives, crap, he moves around a lot, last location was Mars).  He recently was #11 paid on Kindle with Isabella: Braveheart of France.  All his books are selling better than ever.

We were recently queried at Cool Gus by an author.  I responded pretty negatively because I tend to be negative.  Nah. Because I’m a realist and I read what the author had to say about her situation and gave honest feedback.  But the author’s reply really inspired me, because I could tell she got it.  She wasn’t focused on where publishing is now, but on where it will be several years from now.  It’s the same reason in 2011, I decided to chuck my traditional publishing desires and go indie.  I was looking ahead, not down at my own navel.

Okay, I tend to be negative.

So frak, dadgum, dadgum, dadgum, dadgum (okay had to watch Mater like 20 times at Xmas with my grandson so those of you who had to watch that know exactly what I’m ranting about—and seriously isn’t Mater gaslighting McQueen?  And isn’t he a bit misogynist?)  But dadgum.  Lying in bed with a grandson and two yellow labs is my idea of heaven.  Even if we have to dadgum.

There. I can cuss so you better listen to me.

Authors create product, readers consume product—those in between must provide long-term value

When talking with an author about possibly partnering with Cool Gus, the second they drop the phrase “my agent” into the conversation, we know the odds of coming to a working partnership are not likely.  This is not because agents are evil or mean, but because we’ve found most to be mired in an outdated business model and unable to see the advantages of focusing on long-term profitability.  This is because traditional publishing didn’t particularly value the long tail because it wasn’t possible with limited shelf space in consignment outlets, called bookstores.

That’s changed.

Ten years ago when someone from the outside asked me to describe the publishing business, I would say:  “Slow and Techno-phobic”.  While the Big 5 and others scramble to adapt to the digital world, there is a segment that has been very resistant to the winds of change blowing through the publishing world:  agents.

When I present my Who Dares Wins concepts, whether for people inside the industry or those outside, I use the Myers-Briggs 16 character types as part of understanding character.  I focus not on what one is, but what the exact opposite character type is.  After all, we all like to do what we’re good at.  Where we need to improve is where we aren’t good.

For example, the least common of the 16 types is actually labeled Author.  INFJ.  Introvert, iNtuitive, Feeling, Judgmental.  The exact opposite, the ESTP:  Promoter.  Duh.  Big problem authors!

What do we want an agent to be?  Most agents want to be Sellers.  The exact opposite?  Architect.  That suggests to me that while agents might be very good at selling, they are not so good at structuring a business plan or analyzing the changes in publishing. An architect tends to be a strategic thinker, while a seller is tactical.

I’m generalizing here, and I know there are agents who have adapted swiftly, such as Kristin Nelson and Scott Waxman.  But overall, most agents are still so focused on the traditional format of publishing doctrine, they can’t see the bigger picture.

First, agents are focused on the advance.  The ‘guaranteed money’.  Authors have been propagandized into thinking an advance is the kindness of publishers giving them money so they can write.  Authors need to rethink that.  An advance is the money that binds the author’s content to the publisher via the contract.  Nothing wrong with that if the author is happy with the money and the almost complete lack of business control they’ve surrendered when they cash those checks.  The concept of monthly income after publication seems to escape many traditionally published authors and especially agents since over 90% of traditionally published books fail to earn out.  The concept of a publishing partner working for the author, allowing the author the final decision (after getting experienced advice) on everything from cover, to content, to product description, to metadata, to promotional opportunities, to pricing, etc. is one that doesn’t seem to do much for agents.  Also, working with a publishing partner that considers the publishing timeline in terms of days and weeks rather than months or years is a concept few in traditional publishing seem to grasp.

Let’s break this down simply.  The bottom line in publishing is:  Authors create the product, which is content (not the book).  Readers consume the content.  Everyone else is in between.  They must provide a value to that relationship or they are not relevant.  Since an agent is more focused on the relationship between author and publisher (not reader), their value is even more put to the test in a market where distribution no longer rules.  It is discoverability.

Recently I’ve seen a spate of earning reports that indicate a trend:  while overall print sales are slowing or down for major publishers, they’re making more.  Where is this ‘more’ coming from?  The higher P&L on eBooks.  Where are the agents rallying to point out that this ‘more’ is being taken from the authors?  That authors getting a royalty rate that is pathetically out of date is lining the pockets of publishers?  When 75% of the cover price of an eBook goes to the platform and the publisher, something is very out of balance.  And then 15% of that 25% for the author goes to the agent?  In essence authors are getting just over 20% of cover price.  At Cool Gus our authors make over 50% of that cover price, varying depending on each one’s situation—which is another thing.  Every author, every book is a unique entity.  In Special Ops, one of the tenets is that Special Operations Soldiers can’t be mass produced.  Authors can’t be treated that way either.

Yes, there are big-name authors, in the top 5%, whose agents have negotiated for them higher royalty rates (hey, midlist author, ask your agent about that).  Good for them.  I submit however, that we will see some big name authors jump ship and go hybrid, not for more money, but for creative control.  The problems for these authors are several:

1. Backlist is held hostage by their traditional publishers.
2. The politics of becoming hybrid, where publishers and agents feel the author has ‘betrayed’ them, when in reality it is a positive for everyone involved if they work together.  For example, we’re working to promote Jennifer Probst’s books from Pocket with her backlist and also the frontlist we will publish.  We link and promote all her traditionally published titles.  We can actually run price specials, countdowns, and targeted ads that promote Jennifer Probst, which is a win-win for all involved, including her traditional publisher and her agent.
3. Lack of awareness of how to ‘self’ publish.  I refer back to my Kirkus article on how the term ‘self’ publish is a misnomer.  Top authors need help in this area, especially if they are focused on writing.  They need the expertise and advice of an organization experienced in what they want to do.  But they don’t need boilerplate services:  they need a partnership tailor made for each one’s unique situation.
4. Fear.  I won’t get into it, but fear is ruling publishing.  Many authors are terrified to break free and take a chance.  Understandable.  But potentially fatal to their long-term career.
5. Editorial.  Some authors are wedded to the editors.  While we can say this is purely a business relationship, it goes beyond that.  We’re talking creative process.  However, there are very good freelance editors and one thing we do at Cool Gus is invite authors to our Write on the River retreat where we all work together on story and they also have access to my wife, who has worked with several NY Times Bestselling authors. A few weekends ago we had Jennifer Probst here and Richard Phillips and his writing partner.

We’ve negotiated with authors about their backlist, only to have the agent jump in between and shift their client’s focus toward selling their electronic backlist to a traditional publisher and getting an advance.  I submit they are harming their clients in their own self-interest (and mistakenly in their client’s interest).  They want that advance money which is guaranteed.  I occasionally check on the status of the digital version of books we tried to partner on, and not a single one has been published yet, over a year after talking to the author.  So a year’s worth of revenue that can’t be recouped is gone while they wait on the rusty wheels of traditional publishing to get around to their backlist.  And, as an editor at Random House told me:  We can’t promote our front list, never mind our backlist.  How do you think they’re going to focus on you?  I make more in one day from my backlist I own the rights to than St. Martins does in six months in the three books I co-wrote with NY Times Bestselling author Jennifer Crusie.  Who at SMP has a vested interest in promoting and selling those stories?  No one.  They’re overwhelmed dealing with their current authors and frontlist.

Lastly, agents are effective in securing foreign rights.  But even that model is changing.  Three years ago, people were laughing at eBooks in the US market at only 3%.  They aren’t laughing now.  Russ Grandinetti from Amazon said at the Frankfort Book Fair that they’re seeing a growth in digital devices in Europe matching the US market three years ago.  So three years from now, digital will be a huge earner in foreign markets.  A market authors can have control of via digital, instead of signing away their rights.  Something to consider.  While I believe in operating swiftly in most areas in publishing, foreign rights is one area I’m taking my time in.

Bottom line is that authors have to consider the long-term business, thinking strategically instead of tactically..  The long tail of earnings.  Publishers, and especially agents, seem to be more focused on the immediate dollar.  Authors need to be focused on their income stream five to ten years from now and also accept a fundamental truth: no one cares more about their stories than they do.