There has been a lot of talk as to whether or not social media is the front runner in another inflated internet bubble waiting to burst, leaving users “virtually” friendless and clueless. Will everyone be out of the loop, with no one keeping track of daily deals, happenings or status updates? Warren Buffet confirmed this fear stating that although it’s not as big as the dot com bubble, social media is not long term by any means. However, industry trends and buyer behaviors are stating otherwise.
Facebook has proven beneficial to marketing efforts for B2C companies, but B2B marketing has struggled to find its footing on the platform. That’s where LinkedIn has emerged as the go-to medium for B2B marketers.
A recent study done by BtoB Magazine, showed that when asked “Which of the following social media methods does your company currently use for your B2B marketing (i.e. not personal use)” 72% of B2B marketers said LinkedIn. After reaching more than 100 million users, LinkedIn has solidified its niche as Facebook in a business suit, and B2B companies have taken notice.
The 2011 State of Inbound Marketing (an annual report done by HubSpot, an inbound marketing software company) found that 61% of B2B marketers who participated in the survey acquired a customer through LinkedIn. The targeted and measurable aspect of inbound marketing is what makes it so attractive to smart business owners who are tired of spending money on marketing with no proof that it’s working. Former Chief Marketing Officer of McDonald’s, M. Lawrence Light said, “It no longer makes economic sense to send an advertising message to the many, in hopes of persuading the few.”
Continued on the next pageThere has been a lot of talk as to whether or not social media is the front runner in another inflated internet bubble waiting to burst, leaving users “virtually” friendless and clueless. Will everyone be out of the loop, with no one keeping track of daily deals, happenings or status updates? Warren Buffet confirmed this fear stating that although it’s not as big as the dot com bubble, social media is not long term by any means. However, industry trends and buyer behaviors are stating otherwise.
Facebook has proven beneficial to marketing efforts for B2C companies, but B2B marketing has struggled to find its footing on the platform. That’s where LinkedIn has emerged as the go-to medium for B2B marketers.
A recent study done by BtoB Magazine, showed that when asked “Which of the following social media methods does your company currently use for your B2B marketing (i.e. not personal use)” 72% of B2B marketers said LinkedIn. After reaching more than 100 million users, LinkedIn has solidified its niche as Facebook in a business suit, and B2B companies have taken notice.
The 2011 State of Inbound Marketing (an annual report done by HubSpot, an inbound marketing software company) found that 61% of B2B marketers who participated in the survey acquired a customer through LinkedIn. The targeted and measurable aspect of inbound marketing is what makes it so attractive to smart business owners who are tired of spending money on marketing with no proof that it’s working. Former Chief Marketing Officer of McDonald’s, M. Lawrence Light said, “It no longer makes economic sense to send an advertising message to the many, in hopes of persuading the few.”
Continued on the next pagebench craft company
Maya Moore quickly signs deal with Minnesota Lynx
The Minnesota Lynx have signed Maya Moore, the first pick in this year's WNBA draft.
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Small Business <b>News</b>: Small Biz Social Media Tips
In recent weeks we've shared articles on social media sites like Twitter, Facebook, LinkedIn and others. Now it's time to look at how all these tools are.
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Courteney Cox Does Letterman and Other <b>News</b> - The Superficial <b>...</b>
Gwyneth Paltrow makes bulimia fancy again. - Robert Pattinson is spreading disease. - Emily Browning stars in a movie about high-end date rape and,
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Given the current cost of components, a prepaid contract-free iPhone with less internal storage would likely earn Apple only about 16 percent gross margin if it were priced at $300, a new analysis has estimated.
Analyst Charlie Wolf with Needham & Company took a closer look at the prospect of a hypothetical "iPhone lite," to see if it would be in Apple's best interest to build such a product. A cheaper iPhone has been viewed as a strategy that would work to Apple's advantage in emerging markets like China.
In February, both Bloomberg and The Wall Street Journal reported that Apple is working on a smaller and cheaper iPhone that it could sell contract-free. Soon after, The New York Times chimed in, and claimed that while Apple is not working on a smaller iPhone, it has explored opportunities in developing a cheaper handset.
Wolf largely agrees with the Times, and doesn't see a smaller iPhone with a new form factor as something that would be in Apple's best interest, even though it would be the easiest way to cut costs and created a cheaper handset.
"In our view, the iPhone would not be an iPhone if the display were, say, cut in half," he said. "Such a move would (dramatically) reduce the value of the iPod module for video viewing as well as the size of web sites accessed through the Safari browser. A smaller screen would also degrade the experience in using some applications, not to mention the possibility that some applications would probably have to be rewritten to accommodate a smaller screen."
iSuppli estimated that the 16GB iPhone 4, when it launched last June, carried a bill of materials of $188. The iPhone has an average selling price of $625 with a carrier subsidy, while gross margin is usually around 50 percent, suggesting that additional costs like assembly, software, testing, licenses and warrantees add up to $100 or more.
Ruling out the possibility of a smaller iPhone, Wolf said Apple could reduce internal storage from 16GB to about 4GB, but that would only reduce the bill of materials by $30 to about $157. By his estimation, such a handset would still have a total cost of $270.
"Apple would at best break even if it priced an iPhone Light at $250; and it would earn a modest 16% gross margin if it priced it at $300, which we regard as the high end of the range for a prepaid phone," Wolf wrote.
Gross margins of just 16 percent would be a number uncharacteristically low for Apple. For example, in its last quarterly results for the 2010 holiday buying season, Apple reported margins of 38.5 percent, or more than twice Wolf's estimate for a low-cost, no-contract iPhone.
"We suspect that the iPhone's designers and engineers have thought about this a lot more than we have so that the cost savings would be somewhat greater than we've estimated," Wolf said. "If, for example, the expenses incurred beyond the cost of components could be materially reduced, Apple might be able to earn a gross margin of 20% pricing the phone at $250 and 33% gross margin pricing it at $300."
The possibility of a cheaper iPhone with fewer features was hinted at by Apple Chief Operating Officer Tim Cook earlier this year. Cook, in an interview with Bernstein Research analyst Toni Sacconaghi, said Apple doesn't want its products to be "just for the rich."
Cook reportedly said that Apple is planning "clever things" to compete in the prepaid handset market. He also stated that Apple is "not ceding any market." He also referenced China, where Apple has found great success of late, and noted that it is a "classic prepaid market."
Apple should see a material dip, on top of the one that occurred
after I indicated that I was short the stock on March 16th. Before we
delve into my opinion, let’s peruse the news from 1 a.m. this morning:
WSJ: Apple Crunched in Nasdaq Rebalance- In
a move likely to ripple across the stock market, Nasdaq OMX plans to
announce a rare rebalancing of its Nasdaq-100 index, which will reduce
the big weighting of Apple, which currently makes up more than 20% of
the index.
Bloomberg: Apple’s Weight in Nasdaq-100 to Be Reduced as Microsoft, Cisco Are Raised
So, why do you think Nasdaq decides to reduce Apple’s weighting now?
Well, the competitive pressures that Apple faces are nigh guaranteed to
make it impossible for it to fulfill the pie in the sky expectations
that are being built for it. That in combination with a 20% weighting
create a recipe for a guaranteed crash in the Nasdaq unless something
was done about it. Signs of heavy reliance on on or two products for 70%
of their profit, while sourcing the most important parts of those
products from their biggest competitors, were starting to show. iPad 2
supplies are tight due to Japan’s woes, and Apple does not have the
mobile computing product diversity to handle it like the 150 or so
Android competitors it is battling. This means much more than just a gap
in profits for the quarter. These companies are in race, and Apple is
being forced to give up some of its lead due to diversification issues –
issues that Android manufacturers (who are more diversified because
there are so many more of them from different places) don’t have, or at
least not to the extent that Apple does. Thus, Samsung, LG, Asus, HTC,
etc. will be rolling out to customers who may have had an Apple iPhone
or iPad.
This is also another (of many) massive triumphs of BoomBustblog
research over that of the most esteemed Godman Sachs who put a $430
price target on Apple just as it was making all time highs and in direct
contravention to BoomBustBlog’s stated logic. See Shorting Apple and Why Software Developers Can Make More Money On Android Wednesday, March 16th, 2011
I have finally started dabbling with Apple
shorts and puts. My OTM S&P put positions were profitably stopped
out due to trailings yesterday when the market recovered some of its
losses. I have decided to use Apple in the place of the S&P puts
for the time being. Medium to long term, the trade is more evident and
obvious to anyone who is objective and follows BoomBustBlog. It is
significantly more risky shorter term. Alas, there are marginal gains
already, and once they accrue to the point of indemnifying my trailing
stop, I will add more. After I finish the current leg of my global real
estate research to be disseminated to institutions, I will offer
tidbits of the modeling (I have already offered subscribers significant
info on why I think Apple is a risky long play). From a contrarian
standpoint, it may be safe to go short with tight stops, after all
although Apple Gears Up To Combat The Margin Compression That Apparently Only It, Google & Reggie Middleton Sees Coming, we still have those guys over at West Street… Goldman’s
$430 Target, Screaming Buy On Apple At Its All Time High Is In Direct
Contravention To Reggie Middleton’s Logic – Who’s Right? Well, Who
Has Been More Right In The Past? I have taken The Challenge To Goldman Sach’s Apple Proclamation One Step
Farther, Apple’s Closed System Risks
Failure! Listen, everyone, regardless of what investment positions or
tech products you may have in your stable, needs to ask themselves the
appropriate “What if’s”. I have spurred the conversation with “Will Google Win The Mobile Computing War? Let’s Walk Through Where They Stand Now & How To Value Them”
Remember, I may not always be right, but it does pay to look at the track record… Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best? More attention should be paid to the little guy, after all by now it is Now Common Knowledge That Goldman’s Investment Advice Sucks!
Didn’t you get the memo? I’m sure many traders have spurned Apple due
to the Japanese market being cut off right at the launch of the iPad 2,
but the issues go deeper than that. I will cover it in depth at a later
date, though.
Additional thoughts on the Apple short:
- Note For The Few Realistic Apple Bears… Wednesday, March 16th, 2011
- Buffet on Apple – Common Sense! Monday, March 21st, 2011
- Competition Heats Up In The Mobile Computing Space On Many Fronts – Prices Driven Down Once Again By The Big Players Tuesday, March 22nd, 2011
- How the “I Love Apple, There Is No Other Fever” Adds To The Attractiveness Of An Ever So Unpopular Apple Short Monday, March 21st, 2011
And that Research in Motion short alert
given to subscribers is working like a charm – even more so if it get’s
caught in NASDAQ storm: Research in Motion Drops 10% After Hours, Precisely As We Warned Two Months Ago – MARGIN COMPRESSION!!! Thursday, March 24th, 2011
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In recent weeks we’ve shared articles on social media sites like Twitter, Facebook, LinkedIn and others. Now it’s time to look at how all these tools are changing the way you do business. By the way, we’d like to learn what kind of social media your business is using and why. Be sure to leave a comment below.
Strategy
How to be a social media leader. How to be a social media leader or authority. It’s a question surely on the mind of plenty of small business owners working to learn the vocabulary of the new online media. In the end, it may be easier than it looks. Check these simple tips. Small Business CEO
How to set up a small realization that business blog. Whether practitioners of small business social media nowadays would describe a format as “old school” as blogging as being a part of the social media is uncertain. We certainly consider it to be. In many ways blogging is the cornerstone of a strong online social presence and establishing a blog as the hub of your social media campaign requires learning some basics on establishing a small business blog. Dazzlin Donna
Marketing
How to use social media to build context. Gary Vaynerchuck is arguably one of the most innovative pioneers of the social media marketing approach, but in this interview he argues using the means open to small businesses today isn’t necessarily about the tools, it’s about the context. Find out why. The Rise to the Top
How to grow your social media fan base. Whether it’s Facebook or another comparable site, social media is about being social. To understand why this is harder than it might at first seem, check out this post on growing a social media fan base for your business. Like other online marketing, social media is about content. This post talks about how to use content and other tools to boost your number of fans. Premium SEO Solutions
Operations
How to create Twitter and other social media content. So, we know that using social media and frequently updating with content are the key to an effective social media marketing campaign. But what in the world can you say. As it turns out talking endlessly and pitching endlessly about your business on social media is NOT the answer. Follow this guide to participating effectively in social media WITHOUT being labeled a spammer. What’s your approach? Blog Godown
How bloggers have become much more influential than celebrities. When it comes to influencing purchasing decisions, people are more likely to listen to a blogger than a rock star. That’s according to a recent study suggesting the increased influence social media is having on purchasing decisions. If you haven’t yet considered social media and particularly blogging as part of your marketing campaign, you may want to read more. Fox News
Research
Why social media may not be your best traffic driving tool. A recent study suggests that as a strategy for driving traffic to your Website, social media may not be the best choice. Then again, the study goes on, for brand awareness its effectiveness may be somewhat higher. In the end, it’s important to remember that the tools you use must make sense to your business, says blogger Cynthia Boris. Don’t look to social media as a magic bullet. It’s a useful tool, nothing more. Marketing Pilgrim
How to create a successful social media strategy. Businesses seeking to take advantage of all aspects of the social media need to apply careful planing to their approach. The possibilities for crowdsourcing, studying of online customer conversation and other factors makes innovation easier as well. But with all these possibilities, where should your business begin? A well defined social media strategy is a good first step. 1 to 1 media
How to listen to social media and gain insight about your brand. Someone is talking about your business out there. But what are they saying and is it something you should even be worried about? Monitoring social media for positive and negative comments about your business can be a great strategy for constant innovation. Here’s more about how it works and how you can get involved. InformationWeek
Final Thoughts
Trying to figure out social media. One of the main issues for small businesses today, surprisingly, is not just deciding to implement social media but trying to figure out all of the possible implications. Social media is, after all, more than just a tool. It is a movement as well. The existence of social media is a hard reality and offers opportunities to small business of all kinds. But there are challenges too. Here are some important thoughts. Business 2 Community
The Business Rusch: Royalty Statements
Kristine Kathryn Rusch
Imagine this:
Pretend you run a very large business. The business has a lot of built-in problems, things not easily fixed. You’re aware of the problems and are trying to solve them. A decade ago, you actually had hope you could solve them. It will simply take time, you thought, but back then, your business was a leisurely business. Back then, you had no idea that the word “leisure” would leave your vocabulary and never return.
In that decade, your business has changed dramatically. Your corporate masters sold out to large conglomerates, so now you can no longer point to your small but steady profit as normal for your industry. The conglomerate doesn’t care. All the conglomerate cares about is quarterly profits, which should rise steadily.
Your industry doesn’t work that way, but you do your best to make those quarterly balance sheets work for the conglomerate. Unfortunately, that means any long-term outlook you used to have no longer works for your corporate masters. Now you can only look one year ahead, maximum, because that’s all the focus the conglomerate will allow.
One of your business’s largest problem comes out of the nature of the industry itself. The success of each product cannot be replicated. Just because you build one really good widget doesn’t mean that your next widget will sell at all. Your business has a luck aspect to it, an unpredictability that no matter how much you plan, you can’t fix.
The other built-in problems mentioned above cause your prices to verge on too high. If you solve the built-in problems, you might lose even more revenue, because most of those problems benefit the stores that sell your product. Those stores have made it clear they will not order from you if you take those harmful (to you) perks (to them) away. So your prices hover at a point too high for an impulse purchase, even though your business does better when consumers can buy your product on impulse.
You have maintained this system for decades now, trying different ways to fix the built-in problems. None of the solutions work, because the only way to fix the built-in problem would be to have an industry-wide change, one that all of the businesses in the industry agree to. Unfortunately, if all of the businesses in the industry make that change, it will hurt stores, which will say that the industry businesses colluded to hurt their retail business—and sadly, the stores, under U.S. law, would be right.
So the easy solution is impossible, and all other solutions are half-assed. You hang on and your business maintains a consistent, if unspectacular, profit year after year after year.
Then some changes hit your industry that force you to cut costs where you can. Some of that cost cutting comes in employees. You have to lay off necessary folk and hope that the remaining staff can pick up the slack. These things have happened before, and you believe that you’ll be able to rehire in a few years.
Only this time, the economy “craters” and a global recession hits. Every business loses much-needed revenue and products like yours, which are not necessities, sell to fewer and fewer consumers because the consumers have less disposable income.
You anticipate, cutting everything you can, dumping real estate, abandoning rent, maybe even negotiating your way out of some long-term contracts. At the very end, though, you can’t prevent it: You cut staff to the bone.
Now, in some departments of your business, one person quite literally does the job that five people used to do as recently as a decade ago. You have no flexibility left.
And then the industry you work in undergoes a technological revolution, one so big, so profound, that it changes the way business gets done. Because you aren’t flexible, you adapt to the change late. You can’t hire new employees to help with the shift without firing the remaining good, valuable (and dare we say it), unbelievably efficient employees that you kept when the recession started. Yet your old employees can’t adapt to the new world.
Worse, this new world requires new systems. You have to figure out new ways to produce your product. You need to shoehorn these changes into the existing contracts with your suppliers. You need an entirely new production crew because the old ways to produce your widgets are becoming obsolete.
And, most annoyingly, you need to develop an entirely new accounting system, because everything you’ve known, everything you’ve done, no longer applies in this brand-spanking new technological age.
But you can’t hire employees who can actually help you develop these systems. Because those employees won’t earn you any money. At best, they’ll prevent a loss of revenue. At worst, the systems they develop will cost you money because your suppliers, whom you pay a percentage of the retail price of the product they supply, will realize you’ve been inadvertently shorting them since the technological change hit at the same time as the beginning of the global recession.
In other words, to fix this problem, you will need to invest—in new employees, in brand new technological systems, in new ways of doing business. More importantly, you will have to take a huge loss as you make this change. A loss that might eat into your profits for not one, not two, not three quarters, but maybe for two to three years, something your corporate masters will never, ever allow.
Better to close your eyes and pretend the problem doesn’t exist. Better to hope no one notices. Better to keep doing business as usual until profits rise, the recession ends, the world becomes wealthy again, and you can make the changes without causing a series of quarterly losses on your balance sheet.
Better to keep kicking this problem down the road until you retire or move to another company, preferably one which has already solved this problem so you don’t have to deal with it.
Does this scenario sound familiar? It should if you watch the evening news or read a daily newspaper. Industry after industry suffers a variation of these problems, some caused by inefficiency, some by technological change, and all exacerbated by the worst recession to hit in the last eighty years.
But this blog deals with publishing, and what I just described to you is the situation at traditional publishers—the big publishers, the ones most people mistakenly call The Big Six (there are more than six, but leave it)—all over New York City.
Last fall, I dealt with these problems in depth. Before you decide to comment on this post and tell me that traditional publishing will die (which I do not believe), read the first few posts I did in the publishing series, starting here.
I’m grappling with the changes in publishing just like everyone else is. I knew that the changes—particularly the rise of e-publishing—would hit traditional publishing hard. And it has, although not as hard as I initially thought. As Publishers Weekly reported earlier in the month, traditional publishers have remained profitable in the transition so far.
The reasons why should sound familiar to those of you who read my earlier posts. Publishers Weekly puts it succinctly: “While the improvement in the economy helped all publishers in 2010, companies where profits improved all pointed to two main contributing factors—cost controls and skyrocketing e-book sales.”
Right now, e-books comprise about 10% of the book market, but some analysts believe that e-books will be as much as 50% of the e-book market by 2015. Some see evidence that e-books will grow faster than that. A month ago, a Barnes & Noble executive made news when he stated in a speech that e-books will “dominate the market” in 24 months.
We all know these figures are important. Daily, writers tell me about their careers and then ask me if they should become independent publishers or go to traditional publishing. As I’ve said repeatedly, I see no harm in doing both.
Earlier this month, however, I opened my mail to find a big fat warning sign of the future. And if the problem that I—and hundreds of other writers—noted doesn’t get resolved, then traditional publishing will cease to be viable for all writers.
What happened?
I got a royalty statement for backlist titles of one of my on-going series. The statement came from a traditional publisher. Let me give you some background.
A few years ago, the publisher refused to buy the next two books in the series saying that while the series had some growth, the growth was not enough to justify the expense of a new contract. I started writing some novellas in that series and publishing them in the magazine markets while I searched for a new publisher.
Then the e-book revolution hit, and as an experiment, I put up two of those novellas as e-books. Since they were the first two e-books I had ever done, the covers—in a word—sucked. I did no promotion and no advertising, except to say in the cover copy that these e-books were part of this particular series.
In the first six months of 2010, those badly designed short novels sold about 300 copies each on Kindle, the only venue they were on at the time. No advertising, bad covers, just hanging out waiting for buyers to find them.
I would occasionally check the Amazon sales ranking (that weird number you see on each book Amazon publishes, the thing they use to compile their hourly bestseller list). Even though that ranking did not give me actual sales numbers, I did note that the sales of the novellas were less than the sales of the traditionally published e-books on Kindle in the same series.
In August, I wrote to the traditional publisher, asking that my rights revert. The kind woman in rights reversal explained to me that she couldn’t revert the book rights because the e-books were “selling too well” to revert. Okay. All well and good. What I care about is getting books into the hands of my readers. I figured I would eventually be compensated for this. I just had to wait until the royalty statement hit.
Which it did. At the beginning of this month.
How many e-books did the traditional publisher say I sold? 30. That’s right. 30.
When the novellas, which had worse sales rankings from Amazon, sold 300 each.
That 30 number didn’t pass the sniff test for me. So I talked with other writers who have books in the same genre with the same company. The writers I talked with also had some e-book savvy.
Guess what? They had been shocked by how low their e-book numbers were as well, especially in comparison with their indie published titles. The indie books which had Amazon rankings indicating fewer sales sold more copies than the traditionally published books by a factor of ten or better.
Let me indulge in another sidebar for a moment. I’m involved with four different indie publishers, two of which allow me to see the day-to-day operations, and one of which I own part of. We’ve been having trouble setting up an accounting system that works efficiently for more than 100 different e-book titles. The problem is, in short, that the ebook distributors report sales by publisher and then by title, and not by author, so if you’re published by AAA Publishing and your book is called The Embalming and I also have an older book called The Embalming through AAA Publishing and they’re both in e-book, AAA Publisher will get sales figures on a daily basis for The Embalming. Which Embalming does that statement refer to?
Also, the e-stributors report at varying times throughout the year (some daily, some monthly, some quarterly), so if I want to know how many copies my book The Embalming sold in March of 2010, I can’t easily get that information because the info might not have been reported yet from some e-bookstore in some faraway country.
What all of the various indie publishers have figured out is that using a standard spreadsheet for each title is labor-intensive. You can easily input data into a spreadsheet for one or two or even ten novels. But when it comes to 50 or 100, the data-entry—figuring out what book belongs where and when (even if you use the estributor’s the computerized spreadsheet)—becomes prohibitive.
What we need is a cloud-based system that can be queried. For example, the system should easily answer these two questions: How many copies did KKR’s The Embalming sell worldwide in March; and how many copies did KKR’s The Embalming sell through Kobo’s out-of-country distribution channels? Right now, no spreadsheet program can answer that information easily from a pool of 100 titles and various e-book outlets without a lot of man-hours of data entry.
Traditional publishers—and indie publishers, for that matter—don’t have the staff with the ability to organize this wealth of information. Still, traditional publishers must —by contract— report the information to the best of their ability on royalty statements.
To do so, they revert to an old pre-computer accounting method. The method existed back when there was too much data to be quickly processed. We all learned it in school. They used little snippets of data to estimate, often using an algebraic equation that goes something like this: If The Embalming sold (x) copies in January and e-books sales rose on a trajectory of (y) copies over a six-month period of time, then (x) times 6 adjusted for (y) equals the number of sales of The Embalming.
Close enough. And frankly, I would be satisfied with that, if the number the publisher had come up with wasn’t so wildly off.
For me, in the instance with the traditional publisher I mentioned above, the difference between 30 copies per title and 300 copies per title is pennies on the dollar. It’s not worth an audit.
But I never think in small terms. My training in three fields—journalism, history, and the extrapolative field of science fiction—forces me to think in terms of the future.
Right now, e-book rights are a subsidiary right, negligible and relatively unimportant. Between two and five years from now, e-book rights will become the dominant book right.
If traditional publishers do not change their accounting methods now, then these accounting methods will end up costing writers hundreds of thousands of dollars per year. (In some writers’ cases, millions of dollars.)
Those of you who have any knowledge of journalism have just looked up and asked, Why the hell did Rusch bury her lead? That’s the story: publishers are screwing writers on e-book royalties.
But those of you who have had journalism careers know why I buried that lead. When I was a news director faced with a reporter who had brought me information like the information I gave to you above, I would have said, Sounds like a good story. But it’s all supposition. Now get me something concrete. Somthing I can use.
So that’s what I tried to do. Last week, I contacted dozens of traditionally published writers who also had put up some backlist on their own in electronic format. The writers who had the information handy responded with actual numbers. The writers who didn’t told me that they had worried about their royalty numbers when the statements arrived, but had no real proof that anything had gone awry.
I also spoke to some trusted agent friends, several lawyers who are active in the publishing industry, a few certified public accountants, and other professionals who see a lot of publishing data cross their desks, and I asked those people if they had heard of a problem like this.
To a person, they all confirmed that they had. All spoke off the record, none with numbers. A few hinted that they couldn’t talk because of pending action.
In other words, I got the confirmation I needed, just nothing that a reputable journalist could print. Most people spoke to me on what’s called deep background, confirming my theory, and giving me some suggestions of places to look, and people to contact. Several people, mostly writers, spoke on the record, but rather than using their information in isolation, I’ve chosen to keep their statistics confidential and to only go with mine.
Frankly, what I’ve learned is this:
Right now, some—and I must emphasize some, not all—traditional publishing houses are significantly underreporting e-book sales. In some cases these sales are off by a factor of 10 or more.
This is a problem, but at the moment, not a serious one. When e-books are 10% of the market, we’re talking a relatively insignificant amount of money per author. As one long-term writer said to me, “Ever since I got into this business, I expect my publisher to screw me on the sales figures. This is no different.”
If you don’t understand that writer’s point of view, read the trust-me post I wrote a few weeks ago.
In the past, I would have agreed with that writer. But I don’t in this instance. We’re at an important moment in publishing. We have the opportunity to change the behavior of traditional publishers. We can, with an effort, get them to change their accounting practices.
The reason I started the blog post the way I did is this: I wanted to explain, before I got to the heart of this post, how traditional publishing works. I wanted understanding before I worried some of you.
Because here’s the truth: traditional publishers are not indulging in a criminal act. They’re doing the best they can out of necessity. They see no reason to spend precious dollars revamping their accounting systems to accommodate e-publishing when those dollars can be used elsewhere in the company. Especially when an accounting change will cost them money, and might lead to payouts that will hurt quarterly profits for months to come.
It’s up to writers—and writers organizations—to force publishers to allocate those scarce dollars to develop systems for accurate e-book accounting.
If you are a traditionally published author, do not—I repeat, do not—write a blistering letter to your publisher accusing him of stealing your money. Instead, contact any writers organization you belong to and point that organization to this blog.
What needs to happen is this: writers organizations need to band together and order group audits of e-book sales on behalf of their traditionally published authors. One organization cannot handle the cost of this group accounting alone. It’s better to have all of the writers organizations work in concert here.
A group audit of all the traditional publishers in various publishing divisions will force an accounting change—and that’s all we need. But we need it before e-books become the dominant way that books are sold.
If you’re a traditionally published author who has also produced some self-published e-books and you want to do more than contact your organization, do this:
1. Look over all of your royalty statements. Compare your indie e-book sales to your traditionally published e-book sales. Make sure your comparison is for the same time period. For example, do not compare January 2011 sales to January 2010.
2. Compare similar books. It’s best if you have books in the same series, some indie published and some traditionally published. If you don’t have series books, then compare books in the same genre only. Comparing romance sales to science fiction sales will not work because romance novels always outsell sf novels.
3. If you see a discrepancy, report that—with the numbers—to your writers organization. Be clear in the letter you send to your organization as to what level of involvement you want in this issue. Are you only there to provide background information? Will you take part in a group audit? Will you work on this project?
I’ll be honest. I’m not going to participate in any group action. Even though I’ve published with every single major publisher in New York, I only have two books caught in this problem. I’m more interested in getting the rights in those books reverted than I am in insignificant back royalties.
If I was still a reporter, I would spend the month or two going after this story with a vengeance. But I am not. In nonfiction, I am just your humble blogger, stirring up the pot. My career is in fiction, and I have found no problem with the publishers of my frontlist books. I also have six novels with firm deadlines that won’t allow me to take time away from fiction writing to pursue this.
So all I can offer is a blueprint.
If you’re a reporter who specializes in the publishing industry and you want to tackle this story, e-mail me privately. I’ll tell you what I can without revealing confidential sources.
If you’re a traditionally published writer, please follow the steps above.
If you’re an indie-only writer, stop gloating and for heavens’ sake don’t tell me or anyone else that this is proof traditional publishing is dead. The majority of writers don’t want to self-publish, even when told how easy and financially beneficial it is. They want a traditionally published novel.
Here’s what I believe: If a writer wants to publish traditionally and can secure a contract, then that writer should be treated fairly, with accurate sales reporting and good royalty rates.
Let me state again for the record. I do not believe that anyone in traditional publishing is setting out to screw writers on this issue. I do believe the scenario I wrote in the first 800 words of this blog: I think traditional publishers are overwhelmed and stretched to the limit. Accurate e-book sales reporting is not even on their radar.
Right now, changing the accounting system is not high on their priority list. It’s up to the writers—acting in concert through their writers organizations—to make accurate e-book sales reporting and accurate e-book royalty accounting a number-one priority in publishing houses across the country.
Let’s work together to solve this glitch before it becomes an industry-wide disaster for writers—anywhere from two to five years from now.
Last week, a few of you asked in e-mail why I have a donate button on this blog. Also, last week, this blog marked its two-year anniversary. Every Thursday for two years without a miss, I have published an article on freelancing, business, writing or publishing (and sometimes on all four of those topics). For the first 18 months, those blog posts were part of a book I was writing called The Freelancer’s Survival Guide (which, even though it’s now published, is still available for free on this website).
Initially, I had hoped to make my publishing articles into a book as well, but the industry is changing too fast. I cannot make the publishing articles into a book that will be accurate in the short time it takes to produce. So when this month rolled around, I did the numbers like I always do. When I do a strict economic analysis, I am losing about $100 per week on each post—even with donations. That’s because I can’t leverage these posts into any other income source.
However, I always ask the next question: am I getting something besides money out of these blogs? Right now, I am. I would be doing the same research, the same work, and the same analysis with or without the blog. I would be discussing the changes with my writer pals. But I would lose the week-to-week contact with writers all over the world, who comment on the blog or in e-mail, sharing their own stories.
And that would be a significant loss. It more than makes up for the financial loss. But the donate button is here to minimize some of the financial damage, and to encourage me in busy or difficult weeks to carve out the time to write my post.
I hope that answers the question. As always, I appreciate the feedback and all of the support.
“The Business Rusch: Royalty Statements” copyright 2011 by Kristine Kathryn Rusch.
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