'Vanity' Press Goes Digital

By  Geoffrey Fowler And Jeffrey Trachtenberg
Wall Street Journal
June 15, 2010

Writer Karen McQuestion spent nearly a decade trying without success to persuade a New York publisher to print one of her books. In July, the 49-year-old mother of three decided to publish it herself, online.

Eleven months later, Ms. McQuestion has sold 36,000 e-books through Amazon.com Inc.'s Kindle e-bookstore and has a film option with a Hollywood producer. In August, Amazon will publish a paperback version of her first novel, "A Scattered Life," about a friendship triangle among three women in small-town Wisconsin.

Ms. McQuestion is at the leading edge of a technological disruption that's loosening traditional publishers' grip on the book market—and giving new power to technology companies like Amazon to shape which books and authors succeed.

Much as blogs have bitten into the news business and YouTube has challenged television, digital self-publishing is creating a powerful new niche in books that's threatening the traditional industry. Once derided as "vanity" titles by the publishing establishment, self-published books suddenly are able to thrive by circumventing the establishment.

"If you are an author and you want to reach a lot of readers, up until recently you were smart to sell your book to a traditional publisher, because they controlled the printing press and distribution. That is starting to change now," says Mark Coker, founder of Silicon Valley start-up Smashwords Inc., which offers an e-book publishing and distribution service.

Fueling the shift is the growing popularity of electronic books, which few people were willing to read even three years ago. Apple Inc.' s iPad and e-reading devices such as Amazon's Kindle have made buying and reading digital books easy. U.S. book sales fell 1.8% last year to $23.9 billion, but e-book sales tripled to $313 million, according to the Association of American Publishers. E-book sales could reach as high as 20% to 25% of the total book market by 2012, according to Mike Shatzkin, a publishing consultant, up from an estimated 5% to 10% today.

"If you are an author and you want to reach a lot of readers, up until recently you were smart to sell your book to a traditional publisher, because they controlled the printing press and distribution. That is starting to change now," says Mark Coker, founder of Silicon Valley start-up Smashwords Inc., which offers an e-book publishing and distribution service.

Fueling the shift is the growing popularity of electronic books, which few people were willing to read even three years ago. Apple Inc.' s iPad and e-reading devices such as Amazon's Kindle have made buying and reading digital books easy. U.S. book sales fell 1.8% last year to $23.9 billion, but e-book sales tripled to $313 million, according to the Association of American Publishers. E-book sales could reach as high as 20% to 25% of the total book market by 2012, according to Mike Shatzkin, a publishing consultant, up from an estimated 5% to 10% today.

Traditional book-industry players and tech companies are jumping on the digital self-publishing bandwagon. Apple last week announced a digital self-publishing program for its iPad giving 70% of revenue to authors, similar to Amazon's formula. Last month, Barnes & Noble also announced a service called PubIt!, allowing authors to post and sell e-books online.

Last fall, Jane Friedman, former chief executive of News Corp.'s HarperCollins Publishers, started Open Road Integrated Media LLC, which focuses on e-books, including authors who are willing to be published digitally before going into print. Traditional publishers such as Nashville, Tenn.-based Thomas Nelson Inc., a religious publisher, have struck alliances with Author Solutions Inc. for print and online self-publishing.

And a flurry of tech-focused startups now offers self-publishing services, including Smashwords, FastPencil Inc. and Lulu Enterprises Inc. Website Scribd.com says it publishes 290,000 independent books annually on its site, which authors sell at a price they set themselves.

One of the largest repositories for digitally self-published works for sale is Amazon's Digital Text Platform. Steve Kessel, an Amazon senior vice president, says the company launched Digital Text along with its Kindle in 2007 to give writers and small publishers simple tools to add books to the Kindle store. Today, the Kindle store accounts for about 70% of the U.S. market for e-books.

Amazon has used its retail clout to make deals directly with brand-name authors. It has won exclusive e-publishing deals from authors such as Stephen King and Stephen Covey.

And in May 2009, Amazon launched its own publishing imprint, Amazon Encore. From a sea of self-published titles, Amazon plucks a few with promise, then edits and distributes them online and through print retailers. It began with the book "Legacy," written by then-14-year-old Cayla Kluver. Amazon Encore has announced 19 books so far.

CEO Jeff Bezos says Amazon wants to be a partner, not a threat, to publishers. "I think the real risk is that there are a multitude of publishers. Some of them are really forward leaning, and are really going after this new e-book area," he says. "If you are not one of those publishers, then I would be worried."

The industry says that most authors will stay with their print publishers. More than 90% of sales still come from physical books. In addition to the editing and marketing support for their manuscripts, many writers depend on the advances they get from their print publishers. For some, this means seven-figure payments long before their titles hit the bookshelves. Self-published authors only generate revenue when their books are sold to consumers.

Yet as tens of thousands of authors self-publish their work, publishers' control continues to weaken over how titles are distributed and which books are offered for sale. Some publishers fear that one of the big technology companies now distributing e-books will compete for the industry's best-known authors, by offering advances in a bid to gain market share. Some best-selling authors write several books a year, and may be tempted to test the market if they have a manuscript that isn't under contract.

The market is likely to shift into two tiers, "branded/high-quality" and "cheap/good enough," predicts author and lecturer Seth Godin. Mainstream publishing houses have long depended for much of their profit on selling backlist titles, books in print for more than a year. In coming years, there will be adequate substitutes for many of those works at a quarter of the price, he says.

"Not for the books of J.D. Salinger or George Orwell, but for a book on stretching, certainly," he says. "And books on stretching have long helped pay the bills at many publishing houses."

The proliferation of cheap digital books concerns even publishers who don't think readers will defect to self-published titles. "There is some truth to the idea that low prices will drag down our prices," says Dominique Raccah, owner of Sourcebooks Inc., an independent publisher in Naperville, Ill.

Pricing was at the heart of a public spat between Amazon and five of America's top six publishers this spring. Amazon had been retailing most top e-books for $9.99. Publishers argued that price devalued work they sold for more than twice as much in paper form.

Publishers worried that readers would get used to paying so little for e-books that it could devalue the industry's cash cow, hardcover books. The publishers won, and Amazon adopted an "agency" model, in which publishers set prices for books, and distributors such as Amazon take a cut of the proceeds.

Digital self-publishing is attracting even top-selling authors. F. Paul Wilson, who writes the popular "Repairman Jack" thriller series published by Tor, an imprint of Macmillan, says he posted on Amazon five science-fiction novels published earlier in his careerat $2.99 each.

"This stuff was just sitting around, out of print, doing nothing," says Mr. Wilson, who has written about 40 books. He thinks he'll eventually make as much as $5,000 to $10,000 a month when he lists all his older titles.

Mr. Wilson doesn't foresee abandoning print, but some authors do. Thriller writer Joe Konrath says that, as more consumers buy e-books, the economics will tip.

Under the pen name Jack Kilborn, he sold 50,000 copies of his last novel, "Afraid," published by Grand Central Publishing, an imprint of Hachette Book Group, in all formats. He earned about $30,000. But if he sold it as an e-book on his own, he could make that much in 18 months by selling 800 e-books a month, he estimates.

Mr. Konrath says he's already earning more from self-published Kindle books that New York publishers rejected than from his print books. In the past 14 months, he has sold nearly 50,000 Kindle e-books, and at the current royalty rate, he makes $58,000 per year from his self-published works. When Amazon royalties double this summer, he expects to bring in $170,000 annually.

"I'm outselling a bunch of famous, name-brand authors. I couldn't touch their sales in print," Mr. Konrath says.

Most self-published authors don't have popular followings and see modest sales. Caroline Weiss and Margaret Wallace self-published their novel "Stalking Bret Easton Ellis" last year. Ms. Weiss estimates sales of the book at fewer than 400 paper copies and 100 digital copies. "It's a lot of work to promote your book, definitely," says Ms. Weiss. "Social media helps, but you have to be very aggressive."

Still, the success of Ms. McQuestion's debut self-published novel, "A Scattered Life," illustrates perhaps the biggest long-term threat to traditional publishers: a replacement for their ability to curate and market books.

Ms. McQuestion, who lives in Hartland, Wis., says she wouldn't have entertained a self-funded print run of her books. But she uploaded her first e-books to Amazon's Digital Text because she read that it worked well for another author. "I thought, if nobody buys it, I can just take it down," she says. When people began buying her e-books, she says she wondered: "Who were these people, and how did they find my books?"

The answer: Amazon has proven adept at using its technology to merchandise the so-called "long tail" of niche goods. While traditional publishers rely on name-brand reviews, Amazon has millions of customers posting reviews. Amazon offers free, instant, sample chapters to hook readers. And it makes computer-generated recommendations based on other readers' purchases. So, the more people that bought Ms. McQuestion's books, the more often the site recommended her work.

For new writers, Ms. McQuestion says, Amazon levels the playing field, since it doesn't differentiate between self-published and big-publisher titles. Ms. McQuestion says low prices—the novel sold for less than $2 on Amazon's Kindle—play a role in her success.

Amazon executives say they signed Ms. McQuestion to the Encore imprint after noticing the positive user-generated reviews of her books. Thanks to its vast database, Amazon not only knows what people buy but also how they consume e-books—such as which passages readers most often highlight.

Ms. McQuestion and Amazon won't disclose the terms of their deal for "A Scattered Life." Seattle-based Amazon will issue a new version of her e-book and produce a paperback version targeting book clubs.

"All of this time I have been trying to get traditionally published, I was sending my manuscript to the wrong coast," says Ms. McQuestion

The Stars of Self-Publishing
 
Amazon.com, Jeff Bezos, CEO
Kindle Digital Text Platform lets publishers and writers upload books for sale on Amazon.com, and the e-books can be read on Amazon's Kindle e-reader or other devices that support Amazon apps. Starting later this month, Amazon will give 70% of the price of the book to authors.

Barnes & Noble, William Lynch, CEO
PubIt! system, coming this summer, lets publishers and writers upload books to Barnes & Noble's online e-bookstore, which can be read on the company's own Nook and other devices that support its format. Revenue share terms with authors have yet to be announced.

Apple, Steve Jobs, CEO
Allows authors to upload and distribute books to its iBookstore, which can be used on the iPad and soon on the iPhone. Apple gives 70% of the price of the e-book to authors.

Lulu, Bob Young, CEO
Print and digital self-publishing company publishes approximately 20,000 new titles each month. The company doesn't charge authors to publish, but does charge for a range of services that include editing and cover design. Lulu.com takes 20% of the revenue from each sale.

Smashwords, Mark Coker, founder
Offers a digital distribution platform that supports a variety of e-bookstores, including Sony, Apple and Barnes & Noble. Gives 85% of the net proceeds from the e-book's sale back to the authors. Has published more than 12,600 titles.

FastPencil, Steve Wilson, CEO
Website with social networking features for authors to simplify writing and creating books. Site offers services for publishing in print and in a variety of e-book formats.

Scribd, Trip Adler, CEO
Website for publishing documents that can be read online or on a range of mobile devices. Allows authors to give e-books away for free, or set prices and sell them on the site. Authors get an 80% share of revenue.

Author Solutions, Kevin Weiss, CEO
Self-publishing company charges authors to prepare, market and sell their titles. Imprints include AuthorHouse, iUniverse and Xlibris. The company says it has published more than 125,000 titles by more than 85,000 authors.