Author Earnings, Amazon, and the Future of Ebooks

February 22, 2014 | Written by Chip MacGregor

There has been a ton of discussion over a report on author earnings  by ebook authors (which you can find here: http://authorearnings.com/the-report/), the response to it (http://tinyurl.com/pcebsd5), and the responses to the responses (two of the best are http://tinyurl.com/kbjts5s and http://tinyurl.com/omkjz6v ). If you follow this discussions in our industry, you already know what’s going on: successful self-published author of Wool, Hugh Howey, did a bunch of research and came to the conclusion that self-published authors are selling more books and making more money than those publishing with traditional publishers. It was quickly pointed out that there were some problems with Howey’s work — he sells his books on Amazon, did all his research on Amazon, and (surprise!) came to the conclusion that Amazon is a great place to do your ebooks. Nevertheless, there were really some interesting things that showed up in his research:

—Indie-published ebooks have generally higher ratings on Amazon than Legacy-published ebooks.

—Indie-published ebooks generally cost less than Legacy-published ebooks, possibly leading consumers to the sense of getting better value from indies.

—Indie-published ebooks may be outselling Legacy-published ebooks (this is more inferred than proven).

—Indie-published ebooks constitute a larger percentage of books sales than we’ve been led to believe in the past (Howey estimates it’s more than 50% of all book sales, though his methodology lacks stringent validity testing).

—Indie-published authors of ebooks are earning more per book than Legacy-published ebook authors. (Though his argument that Indie-published authors are making more overall is based on very shaky evidence.)

It’s all fascinating stuff, and I believe his conclusion that publishing’s brightest days are ahead is spot-on. As an agent, I’ve never felt I was one of the people who needed to protect the status quo — the fact is, I believe in authors self-publishing.. Unfortunately, the debate that arose after Howey released his findings was considerably less than insightful. It’s become a fairly rancorous debate, with authors and pundits picking sides, pointing fingers, and making their case with angry words and often impolite rhetoric. Those who want to defend traditional publishing seem to want to dismiss the study, and those who are staunch publishing revolutionists can’t stand the thought that Howey’s work might not actually hold up to critical analysis. Dana Beth Weinberg, who runs a Master’s program in Data Analytics and might know a bit about data analysis, has come under a scathing attack for daring to criticize Howey’s methodology.  (The criticism is basically this:  “We don’t want to hear from experts, we want to hear from people who agree with us!”)

Again, I thought Howey’s study was interesting, since we rarely get to see this sort of data. His premise that Legacy publishers paying a 25% ebook royalty is unfair to authors is obviously true, and he states that one of his goals is to push publishers to change that — something I’m very supportive of. His assertion that traditional publishers have skewed the data over the years to protect their market share isn’t really a surprise — both sides in this debate have done that. And his conclusion that publishers are making more than authors isn’t really “news,” in my view, but it’s a good reminder. So I’m glad he took the time to do the report.

Still, there are some real problems with his work. The study was only done with one company, all the data is from one day, and he admittedly relies on friends and conjecture for many of his conclusions. In other words, his sample size is way too small. He breathlessly reports that 92% of the bestsellers are Amazon ebooks… um, somebody apparently forgot to explain to him that Amazon uses their bestseller lists as promotional tools for the company, so they’re notoriously unreliable as industry examples. And you don’t get “trends” from looking at one point in time, you get them from looking at several and creating a trend line (even my one class in statistics in my PhD program at the University of Oregon taught me that).

So while I tend to view Howey’s data as almost completely one-sided, I also think he raises some very valid points. A few years ago, a writer could live from one advance check to the next — now that’s nearly impossible, except for the very bestselling, A-level authors. A few years ago authors tended to shy away from niche publishers, because they were considered the minor leagues. Every author was trying to push toward the biggest publishers, since that’s where the most money and the most marketing were to be found — now a lot of writers have come to understand that ebooks sell best in clear categories, and a niche publisher that can move a lot of ebooks to their core readers can earn an author a huge payday. A few years ago, most writers really hated the thought of self-publishing, since it was considered a “vanity press” and was only to be used when you just couldn’t land a deal with a “real” publisher. Now a lot of writers have figured out that there is a huge and growing market for ebooks, and self-publishing is a choice many authors are making because it gives them more options. In fact, some authors (including the likes of James Scott Bell, Jon Konrath, Brandilyn Collins, and several others) are deciding to focus almost exclusively on self-publishing. Still, most people making a living with their writing are hybrid authors, doing some combination of traditional publishing and self-publishing.
Howey mentions that, with the advent of e-publishing, some authors are “paying a bill or two from their writing.” That’s doubtless true, since it’s clear an author who is selling a 99-cent ebook on Amazon is at least making something, whereas an author who is still waiting for a traditional publisher to contract her novel isn’t making a dime. But he fails to mention the obvious problems: the vast majority of authors who self-publish don’t really make much at all. And the boom of self-publishing has led to a huge pile of crap, meaning readers now have to wade through a bigger pile than ever to find your books.
The fact is, one of the major problems authors have had with self-publishing is simply being lost amidst all the titles. There are currently about fifteen MILLION titles for sale on Amazon, making it awfully hard for an author to stand up and get noticed — they’re just one twig in a forest. That’s why I’ve become a fan of author communities creating niche lines. We helped authors start a western line of books (www.dustytrailbooks.com) just so that all those writers creating westerns had a common place to gather. Instead of an author posting a book on his website, selling copies to the 200 or so friends and readers who commonly visit, then slogging through months with no one visiting the site and buying a book, he can join with a bunch of other, similar western writers and create a destination site that readers can go to in order to find a bunch of western novels. We also helped create a clean romance line (www.forgetmenotromances.com) so that an author wouldn’t have to just post her book on Amazon and hope somebody noticed. I’d like to see us help authors create more sites, focused on genres that sell well as ebooks. And note that I say “we helped authors create” instead of “we decided to publish.” MacGregor Literary is not the publisher — the authors are the publishers. They don’t turn the rights over to us. In fact, they can decide at any time to withdraw a book if they get an offer from a traditional publisher and want to move that direction. We just exist to help create the destination websites, provide the expertise to make it all happen, and offer some guidance along the way.

So, just because I want you to understand exactly what I’m saying, I’m going to make this very clear: In today’s publishing market, I think nearly every author needs to consider being a “hybrid” author. That is, I think most of the authors our company has the privilege of representing need to consider having a combination of publishing deals. They need to consider doing some books with a traditional publisher, who can pay an advance, give you broad exposure, get you introduced to major media, and get you into every Barnes & Noble, Wal-Mart, and independent bookstore in the country. You also need to consider working with some niche or indie publisher, who can pay you a much better royalty and hopefully draw an audience of readers who like exactly the sort of book you write. And you need to consider self-publishing some of your work — certainly your out-of-print titles, but also  shorter works that won’t attract most traditional publishers, and even new book projects that can reach your core audience. Those self-published books will pay a much greater royalty than your traditionally published books, and you’ll get paid faster, so there’s a nice benefit to working with Amazon and B&N.com and the iBookstore.

Of course, with greater choice comes greater responsibility. If you choose to self-publish, you have to take care of your own editing and copyediting — word will quickly spread about a badly edited book. You will have to pay for your own cover. As a matter of fact, you also have to find an designer to work with you, since a lot of self-created covers are terrible, and all the research suggests that a bad cover will kill your self-published book. You also have to format your book the right way, and get it loaded to each system, which takes a bit of expertise — and all of these are things that require some time and attention to detail. But most importantly, you have to do all the marketing of your self-pubbed book. ALL, since there’s nobody to help you with reviews, distributing copies, letting readers know about it, taking out ads, or any of the million things we do to market a book. One bit of good news: You can pay to have all those things done. Another bit of good news: You can learn to do most of them yourself. And a third bit of good news: this is why you have an agent. You certainly don’t HAVE to do your ebooks with your agent, but if you want help, they ought to be willing to assist with things like finding you a good editor, steering you toward (or possibly taking care of) the copyediting, introducing you to a cover designer, assisting with the formatting and uploading of your manuscript, and, most importantly, helping with the marketing. (I’m not trying to give you a commercial. I’m just trying to point out what we do, and how this job has been changing in recent years. I used to rarely talk marketing — now I could spend every minute of the day just on marketing plans with authors.)
Again, I’m one of those people who is very much in favor of authors self-publishng. We’re trying to put information together to help the authors we represent know how to best do that. We hope to work with them on some books, to help them market and sell copies, and to represent their foreign & translation & movie rights. We also want to continue selling their manuscripts to traditional publishers when that’s the best choice. But even if we’re not participating financially, we want to provide authors with the tools they need to successfully self-publish. Because that should be the role of a literary agent — to help authors succeed and make money.
And that’s the problem where agents are concerned — they’re not sure how they’ll be compensated for their efforts. There’s been some disparaging talk of agents in the press lately, some of it brought on because a couple of big agencies made it clear they weren’t going to help authors who were self-publishing. But it’s also been talked about because some folks believe they don’t need anyone to help them; that they can write and market and sell books without any help from others. If that’s true, more power to them. I’m all for helping authors, and I’ve spent my life doing just that, whether I’m paid or doing it as a favor. I’ve tended to talk with the authors I represent about their careers, and how best to move forward in this crazy business, whether I’m making a buck or not. And right now, you probably need to start thinking about how you can be making some money from self-publishing. I’m happy to talk with you about the topic more on this blog, if you want to. Just let me know if you think we need to be exploring more self-publishing issues.
So that’s what is happening in publishing today. Here’s wishing you success with your books, no matter what publishing choices you make.

Posted in Agents, Career, Current Affairs, Deep Thoughts, Marketing and Platforms, Publishing, Questions from Beginners, Self-Publishing, The Business of Writing

  • http://www.carlalaureano.com/ Carla Laureano

    I love this post. It seems like every time I comment on this subject, I say the same thing: writers can’t just be writers, they must be entrepreneurs. We must take responsibility for our career directions, and I’d venture to say that while most good agents want to help us make sound decisions, it’s ultimately our decision how to run our businesses. That means exploring all the options and figuring out how to best maximize our time, earning potential, and exposure in the marketplace.

    The funny thing about e-books, though. There may be a greater perceived value in lower priced indie e-books, but if you put out a low priced or free e-book, you’re automatically considered a hack. A recent review from someone who downloaded my traditionally published e-book on a free promo day: “I found this book as a free Kindle download. Wow, was I surprised!! This was actually a very good book…” Guilty until proven innocent, I think.

    • Barbara Robinson

      I don’t do freebies anymore :)

      • http://www.carlalaureano.com/ Carla Laureano

        I don’t blame you. However, when done as a part of an overall marketing strategy, it can definitely boost sales. Fortunately, my publisher understands how to work this better than almost anyone out there. The reader assumptions are still funny, though.

    • chipmacgregor

      Thanks for coming on to comment, Carla. And yes, running your writing career like a business is the only way to go. (And that will probably mean doing some self-published books!)

  • Lynn Chandler-Willis

    Finally. A post about this subject I feel I can trust. Thanks, Chip.

    • chipmacgregor

      You’re very welcome, Lynn. Appreciate your compliment.

  • Rebecca Waters

    I appreciate the way you embrace change and I think you are right about writers needing to think “hybrid.” However, as a new author, I need the guidance of an editor or agent to navigate the publishing waters. I think as I learn more, I may be able to be that hybrid author. That time has not arrived. When I was considering a marketing package for my first novel, I said to someone, “I could do all of that.” I could. But the woman I was talking with said,”You need to decide if you are going to wear the writer hat or the marketing hat.” I’m learning more about both but still need the support. Thank you, Chip.

    • chipmacgregor

      I think that’s a fair choice to make, Rebecca. Most writers today have to wear both hats — “author” and “marketer.” It’s easy to find help with the former. The latter is much more in question.

  • Nancy Kimball

    Chip, thank you for this post. It’s encouraging to know that more and more literary agents are supporting hybrids and Indie authors. When I made the decision to self-publish this year, I’d been connected in the industry enough to be prepared to do it well. I do not know if I am in the minority but my decision to self-publish was not about potential income so much as finally reaching readers. That is why I write. If I make enough to recoup the cost of my professional edit, cover design, interior design and formatting, then it’s a boon.

    • chipmacgregor

      Fair enough, Nancy. You’re not the only writer I’ve had contact with who says that same thing — they began to self-publish to reach readers and have more control of the process.

  • Barbara Robinson

    I make more as an indie self publisher than I ever did through my publisher and that’s a fact. I can only speak for myself. I am happy making a larger royalty myself.

    • chipmacgregor

      Well, I’ve yet to meet the author who wanted to make LESS money, Barbara.

  • Ron Estrada

    I’ve been following this closely, Chip. As an unpublished author with a pretty good online following as well as a regular print mag (local) column, I’m confident I could sell a few copies if I wanted to self-publish. However, like you said, writing is only part of the equation. And I still want to traditionally publish before I self-publish to build up a readership. My fear, of course, is all the other duties you mentioned–editing, cover art., etc. This is likely where the agents of this new publishing world will come in. Either agents can provide some of those services or contract with people who can. I would certainly have no issue paying a royalty for that, or even just a lump sum up front so that I can get on with the next project. Of course, if agents take on these kind of services, the dishonest folks will surely pop up like weeds. But they’re already out there. Those of us who’ve been lurking in the shadows for a while know what to watch for. Anyway, I believe you’re right. I’m excited about the new publishing trends. My plan is to get at least two books published traditionally under one genre, then self-pub in another (unless my wise agent advises differently…I’m willing to learn from people smarter than me).

    Thanks for your opinion on this, Chip. I always find your insights helpful.

    • chipmacgregor

      I don’t feel it’s an either/or, Ron — that a writer doesn’t have to choose between self-pubbing or traditional pubbing. In my view, many authors will do best when they do both. But as to your earlier comment, I know it can be overwhelming to feel as though you have to learn several new jobs (cover designer, editor, etc). There are a bunch of people trying to help authors self-publish. Some are helpful, some are scam artists. Talking to others is still one of the best ways to protect yourself.

      • http://www.birgitterasine.com/ Birgitte Rasine

        I’d agree with all of that. I wear the hats of author, publisher, and owner of a design firm that is now working with authors as our clients, and can say that the tasks of editing, cover design, interior design, book production and layout, then pre-press and eBook conversion do indeed command a great deal of respect. As an indie author I’m fortunate to have all of them under one roof—but I am now officially a hybrid author as well.

        One word of advice to the authors thinking about self-publishing is, make sure you have a rock-solid contract with anyone you work with, and never send the full payment up front, especially not the first time you work with someone. Step by deliverable step.

        • chipmacgregor

          Amen, Birgitte. A good, clear contract will save you a lot of trouble down the road. Thanks!

  • http://www.heatherdaygilbert.blogspot.com/ Heather Day Gilbert

    Thanks for this more balanced post, Chip. As I’ve said before, it is possible to get noticed in the sea of e-books, but you have to have a strategy in place (great cover art being integral, I believe–sadly people DO judge books by their covers). Sometimes agents can help in this process, sometimes they can’t. Indie authors definitely have different needs than trad. pubbed authors. We, by necessity, have to be in charge of far more aspects of our publication process. Some of us revel in this fact, because it means we set our own deadlines and it’s on US personally if our book fails. For me and for many indies I know, that means we push ourselves to learn as many aspects of the business as we can.

    Regardless, I’m happy to see agencies thinking of ways to get hybrid authors out there. What I’d love to see (and probably won’t see) is agencies that will take on indie-exclusive authors and come alongside them in all their efforts, offering support with marketing, editing, formatting, etc, or even those niche groups you mentioned (love that idea!). Indies like to keep most of their profits, so agents would have to bring a LOT of skills to the table to make them invaluable in that regard.

    • chipmacgregor

      I don’t know how many agents agree with me on authors taking a self-publishing route, Heather. It’s a change, and people tend to resist change. If they can find a way to monetize it, they’ll step in.

      • http://www.heatherdaygilbert.blogspot.com/ Heather Day Gilbert

        Totally understand that. I was resistant to the idea of self-pub at first, but in the end it made the most sense and that’s the way God led me. I would love to see some kind of win-win for agents and authors to keep working together, even if authors are indie-only.

        In the meantime, though, I have to say it’s great that authors have the option of marketing themselves the most effective way possible–with their books. Blogging, tweeting, and FBing as a fiction author can only go so far. It’s so much more effective when you have a published book to offer.

  • Cheryl Rogers

    Do you or any other agents work with exclusively self published authors to promote them? There’s got to be a way to make this work financially.

    • chipmacgregor

      Just to promote them? No. You may want to talk with a marketing company, Cheryl. A free-lance publicist may be of the most help to you.

      • Cheryl Rogers

        Thanks.

  • http://www.KristinBillerbeck.com Kristin Billerbeck

    It’s so nice to see someone look at the truth of this situation and not be completely one way or the other. Currently, I’m a hybrid author, but I just put out my final contracted book, and now I have to look at what’s next. I think it’s so smart for agents to be involved. Personally, I don’t want to be a lone ranger in this business. It’s lonely enough.

    • chipmacgregor

      Yes. What’s disappointing to me is that people seem to be creating camps — you’re either “for self-publishg” or “against self-publishing.” You’re either “pro-Howie and therefore a revolutionary who wants to destroy the current publishing system” or you are “an anti-howie Luddite who just is trying to defend the old guard.” Good grief. There are some of us who work in the current system and see these changes as GOOD. So glad you stopped by to comment on this, Kristen.

  • David A. Todd

    Chip: So Howey’s data is Amazon only, is for one day, and is limited to the “best selling” books only. He’s done it twice so far: once reaching the top 7000 books in three popular genres; the second time reaching the top 50,000 books in all categories (I think I’m understanding it right). Each time it was for one day only. You say this isn’t a good sampling. But I ask where is there better data available? Bookscan? But they don’t report for Amazon (at Amazon’s choice), so they don’t have info from the world’s largest book retailer. Howey does. And of course Bookscan doesn’t include any self-published books. Howey does. The Writer’s Digest survey of author earnings? That was a self-selecting sample that included a couple of thousand people who had never published anything at all.

    Seems like Howey’s data tells us more than everyone else’s. And it’s just two random days of data. It’s a great start. What happens when it gets to five random days, then a week at random, then a month? We will learn more from him than we ever did from any publisher.

    • chipmacgregor

      I find your comment typical of the people who badly want this all to be true — “His research sucks, but SO WHAT? I like his conclusions!” That’s been my problem all along with this. The data Howey offers don’t support his conclusions, and his supporters are afraid to face that.

      Let me offer some numbers for you, David: Howey looked at the top 1.5% of books in three categories. Um… not exactly the mid-list heroics he makes it out to be. He talked to friends to ask them how much money they made, then matched that to their numbers to figure out amounts — failing to recognize that Amazon jiggers their lists, so that part of the study is pretty much summed up as “wild surmise.” He then took that amount of money and multiplied it by 365 to come up with an annual amount, which is downright silly. Every author knows their best or worst day times 365 doesn’t offer a realistic assessment of the year. His evidence, as pointed out by several others, is that even though he was looking at supposed bestsellers, only 27% of them were making more than the federal minimum wage… and, and again, these were the bestsellers. So, let’s just say that, while I’m very supportive of self-publishing, I’m not quite seeing it as the money-machine Howey suggests it is.

      • David A. Todd

        Sorry, I don’t accept that the data he’s generating sucks. His conclusions from that data may indeed suck; I haven’t read them. I’m concentrating on the raw data, not the conclusions. My original post said nothing about his conclusions. A check of 50,000 books at the world’s largest bookseller is a big sample. It’s more than anyone else has been able to do. It is based on what people are buying there. It is not a self-selected sample. And I would say that 50,000 books does indeed take this down well into the midlist level. How many writers do you put on the A list? 100? 500? 1000? I would guess 100. So unless those 100 writers each had 500 (or those 500 writers each had 100) books represented in the sample, his data is way down into the midlist.
        I’m for sure aware self-publishing isn’t a cash cow for everyone. My own experience proves it. My earnings wouldn’t even feed a Starbucks habit, if I had one. I’m just pleased that someone is making an attempt to generate some data on book sales on a large number of books, data that includes self-published books. Perhaps after a year of once-a-week data samples he’ll be able to fine-tune and prove or refute his conclusions.

        • chipmacgregor

          You know, David, you seem to be splitting hairs. First, I didn’t say his data sucks — I was using that as an example of something you might have said (look again). Second, the point behind his research is all about conclusions — and whether we agree with his conclusions or not, I’m saying they are conclusions based on weak research methodology. Third, he admitted that his research was based on bestsellers in three categories, so he was NOT doing mid list books. (Something that has been pointed out by numerous people with a background in research.) Fourth, the big data and charts he showed in his report were from a study of 7000 books… not 50,000. Again, I’m not an enemy of Hugh Howey. I’m all for authors self-publishing. I just keep seeing authors who want this all to be true leaping to defend this study, when in fact it has problems. And yes, perhaps in a year he can fine-tune this… but in research circles, he would have taken the time to fine-tune it before reporting it as fact.

  • Sara Wolff

    Interesting article. Change is never taken well, by either side. Snide smugness is just as bad (or worse) than sour grapes. The real winners will be the ones that move to the middle, change with the times, and find a way to make it work. My husband worked for years in the newspaper industry. When the internet started to change things, there was much of the same kind of bickering, denial, and refusal to bend. Well, you see where we are with that now.

    For me, self-publishing is simply the only way to do what I want to do. Niche genre serials are not appealing to many publishers. But I am thankful the stigma is falling and I have half a chance now. Nevertheless, looking back when I started writing 20 years ago, it’s a Brave New World. Anything new is scary. But it’s also exciting. I am very eager to see how things will change and how agents and other professionals in the industry will make it work for them.

    • chipmacgregor

      Agreed, Sara. Change is scary, and we’re certainly in a period of change. Glad to hear you’re finding a venue for your serial work.

  • April

    Your link to “Forget Me Not Romances” goes to “Dusty Trail Books.” Just thought you’d like to know.