A Look Back at 2017 Publishing Headlines: 5 Issues Raised for Authors

Photo credit: Clarissa Peterson via Visualhunt.com / CC BY-NC-SA

As one of the editors of the The Hot Sheet, produced in collaboration with journalist Porter Anderson, I regularly read and report on publishing industry developments that affect writers. Looking back at the key stories we covered in 2017, these are the headlines that stand out and raise questions for me in the new year.

Barnes & Noble’s Challenge: Return to Community Bookselling

At the end of November 2017, Barnes & Noble released their latest earnings report. The news was entirely predictable: the store’s losses grew, driven by a 6.3 percent decline in comparable store sales against last year. (Absence of a new Harry Potter book makes up half of that decline.) The declines have been going on for six or seven quarters now, with more declines expected. Still, B&N has been meeting its profit goals as a result of cost cutting.

Keep in mind that B&N’s performance is not necessarily indicative of overall book retail health. Print book sales as tracked by BookScan in 2017 show that the industry is not suffering the same rate of decline as B&N. Therefore, B&N is losing market share, likely to Amazon.

On the ebook side, Nook devices and its associated ebook retail business has been dwindling since at least 2014. In acknowledgment of Nook’s failure to compete against Amazon’s Kindle or even Apple’s iBooks, Barnes & Noble’s chairman, Len Riggio, told investors last month, “There is no business model in technology” for the chain. That immediately led to speculation that the business would be sold off—but to whom? And might Barnes & Noble partner with an ebook retailer if Nook is sold? Barnes & Noble has lost about $1.3 billion on the Nook business in the last six years, according to Fortune. At its peak, Nook enjoyed sales of nearly $1 billion a year. Currently it has sales of about $150 million a year. Many people inside and outside of the industry think it’s time to pull the plug.

The latest earnings report came with the CEO’s assurances that Barnes & Noble would begin to emphasize its core business: bookselling. Given that the store is seeing declines not just in book sales, but also in sales of other types of merchandise—and in foot traffic—it’s not surprising to see a renewed focus on books. Apparently, the thinking is that returning to Barnes & Noble’s heritage, as the CEO Demos Parneros put it, will save the day: “We’ve done recent research that reinforces and validates that, and we want to be the best at selling books. Our publishers are right there with us. They’ve been great partners. Our booksellers shared feedback with us and we know it’s the right decision,” he said during an investor call.

As many authors are aware, today’s Barnes & Noble hasn’t always been the most community-friendly store, and its bookseller attitudes and flexibility can vary greatly depending on location. Independent bookstores have been more successful at offering value and inspiring loyalty in customers that are helping them survive. Will Barnes & Noble truly be able to act more like a bookseller across diverse communities? And should they?

Successful Canadian bookseller Indigo has plans to expand into the US next year, and its emphasis is distinctly not on bookselling; Indigo calls itself “a cultural department store, offering a “joyful, addictive omni-channel experience as well as the ultimate community for book lovers.” That means the stores sell a variety of gift and lifestyle merchandise; about 40 percent of their store sales are non-book items, and those sales have been increasing by the double digits. (Print book sales have been falling.)

Complicating matters, Barnes & Noble plans to shrink its stores—carrying less inventory while improving discovery. Parneros said, “Our goal is to get smaller. We want to actually have a better store, even though it’s a smaller store.” They’re planning for about 40 to 50 percent smaller stores—sometimes even smaller—in terms of square footage.

In an article worth every author’s attention, Nathan Bransford interviews industry consultant Mike Shatzkin, who spells out the grave impact the loss of B&N could have on trade publishing, which was built on the ability of big publishing houses to put books on shelves. “That’s what they can do that authors can’t do for themselves and, up until now, Amazon couldn’t do for them either,” comments Shatzkin. Smaller trade presses would be hurt worse by a B&N collapse, since they have fewer mass-merchant outlets (such as big-box stores, which trade mostly in bestsellers) for their books. Big publishers would find it less efficient but doable to launch trade books only through the disparate network of indie bookshops; smaller presses would have a harder time. Should Amazon Books (Amazon’s physical stores) keep ramping up quickly, then all publishing roads would, finally, lead to Seattle.

The Self-Publishing Market—and Service Market—Shows Signs of Maturity

Author Kristine Rusch has covered this topic at length and in depth, mainly from the perspective of a crowded indie author market. I’m particularly interested in how the services market for indie authors is evolving, and who might survive over the long term.

In fall 2015, Pronoun launched as an ebook distributor that rolled up several startups, including Vook, Booklr, and Byliner. It’s been 100 percent free to authors, which raised serious questions about its sustainability. And, indeed, after two years, it announced it would close in January 2018.

Yet the closing of Pronoun did feel sudden, given that it was so recently investing in new partnerships and functionality. But it never got around to implementing an actual business model for author services. Because its owner was Macmillan (a big New York house), perhaps we shouldn’t be surprised that Pronoun had a short life under its umbrella.

Fortunately, self-publishing authors have other major reputable distribution services to choose from—including Smashwords, Draft2Digital, and StreetLib. While none offer the same incomparable deal as Pronoun, they offer fair terms and solid functionality; the first two options have a strong presence in the US market and appear very stable.

It’s hard to say which self-publishing companies, services, and distributors are most likely to survive in the years ahead, but those that aren’t squarely focused on genuinely understanding and serving the author market (with a supporting business model) are in danger. There’s not really a quick buck to be made and authors are more savvy than they’ve ever been. It’s exceedingly difficult to launch a new self-publishing service company that stands out from the crowd and earns the trust and respect of authors. For most traditional or legacy publishing companies, the work is not worth the potential revenue. This is why Author Solutions’ white label service has been so attractive to traditional publishers (as long as they turn a blind eye to the ethical implications): it offers the profits without the headaches via Archway (Simon & Schuster), WestBow (Thomas Nelson), and Balboa Press (Hay House).

In what is likely a surprise to no one in the writing and publishing community, the latest statistics from Bowker reflect a continued increase in the number of self-published titles in the US market—about 8 percent between 2015 and 2016. And here I offer the same caveat as always: Bowker is an agency that issues and counts ISBNs in the US, which is not the same as measuring the size of the entire self-publishing market. Many authors self-publish without obtaining an ISBN. But Bowker’s report is important because it’s one of the very few consistent and reliable data points we have. Furthermore, it breaks out the number of ISBNs used by specific self-publishing service providers—and that is where the real story gets told.

Last year, Amazon’s free print-on-demand service, CreateSpace, was the big leader in ISBN count and was seeing significant growth year on year. Other services, such as Smashwords and Author Solutions imprints, had experienced declines. Here’s how things have shaken out over the last year.

  • CreateSpace now has nearly 80% of the market—and they continue to grow. They issued more than 18% more ISBNs in 2016. I often hear speculation in the indie author community that Amazon will push indie authors using CreateSpace to the new KDP Print service. The sheer size of the CreateSpace business, along with its continued growth, make that unlikely, but we’ll see.
  • CreateSpace’s competitors are down. After several years of growth, Lulu’s 2016 count was down about 12% to around 75,000 ISBNs, compared to CreateSpace’s 500,000 or so. After growing significantly from 2010 to 2015, Blurb is down by 31% and issued about 23,000 ISBNs in 2016. Also, while not a CreateSpace competitor, Smashwords issued 8% fewer ebook ISBNs than in 2015 (about 90,000 total).

And what of Author Solutions? One big takeaway from last year’s report was that the overall Author Solutions business is declining; it saw a 40% drop in ISBNs between 2010 and 2015. This was welcome news to many in the writing community, who see the company as predatory, with high-pressure sales tactics and questionable, overpriced services. In 2016, there is yet another shift. Print ISBNs declined by 6%, but ebook ISBNs grew by a whopping 175%.

The biggest Author Solutions imprints are Xlibris and AuthorHouse, followed by WestBow (affiliated with Thomas Nelson). The ebook title growth came from these largest imprints, but also from ebook releases across smaller ones. Because Author Solutions print releases declined overall, an obvious question arises: How and why did Author Solutions release so many ebooks? Furthering the mystery: in the overall self-pub market tracked by Bowker, print book ISBNs are up overall between 2015 and 2016—through all services—and ebook ISBNs are down. But not for Author Solutions. It is a curious situation.

Wattpad Works Its Way to Profitability

At the opening of the Sharjah International Book Fair’s program for publishing industry leaders, Wattpad was mentioned admiringly, something of a first. The president of the International Publishers Association, Elsevier senior vice president Michiel Kolman, told several hundred publishers, agents, and rights specialists, “The vast volume of content uploaded weekly to platforms like Wattpad is staggering.” He added, “It’s also proof that—thank goodness—young people aren’t just slumped in front of Netflix. They’re also writing.”

This year involved a series of important developments for Wattpad, including:

  • A partnership with one of the Big Five publishers, Hachette, to produce 50 audiobooks based on Wattpad stories. The first titles became available in summer 2017.
  • A pay-to-play option that removes advertising from the website and apps. Wattpad Premium charges $5.99/month or $59.99/year, but free access remains for all—just with ads.
  • Chinese online retail giant Tencent invested $40 million in Wattpad as part of a $50 million venture capital deal, valuing Wattpad at $400 million.

Wattpad generates $20 million per year in revenue in advertising and licensing, a figure that’s growing by some 100 percent each year. Years ago, Wattpad co-founder Allen Lau mildly scandalized an audience of trade publishers at a BookExpo conference by telling them that the way to monetize Wattpad would become apparent in its own good time. Clearly, the time has arrived, and it involves partnerships (where publishers offer book contracts to platform authors), Wattpad Studios (which continues to roll out new Hollywood development deals), and the advertising play (Wattpad Premium).

There’s a keen awareness among the company’s leadership that the writers (who always retain the rights to their work) are the foundation of everything the platform does. Currently, Wattpad offers earning opportunities for writers with strong followings who are designated Wattpad Stars; also, Wattpad Futures allows readers to “pay” their favorite Wattpad writers by watching videos inserted between chapters in stories. Wattpad is well known for identifying popular writers and stories on its site by evaluating its platform’s usage data.

Wattpad’s roster of partnerships grows ever more impressive; aside from Hachette, they’ve had publishing or promotional partnerships with HarperCollins, Macmillan, Simon & Schuster, and Sourcebooks. They’re also moving briskly into broader entertainment deals, including partnerships with TNT and Universal Cable Productions. The Toronto-based company recently celebrated its tenth anniversary, and its recent initiatives have clear income attached. Founder and CEO Allan Lau, when interviewed, still emphasizes Wattpad’s original mission, telling Publishers Weekly in December 2016, “We help writers form a fan base.”

Given the comments from Kolman, I’m curious to see how Wattpad’s reputation evolves and what new programs it may launch to attract writers.

Is Traditional Publishing Losing Its Ability to Launch Blockbusters—and How Much Does It Matter?

In 2016, there were reports of a “dry spell” for new novels on the bestseller list. While 2016 marked a fourth straight year of volume growth for traditional publishers, with the industry up by 3.3 percent, the growth came from coloring books and nonfiction print backlist in self-help, plus JK Rowling’s The Cursed Child.

In 2017, the story is similar. Publishers Weekly article reports, “Despite the lack of a hot new title in the first nine months of 2017, print unit sales for the period were 2 percent higher than in the comparable timeframe in 2016.” And that growth is once again driven by backlist. The bestselling title this year is a poetry book released by Simon & Schuster in 2015, Milk and Honey by Instagram poet Rupi Kaur. Simon & Schuster CEO Carolyn Reidy said that Kaur’s young fans are buying the physical object because they “want to own something that is connected to the person they like online and  because they can share it.”

And, once again, nonfiction is outperforming fiction in 2016. That’s in part because Kaur’s poetry book is classified as nonfiction for the purposes of these reports. Adult fiction sales would be doing even worse this year if it weren’t for two backlist bestsellers, The Handmaid’s Tale by Margaret Atwood and 1984 by George Orwell.

The absence of a traditional publishing blockbuster can be keenly felt and observed in financial results; for example, when Scholastic didn’t have a Harry Potter book in the first quarter of fiscal 2017, as it did in 2016, total revenue at the company declined 33 percent during that quarter. And of course the effect of such titles isn’t limited to publishers’ bottom lines; bookstore sales declined nearly 11 percent in August (compared to the prior year) because of the absence of a Potter book.

That said, the story coming out of Frankfurt Book Fair in October 2017 is that traditional publishers are feeling buoyed by the recent years of growing print sales and the leveling-off of ebook sales—never mind that print market share and growth is dominated and driven by Amazon. Amid the political noise—which is seen as a primary culprit in publishers’ difficulty to break out new titles—the major trade personalities signaled their belief in the strength of print books, with Penguin Random House CEO Markus Dohle referring to a “massive stabilizing effect on physical retail.” Brian Murray, HarperCollins’s CEO, told the Wall Street Journal that “screen fatigue” is shoring up print’s dominance. Of course, it’s rare to hear anyone note Amazon’s retail hegemony. They talk format much more than sales channels—as when Reidy said she sees younger readers showing a fondness for print, referencing Rupi Kaur’s Instagram-based poetry book.

Ebook Sales Are More Robust Than Mainstream Media Seem to Realize—Because of Amazon and Self-Published Work

When Simon & Schuster’s Reidy was asked about self-publishing at Frankfurt Book Fair in October, she said that independent publishing is “huge” and has “taken away some consumers” from the trade in the US market. She was referring most specifically to the romance market.

Independent publishing in the US is strong partly (or mainly!) because of Amazon, of course. If you look at the universe of Amazon US ebook sales, self-published work constitutes about 40% of unit sales. Michael Cader of Publishers Marketplace estimates (drawing on industry figures as well as stats from Author Earnings), “Over 86% of all self-published ebooks sold are estimated as sold through Amazon. … Traditional publishers are capturing just over half of paid ebook downloads [at Amazon], while self-published authors are above 40%.” Summing this up later, he says publishers “captured 80% of the [ebook] dollar sales” in 2016, “but only about 53% of the unit sales.”

But these figures do not factor in Kindle Unlimited and other “borrows” in the Amazon market. As Cader writes, “The larger hole in the ebook market is measuring the growing influence and size of Amazon’s proprietary and promotional markets, in which subscription and member ‘reads’ and ‘borrows’—sometimes inexpensive and sometimes free—take the place of one-at-a-time download sales.” And there, it’s believed that self-published work accounts for about 60% of KU reads and other borrows. The remainder is made up of titles from Amazon Publishing and the Kindle First promotional program (which offers Amazon Publishing titles only). Cader writes of Amazon’s proprietary e-reading programs, “[They] could be moving more units than all of the competitive stores together. It also means that Amazon Publishing … is on its own close to the size of the entire non-Amazon market.”

Kindle Unlimited is becoming an increasingly important and contentious platform in the author community, as scammers continue to find ways to game the rankings and thus the page-read payout system. In a series of posts throughout 2017, indie author David Gaughran detailed his frustration with scam operations that impact the free-book charts at Amazon, plus click-farming schemes that can send a title from the depths of anonymity to the number-one spot in paid Kindle rankings—thus increasing its visibility and KU page-read payouts.

The effect these hacks can have on Amazon’s system are tantamount to security breaches; they’re not taken lightly or discussed by Amazon in public. A big question yet to be answered is how well Amazon can prevent fraudulent and unethical activity while not mistakenly taking down honest authors in the process.

If you enjoyed this article, check out The Hot Sheet. We report every two weeks on industry issues that affect writers, providing explanation and analysis.

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