An interesting Publisher’s Weekly article came across my Twitter feed late last week: Profits Fall 48% at Penguin on 4% Sales Decline. I tried running some figures, and it doesn’t quite add up:
- A 4% decline to £441 million implies last year’s sales were about £460 million.
- A 48% decline to £22 million implies last year’s profits were about £42 million.
- That means profits declined £20 million on a sales decline of £19 million!
The above numbers suggest that margins cratered, overhead soared, or a combination of the two. The CEO partly blamed the decline on a lack of blockbuster titles (“none of them were Fifty Shades of Grey”) and “softness in the more profitable backlist business.” To me, both of these points were interesting:
- Both Fifty Shades and The Hunger Games were called out as “[siphoning] sales from other titles.” Correct me if I’m wrong, but didn’t these both start out as indie works?
- A lot of mid-list authors like Joe Konrath have reclaimed their backlists from publishers, and are doing quite well selling both old and new titles as eBooks, for reasonable prices.
If my assumptions are correct, then Amazon is the least of publishers’ problems, no matter how they want to spin it.
A final point: the article mentioned that eBooks now make up 19% of Penguin’s sales. Spin that.
Speaking of Amazon and indies, not all seems to be chocolate and roses there, either. According to iReaderReview, which is usually insightful when the lead blogger isn’t indulging his admitted anti-Apple prejudice, suggests that Amazon is gaming the best-seller lists to downplay $1 books.
In 2011 $1 books were beginning to really take over. … In 2012 this suddenly [ground] to a halt. Lots of indie authors have covered this and talked about a shift to ‘Top Grossing’ instead of ‘Best Selling’.
If this is indeed what’s happening, I must admit to mixed feelings. Sure, at $2.99, everyone makes more per-unit. One point that iReaderReview makes, over and over again, is that the combination of eBooks and easy self-publishing puts enormous downward pressure on prices. As an author, I’d much rather get $2.10 per sale than $0.30. On the other hand, I’ve often said that 99¢ is an impulse buy for most people. If I knew I’d get seven times the volume, I’d definitely go for it. But with 99¢ books largely disappearing from the best-seller (or top-grossing) list, it doesn’t sound like the 99¢ titles are selling in the numbers needed to overcome the higher-priced titles. I’ll definitely play with pricing once I recoup my (small) expenses associated with White Pickups (mostly the cover art), just to see what happens.
And, with any luck, I’ll be so busy working on Pickups and Pestilence that I won’t be obsessively checking the sales figures every time I turn around…
"either way, you’ll get a book that’s fascinated a lot of people and has actually been edited!"
ReplyDeleteThat made me laugh out loud. Even in the indie epub market, honesty is a rare and delightfully novel commodity.
Best of luck!
ReplyDeleteOh good luck with the book, and like Katherine the edited comment made me laugh.
ReplyDeleteI found the rest of your post interesting, you know I've always thought 99c was far too low for the amount of work an author puts into a book, even at $2.99 (which my own sells at) the return is not that great, but at least it acknowledges you have worked, in may case on and off for four years.) No one should be paid as little as $1
Without all the originating numbers it is hard to know. Making the reciprocal error is common even in construction estimating where it can cost a lot of money and you would think people would know better.
ReplyDeleteThe reciprocal error is best illustrated that if you multiply a number by .8, and than multiply it by 1.2, you do not come up with the same number. But if you multiply by .8, and than 1.25 you do.
If you take 1 and divide it by 1.25, you get .8. If divide 1 by .8, you 1.25.
People are constantly thinking that if you decline from 100 to 80, that it is a 20/80 = 25% decline, when it is actually a 20%, 20/100, decline.
So excited for you Larry!!!!!
ReplyDeleteGlad you liked that, Katherine! And… "huh huh, she said novel."
ReplyDeleteThanks, Tim!
Helen, I think that the $2.10 you get for a $2.99 novel is pretty close to what a traditional author gets for a paperback sale. I know what you mean by the time put in—according to the timestamps on my laptop, I started White Pickups almost three years ago (Aug. 14, 2009). That's not if you count the flash it was based on, which I wrote in January 2008.
Russell, I didn't make that particular error (or if I did, I corrected it). It's true that x * 0.8 * 1.2 != x, but x * 0.8 / 0.8 does equal x. I think where my error came in is, I was making a bad assumption that margins and overhead were fixed quantities from year to year. Instead of two equations and two unknowns (margin, overhead), I had two equations and four unknowns (margin1, overhead1, margin2, overhead2)! Still, I think it's safe to say that there's a lot of overhead at Penguin.
Cathy, me too! My Giddy Control Module is almost overheating now…
The biggest problem with 99c books is people often buy them and never read them. They're impulse buys so there's no real impetus to read them, and certainly not to review them. At $2.99, more of an investment has been made so sure, a reader might buy fewer books but they're more likely to read the ones they do.
ReplyDeleteBest of luck, Larry! I hope that you get a lot of attention. You certainly deserve it. I'm happy to have been an original reader of White Pickups, at least as it was published here.
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