The Creative Revolution: Part 4 of The Business of Books

Everyone is familiar with the “Industrial Revolution.” In the past 500 years there have been five official “revolutions” that have changed the way people live.

(1600–1740) Financial-agricultural revolution (1780–1840) Industrial revolution (1880–1920) Technical revolution (or Second Industrial Revolution) (1940–1970) Scientific-technical revolution (1985–2000) Information and telecommunications revolution

We’re going to propose #6 and we are in the middle of it:

(2015-????) Creative revolution

Each of these revolutions was made possible by its predecessor.

This is what our current system defines as the “Value of Books.”

“Free papers!”

So, the result is clearly seen in the revenue earned by writers for their work.

The Chameleon Writer Market Survey is still open. But as of last week, among the 122 respondents, the pattern of earnings distribution is clear. The survey in fact, is weighted heavily toward working writers who’ve published a number of books.

Within this group, the earnings do correlate. The writers who had published more books all fell in the top four earning categories of $24,999 and above. The respondent who made more than $200,000 was individually recruited to complete the survey, as were a number of indy-published or self-published writers.

These results are a bit “better” than the data collected by the UK Authors Licensing and Collecting Society in 2014, or information on the collapse of writer earnings identified by the Authors Guild and currently being used in support of advocacy for fair writer contracts. The Authors Guild is actively advocating for major trade publishers to offer 50% e-book royalties, instead of the industry-standard 25%. As a number of independent publishers including Zumaya Publications‘ Elizabeth Burton, have pointed out over the course of these articles, independent publishers have been offering similar terms to writers for years (Zumaya was founded in 2001 and has a number of successful imprints and authors). The Book View Cafe “split” as an author cooperative is 95/5–95% to the author, 5% to the cooperative, retained as reserve and operations funds.

This article is going to be a bit different than the first three in the series (Value to the Reader, Writer Attitudes About Book Quality, and Why Don’t More People Read?).

“Why Don’t More People Read?” was about who really reads and buys books currently — as much as can be determined. We’ve previously made the point using observable data (again, as much as can be determined) that the present systems are not reliably serving the current market of approximately 20 percent of North American adults who regularly buy and read books (some 70 million people). As other advisers have pointed out, we initially looked at rapidly rising college graduation rates, particularly among women and diverse populations, and predicted that some 140 million Americans, Mexicans and Canadians were potential book-buyers and readers. But the truth is: nearly 100 percent of adults are literate in the U.S. and Canada. Mexico’s literacy rate was 93% in 2013. Among young Mexicans (15–24), the rate is 98.5%. So, the potential market for books in North America really is just about everybody who is literate, i.e. the entire adult population. In addition, the book as a creative format is, as we’ve previously pointed out, foundational to other forms of communication. The delivery format does matter, as is shown in Pew’s ongoing research: younger readers not only read more, and more often, than older age groups, they prefer paper books. Here is a new link, regarding younger Americans and library use. While e-books are an important new publication platform, it is unlikely that they will ever replace paper books in their present form.

Yes, we are talking among ourselves about a different way of combining tech and the paper book. But we are crazy.

So, the current system of publishing, which includes self-publishing which is dependent on retailers (Amazon) which have brilliantly devised a system to acquire limitless content at no upfront cost, solving one of the problems of bringing products to market at scale, but offering no ability to control quality or expand markets (as seen in the leveling-off of e-book sales) — and let me explain this in plain English:

Unless Amazon fixes its approach, it will be stuck with its current Kindle customer base and ongoing declines in paper book sales since those customers are falling away. The independent booksellers that survived the seismic changes in the industry in the past 20 years are strong and new bookstores are beginning to open. Amazon is not the only e-book seller and their competitors are offering books on devices that have legs, are continuously upgraded, and really are good for more than one thing. And the traditional bookstore is not the only way to sell books.

Bound to Happen

It really was bound to happen, I realized this past weekend at the Greater Los Angeles Writers Conference. We told attendees, “Chameleon is the only company of its kind right now, but five years from now, there will be a lot more.” We said, “If established publishers want to make it, they’ll adopt more of our methodology.” There isn’t much chance of business growth and success if a business is trying to make a product using flawed methodology and is siloed from its market customers all along the supply chain — a market it knows little about, and which is self-limited based in false assumptions (“Books compete with movies, TV and games,” and “Nobody reads any longer.”) Even when successes are noted, they are evaluated based in superficialities: i.e. the success of the Twilight books led to other books that were superficially similar, and even the later success of 50 Shades of Gray, based on the more “wholesome” Twilight books — like people don’t get what the underlying basic elements were (entertainment, absorbtion and a heroic fantasy for YOUNG FEMALE READERS — told actively and at a fast pace).

Metrics and Bookscan

The only metric used in the trade publishing industry outside of Amazon’s own internal metrics, used within its customer base, is Nielsen Bookscan. When we first started Chameleon and I explained to some of our initial founding group (including Silicon Valley pioneers) that established publishers were very slow in determining how many books they’d sold, and that they didn’t have very strong control over the pipeline; i.e. they pretty much had no idea who was buying any given title, how, why and where, they thought I was making stuff up. “Authors sure don’t know,” I said, “they receive their royalty statements very late and they’re hardly reliable.” At the same time, I explained, authors are also now being asked to take the lion’s share of marketing their books, when they don’t even know who’s buying them until months later and even then, they just see an aggregate number, not ‘who’s buying what, where or when’.”

“That’s not possible,” one person said.

I explained that publishers greatly relied upon a third-party service, Nielsen Bookscan, in making purchasing decisions. Right now, AC Nielsen is stating they cover 80 percent of paper book sales. Any US-based author with an Amazon Author Central account can track their Bookscan sales on a daily and sometimes hourly basis. There are probably 1,000 internet articles and posts, most denigrating Bookscan, and a few extolling its virtues — this is a post of ONE right now that’s going to contextualize it in the larger scale of industry and commerce.

AC Nielsen is a good company and produces incredible market research in general, and fantastic insight in retail market trends and potentials. Bookscan could not be characterized as a good, future or long-term sustainable BI product. Launched in 2001, it’s a POS system (business acronyms are funny, huh? In this context it means “Point of Sale”) that offers little insight beyond the basic purchase and sales volume among the current customer base.

In contrast, Nielsen offers rich data and insights for general retail, and to a lesser extent, manufacturing and services industries.

This is just one of their insights.

Most of the growth in retail spending over the next decade will be from multicultural consumers. Books are a retail product.

Why Using Bookscan is a Recipe for Failure

We’ve used cookies, organic/natural foods and Uber to try to communicate what needs to happen. Now: bicycles.

After an historical record high of 15.2 million bicycles sold in the U.S. in 1973, bicycles suffered a long decline in the 80s and 90s. Everybody was driving, and even kids started skateboarding more and riding bicycles less. Sales started to rebound during the early 2000s, but the industry slumped during the recession.

Now, bicycles are making a comeback, with almost 2 million more bicycles sold in 2014 than the previous year. The National Bicycle Dealers Association reported that 18 million bicycles were sold in the U.S. in 2014. The growth rate is found in cool, new (“retro”) bicycles, bicycles for specific enthusiasts, and basic meat-and-potatoes bicycles used for fitness and transportation.

If bicycle manufacturers and dealers were only looking at partial records covering the numbers of bicycles sold during any given period, including “down” periods like the recession, and determining their future purchases by doing more similar models, then … they would not be at that 18 million bicycles sold figure.

“Nobody rides bicycles any longer.”

“Young people don’t ride bikes.”

HELLO. If you assume this, no — of course you’re not going to make money designing, manufacturing and selling new bicycles to new riders.

Detroit, Japan, Munich and Seoul have “noticed” that millennials are not buying new cars at the rate of prior generations. I’ve heard lots of reasons or rationales for this; let’s just say the major auto manufacturers are not deciding what types of new cars to make or how to handle their brand development and customer relations based on who bought how many of a certain model and make last year. A reasonable percentage of the new bicycle sales are to people, mostly young, under 30 and urban dwellers, who do not own a car.

That is a megatrend. We have near 100 percent literacy in North America and in Canada, more than 50 percent of young people attend and graduate from college, and the U.S. will achieve that rate within the next decade. More young women than men already attend and graduate with college degrees. These are megatrends.

58 percent of current regular book-buyers and readers are women — and the current system can’t even serve them very well, much less other, more diverse, younger groups of potential book buyers and readers.

What Would a World Look Like That Valued Creativity as Much as Tech?

As we tell people, we can only “fix books.” We can’t do anything about other related industries. We can’t fix the art world, the music world, or film or TV. GoldieBlox is already doing engineering from the ground-up based in toys (and books). It’s books we know about and we want to work with books and readers.

Back to the money. An analysis of the 2013 and 2014 annual reports of the major trade publishers shows they are investing as little as 2.7 percent of revenue to a maximum of 7 percent of revenue on the people who make the basic product that is sold: the writer. Combine this with other barriers to a successful, reliable way to deliver value to the market customer (readers) and it isn’t a growth industry (as is presently seen — flatline projected by every industry analyst out there).

It’s Blockbuster Video, Xerox, Blackberry, MySpace, Polaroid, IBM. It’s Sears.

Are people still watching videos? (Yes, online and via numerous other channels). Are people still using digital copying technology? (Yes — eventually they’ll even be using 3-D printers). Are people still using smartphones? (Uh, yes … with touchscreens). Are people still using social media? (Uh …). Are people still taking photos? (Yes). Are people still using a dizzying array of office and business technology? (Yes). Are people still buying tires, appliances and clothing? (Yes).

“Nobody reads any longer.”

“Young people don’t read.”

“Minorities don’t read.”

“Boys won’t read books about girls.”

“Books with green covers don’t sell.”

“Books with minorities on the cover don’t sell.”

  • When You Make Things Using a System That Disconnects the People Who Make the Product From the Customer Whenever and Wherever Possible …
  • When You Seldom if Ever Talk to Your Market Customer About Their Needs
  • When Your Product Development and Selection is Ceded to Outside Entities Whose Interests are Not Your Own (Agents)
  • When Your Core Means of Product Manufacture and Development (Writer) is Siloed and Isolated from Every Conceivable Part of the Pipeline
  • When You Are At War With Your Vendors
  • When You Can’t Even Price Known Products Reliably in Response to Current Customer Needs
  • When You Cannot Identify Basic Product Elements Desired by Customers
  • When You Think You Can Get Your Raw Materials For Free or Close To It
  • When You Do Not Value Your People, Without Whom Nothing May Be Made or Sold Successfully
  • When You Think It’s an Accident That a Book is Successful and Do Not Learn From Your Failures
  • When You Do Not Love, Respect and Value All Business Partners
  • When the Engine of Manufacture (Writers) are Asked to Work for Years on a Volunteer or Part-time Basis in the Hope of Someday, Making Some Money
  • When There is Little to No Connection Between Formal Education and Industry Work or Performance

“Nobody reads any longer.”

“Young people do not read books.”

Yes, they do. And they deserve products made for a world in which just about everybody can read and will have some need and desire to do so, not a world in which only a few could read, and fewer still had access, means, time and motive.

Chameleon isn’t offering the “deal” that the Authors Guild is advocating for — 50% e-book royalties. Chameleon will be splitting all earnings 50–50 with authors, all platforms, all editions. It is the company’s responsibility to make this work. It is not the author’s responsibility to undertake all corporate operations (i.e. “self-publishing”).

Famously, Hillary Clinton’s book took the title of an African proverb, “It Takes a Village to Raise a Child.”

Everyone who’s ever worked in a successful enterprise, who’s ever launched a new product, who has ever innovated, knows it takes a team to do this. We can watch old videos of how Nikola Tesla had the right idea about alternating current, but Thomas Edison didn’t see things that way, and the two warred until finally, alternating current successfully won out. As an individual, Tesla tore up his agreements with Westinghouse in order to see his idea become reality. Tesla sacrificed his own financial future and ended up dying penniless … but I’m typing on the internet today because of what he did, not because of what my theoretical 6th cousin (Edison) did.

It Was Bound to Happen

I have given up my so-called “writing career” to do this. It was bound to happen, that someone who declared “creative writing” as a major and “creative writing” as a minor upon going to college for the first time, and ended up with bachelors’ degrees in art and literature, would then work for a nonprofit organization and change everyone’s minds about what was best to do to improve the lives of homeless and very low-income families. It was bound to happen that I would then become a college teacher and writer and be on the front lines facing classes of students forced to take English in order to transfer or graduate for 18 years. It was bound to happen that those classes would be diverse, full of all types of students, ages, backgrounds and interests. It was bound to happen that I would “market test” books with these students and see what engaged them and what did not. It was bound to happen that I’d be part of a dialog with fellow writers, of course, far behind them in ability, skill and talent, but even so, able to listen and be part of the group — and hear the same refrains over and over again of their barriers in just being able to do their work.

  • Publisher XXX dropped the last book of my series but I’m still hearing from readers who want to read it.
  • Publisher ZZZ was going to publish Book Y, which is so cool because ____________ , and they said they didn’t want it because ______________ (spurious reason).

“Why are we sitting around taking this when there’s something we can do about it?” I said. Book View Cafe. No, I’m not responsible; I’m just the one who said that.

It was bound to happen that I’d be involved in Wildside Press and Alan Rodgers Books, that my first collection and novel would be among the very first print on demand books, and that I’d also be in on the ground floor with the first Kindle books, and other early e-book services like Fictionwise. It was bound to happen that I’d do 3 years in the barrel writing for McGraw-Hill.

It was bound to happen that I’d be working for Beyond Shelter and be the person who would have to a) raise all the funds; and b) make sure the actual projects worked and delivered the promised results. It was bound to happen that I’d be the “fixer” who helped women get businesses off the ground in South and Central Los Angeles. That I would work to get employment, business development, housing development and social services projects off the ground with hundreds of families.

It was bound to happen that I would decide “All the social services in the world won’t be beneficial if families don’t have decent jobs and economic opportunity” and leave the nonprofit world to try to make that a reality by using the same process I did to make all these projects in the inner city work by doing business consulting and development.

It was bound to happen that I’d get a strong picture of how successful, new businesses worked in a huge range of sectors, the kind of operations structures worked, the kind of business ethics that were successful, and the kind of revenue, cash flow, R & D and other structures were workable on a broad scale.

It was bound to happen that I would get the gumption to write the book of my life, to finally put it all together, and to finally realize, “I’ve done it. After all these years, I really wrote a good book — my way, the only and best way I can.”

I know people will like it, I thought.

It was bound to happen that the agent to whom I had been faithful for over a decade, but who’d never done too much (in fairness — she didn’t exactly have the hardworking, fully-producing writer seeking to meet the needs of her customers … acquiring editors) would blow me off and I’d then seek to activate my carefully nurtured and stewarded list of top agents, each of whom had indicated, “Anything you write, Amy, just send it — we will always look at your work!”

Uh, no.

It was bound to happen that this would start the engine. That I would then do the type of competitor analysis I’d developed at Beyond Shelter, which enabled the organization to go from under $500,000 raised in corporate and foundation support to over $2 million, and much more, counting government partners. I would then do the type of comps I’d done for over 100 different businesses, in numerous sectors. I would know what BI software was and how it was used, what CRM software was, and how it was used. I would know how any number of new, innovative and successful products were developed and launched. For example, I would know that in 2000, there were only 6 free-range beef operations in the US and Canada, and now — there are more than 2,000. I would know that five years ago, natural and organic products had only 2–3 percent of the shelf space in grocery stores, and now, they have more than 20 percent.

We’re not going to “share” what our comps have told us in depth, but we can share that what we’ve learned is the way that we have developed our business plan, and helped us to set our initial goals, because we are approaching the end of “Proof of Concept” and getting toward launch.

This business is based in the following benchmarks:

  • Average 10,000 copies per frontlist title sold — by whatever means — to the market customers for whom the book has value
  • Basic pricing, consistent throughout editions and formats
  • Long-term, mutually beneficial relationships with author-partners (this is why it’s like “job interview” not single-title purchase).
  • Creative and production teams: editors, designers, authors, artists, marketing and sales professionals

Now — by all means continue reading the “Author Earnings Report” for your facts considering it may possibly cover 15% of the current book-buying and reading market and is always at least a quarter behind. It’s kind of like an in-depth study of who’s buying bikes at Sears.

We’ll be sticking with Pew, Library Journal and the Kaiser Family Foundation.

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Originally published at www.amysterlingcasil.com on June 29, 2015.