3 Challenges Facing Publishing Startups in 2024 (That Aren’t AI)
ChatGPT Won’t Be The Reason Your Publishing Company Fails… But These Might Be
Artificial intelligence has been getting more than its fifteen minutes of fame in the publishing industry this year. It did not take long after the introduction of GPT-4 for conferences, seminars, roundtables, and dissertations to declare the end of books as we know it. For those of us who remember the doomsday cryers following the rise of the ebook, the atmosphere feels eerily similar.
On average, publishing startups have been more eager than their trade or academic counterparts to embrace AI and see it as a useful tool rather than the mark of the beast. This makes sense. Startup founders are more likely to have a background in tech, business, or marketing, worlds that have a significantly less suspicious approach to innovation than publishing. Not to mention, the general oversaturation of the publishing startup market makes showcasing shiny new bells and whistles important for acquiring clients faced with a glut of options.
This is where caution is warranted. Thanks to the Covid pandemic, labor and supply shortages, and insidious unofficial monopolies on sales and distribution channels, publishing startups are facing an uphill battle to growth in 2024 and beyond. The AI conversation is distracting from these very real, immediate (though admittedly less headline-grabbing) challenges. Failing to address and adequately prepare for these challenges will be the real deciding factor when it comes to surviving the competition.
Challenge #1: Ebooks Have Been Replaced
As valuable as the humble ebook has been to spurring on the creation of the publishing startup niche, it has been losing ground to audiobooks steadily since 2019. Meanwhile, audiobooks pulled in $1.8 billion in 2022, with sales revenue growing over 50% in the last five years alone. The percentage of US adults who listen to audiobooks has steadily grown, with almost a quarter of the population reporting they’d read an audiobook in the last year in 2021 (that number skyrockets to over 50% when you include kids and teens).
While this is most definitely a win for accessibility (and those of us who prefer to listen to books while we commute), this trend is dicey for publishing startups, many of whom are operating with limited resources and for whom ebooks are a foundational (and inexpensive) building block.
Most immediately is the issue of production. Unlike ebooks (or even print books, to an extent), audiobooks have high quality standards. Poor performance, poor audio quality, poor editing or mastering — it will all stand out like a sore thumb. This is not the realm of “fake it til you make it,” as even one bad audiobook will likely tarnish a publisher’s brand. Good audiobook production requires access to expensive equipment, experienced actors, and top-notch audio editors.
It will cost a publisher anywhere from $2,000-$10,000 to produce one audiobook. Anything below that price tag becomes suspect, as small audiobook producers rely on AI narrators that will creep listeners out rather than draw them in.
Some publishing startups have gotten around at least some of the cost by having authors narrate their own books, but this is hit-or-miss, as recording an audiobook can take up to a week for a professional voice actor. Authors who opt to work with publishing startups tend to have limited time to invest in this kind of project, and the difficulty of recording an audiobook can sour author/publisher relationships. Author narrators are also more likely to need extensive audio editing to make them sound professional, so the money saved in narrator costs often goes into production.
Meanwhile, big conglomerates like ACX hold virtual monopolies on audiobook publishing, publishing 64.3% of audiobooks in 2023 (an increase of 57% since 2018) and requiring anyone who uses their services to agree to seven-year exclusive distribution rights. This could pose a distribution problem for smaller publishing startups, especially given their tendency to over-rely on Amazon as a publishing platform.
You may have seen this issue rise to mainstream media attention this year when Brandon Sanderson announced new books and refused to work with publishers who would put the audiobook on Audible. He is not alone. Whether due to financial or moral concerns, more and more authors will begin shying away from publishers who are overly tied to ACX, opting for alternatives that, while more flexible, may add complexity to the publishing process.
The easy option, of course, is to ignore audiobooks and stick with the tried-and-true print/ebook combo. But in a market quickly saturated by publishing startups with very similar offerings, is avoiding this headache worth falling behind the competition? There are only so many tools in the publishing startup’s toolbox, and this is a big one.
Not to mention, the global audiobook market is worth over $5 billion as of June 2023 and is projected to reach $35 billion by 2030, a 26.4% increase in comparison to the 1.9% increase projected for the book publishing market as a whole. (For context, the market for self-published books as a whole is expected to increase by only 17% in the coming years.) Playing chicken with this seismic industry shift will result in billions of dollars being left on the table.
Challenge #2: KDP Is Now A TOS Minefield
Most of the big publishing startups use Amazon’s self-publishing service, Kindle Direct Publishing (KDP), to manage most or all of the actual publication part of the publishing process. The benefits of using KDP are numerous:
- Free to use
- A friendly and accessible interface
- Up to 70% royalties per book sold and no seller fees
- Built-in print-on-demand (POD) options and Prime shipping
- Immediate shelf space in the largest bookstore in the world
However, KDP was built to be utilized by individual authors, not publishers. Beyond making the actual uploading and publication management process tricky to navigate, this means that KDP will crack down if it suspects a publisher is using it for distribution. KDP might demand proof of author identity or copyright ownership, delay the launching of books, pull the book entirely, or even terminate the associated account altogether.
Imagine needing to tell an author who has been marketing their book’s launch date for months that, two weeks prior to publication, their book has been booted off the platform and they’ve been locked out of their account. Unfortunately this happens far too often, and it can be a death knell not only for the author/publisher relationship but also for sales.
Being able to sell your book on Amazon is a requirement if you want to see any meaningful sales numbers, and publishing through KDP is the only way to make any revenue, unless you’re very, very lucky. You can sell books through Amazon that are not published through KDP using their FBA program, but it requires paying for production through an external distributor, shipping, and warehousing. Not to mention the numerous fees Amazon charges sellers.
Let’s imagine you’re utilizing IngramSpark (the most popular POD commercial printer and distributor) and the Amazon FBA program to sell 100 copies of a 200-page paperback book with standard specs (5x7 trim size, B&W printing, perfect bound). Your list price is $12.99, because your competitors have not been kicked off KDP yet and can afford to price books at the low end.
Assuming minimum costs across the board (e.g. bulk discounts, standard shipping, lowest fees), here’s how that would break down:
This would mean a grand total of $1.23 per book or $123 for all 100 books. The average book sells about 250–300 copies, but lets be optimistic and assume it sells 500 copies. This means over its lifetime, in perfect conditions, that book will generate $615 in revenue. If you spend more than that on creating or marketing the book, that P&L is going to start looking like a blood bath.
Now for the bad news. KDP’s crackdowns on suspected publisher activity have gotten more sophisticated and swift in recent years, pushing publishing startups into some operationally unsustainable and even ethically dubious situations. There are horror stories about production managers spending the majority of their time on the phone with Amazon representatives, trying desperately to get help unlocking, re-uploading, or unfreezing titles that KDP had flagged for one reason or another. Some have even gone so far as to impersonate authors by putting on fake voices in order to pass identity checks. Needless to say, this is not ideal.
And as the publishing startup model gains prominence and more and more of these new companies start using KDP as their primary platform, things will only get harder.
Challenge #3: Print Distribution Is Suffering
Speaking of IngramSpark, let’s talk about third-party commercial printers. Even publishers running a successful operation selling to customers via KDP will need a printer and distributor like IngramSpark to manage bulk orders from retailers. At least they will if the goal is to get books on the shelves at Barnes & Noble or Target.
Again, the benefits of this collaboration are clear. Working with a commercial printer and distributor means publishers don’t need to worry about building, operating, and funding an industrial printing facility. Nor do they need to worry about the headache of warehousing, shipping, and tracking orders (or the hair-pulling process of managing the return of unsold copies).
This arrangement worked fairly well until the Covid pandemic began causing supply chain issues, resulting in paper shortages, staffing cuts, mill closures, and stalled transportation. Turnaround times for book orders ballooned, as did prices. Paper costs have increased 50%-80% in the last two years. Ink prices have as well.
All of this culminates in this terrifying US Bureau of Labor Statistics graph:
These price increases are passed along to the client — aka the publishers and the retailers — resulting in more modest buying practices and less physical copies sold overall. The copies that are ordered could spend months languishing in warehouses due to shipping delays, costing money rather than making it.
Commercial printing were expected to start evening out in 2023, but the situation has not gotten less tense for smaller book publishers. Very few new commercial printers are entering the arena, and Amazon (again, our old friend) is forcing the few big names into a corner. Unlike their bigger, well-established counterparts, publishing startups often don’t have the liquidity to accommodate expensive and ongoing delays and increasing prices. What might be worth a wince at Simon & Schuster could drive a new publishing startup into the ground.
So why not just use KDP and avoid third-party printers and distributors entirely? Well, apart from KDP’s own tenuous relationship with publishing startups, let’s talk about competition again. Anyone who has worked with first-time authors can tell you one of the first questions out of their mouths is: “How do I get my book into Barnes & Noble?” For many, it is the defining moment of success, seeing their book out in the wild for Starbucks-sipping perusers to stumble upon. Being able to offer them this moment could be a real make-or-break selling point, especially if your competition is doing so.
And why not just skip print books altogether? Many publishing startups seem to be interested in going the purely digital route, true to their indie press forbearers. Certainly it avoids the growing headache of dealing with commercial printers. However, making this decision does come at a substantial cost: simply put, print books still win out, with $22.6 of $27 billion (83.7%) in 2019 book sales coming from physical copies. Is the headache worth that much lost potential revenue?
How Publishing Startups Can Survive in 2024 and Beyond
The world of publishing startups is exciting, a wild wild west of opportunity and innovation. It can be easy to expect the challenges and solutions to success in this industry to be equally glamorous, but that is simply not the case. When push comes to shove, whether a publishing startup succeeds or fails will come down to the line items on their P&L spreadsheet. The devil — and the dividends — are in the details.
There is no one right way to get ahead of these challenges, but a good start would be to take a page out of the publishing industry’s history book. As stubborn, risk averse, and glacially paced as trade and academic publishers tend to be, they’ve done this for hundreds of years now. Find what worked for them and apply it to this new, daring, and boundary-breaking method of creating books. Aggregate and reconfigure existing knowledge to get new and unique results. If AI can do it, you can too.
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